Can I Get an Investment Property Loan with Less Than 20% Down?
If you're considering purchasing a rental property in Nashville or anywhere in Middle Tennessee, you may have heard that you need at least a 20% down payment.
The good news? That's not always the case.
Yes, it is possible to get an investment property loan with less than 20% down.
While putting down less than 20% can increase your borrowing costs, it may also allow you to purchase an investment property sooner rather than waiting years to save a larger down payment. For some investors, using a smaller down payment means keeping cash available for renovations, reserves, or future investment opportunities.
Do You Need 20% Down for an Investment Property?
Many people assume that investment properties require a 20% or 25% down payment.
In reality, there are loan programs available that allow qualified borrowers to purchase investment properties with less than 20% down.
This can be especially helpful for investors who have strong income and credit but want to preserve cash for renovations, reserves, or future investment opportunities.
What Happens If You Put Less Than 20% Down?
The biggest trade-off is cost.
Generally speaking, borrowers who put less than 20% down on an investment property can expect:
Higher interest rates
Higher borrowing costs
Potential mortgage insurance requirements, depending on the loan program
Larger monthly payments
Lenders view lower down payments on investment properties as carrying additional risk, and pricing is adjusted accordingly.
However, for some investors, buying sooner with a smaller down payment can still make financial sense.
Why Putting More Down Can Save You Money
Although purchasing an investment property with less than 20% down is possible, increasing your down payment can significantly improve your financing terms.
In many cases, borrowers who put down 25% or more gain access to:
Significantly better interest rates
Lower monthly payments
Reduced loan-level pricing adjustments
Improved cash flow on the property
Even a modest reduction in your interest rate can have a meaningful impact on your investment property's long-term profitability.
That's why many experienced real estate investors carefully evaluate whether a larger down payment may improve their overall return.
Can First-Time Investors Buy an Investment Property?
Many first-time investors assume they need a large down payment or years of experience to purchase a rental property.
In reality, many lenders offer financing solutions for borrowers purchasing their first investment property. The key is understanding your options and choosing a financing strategy that fits your goals, cash reserves, and long-term plans.
Which Option Is Better?
The answer depends on your goals.
For some investors, purchasing sooner with a lower down payment allows them to begin building equity and generating rental income right away.
For others, waiting until they have a larger down payment may result in substantially better financing terms and improved monthly cash flow.
There is no one-size-fits-all answer.
The right strategy often comes down to your long-term investment goals, available cash reserves, and how quickly you want to grow your portfolio.
As a Nashville mortgage broker, one of my jobs is helping investors compare these scenarios so they can make an informed decision based on their financial goals and investment strategy.
Why Work with a Mortgage Broker for Investment Property Financing?
Investment property financing can be more complex than purchasing a primary residence.
Different lenders have different requirements for:
Minimum down payments
Credit score requirements
Reserve requirements
Debt-to-income ratios
Interest rates and fees
A mortgage broker can compare multiple lenders and loan programs to help identify the financing solution that best fits your investment goals.
Want to explore your options? Learn more about our Investment Property Loans.
Frequently Asked Questions
Can I buy an investment property with 15% down?
In some situations, yes. Certain loan programs allow qualified borrowers to purchase an investment property with less than 20% down, though rates and costs may be higher.
Is 20% down required for a rental property?
No. While many investors choose to put down 20% or more, some loan programs allow lower down payments for qualified borrowers.
Does a larger down payment lower my interest rate?
Often, yes. Borrowers who put down 25% or more may qualify for better pricing and improved monthly cash flow.
Should I put less down and keep more cash available?
That depends on your investment goals. Some investors prioritize preserving cash for future opportunities, while others prefer lower payments and better rates.
The Bottom Line
Yes, you can get an investment property loan with less than 20% down.
However, borrowers should understand that lower down payments often come with higher borrowing costs and potentially higher monthly payments.
In many cases, putting down 25% or more can result in significantly better interest rates and more favorable loan terms.
Every investment strategy is different. Whether you're purchasing your first rental property or expanding an existing portfolio, we'll help you compare financing options and determine the approach that makes the most sense for your goals.
Explore our Investment Property Loan options or contact AP Lending to discuss your next investment purchase.