Most first-time landlords hear that a rental needs 20% to 25% down, and many stall for years while saving it. There are legitimate ways to get in sooner, but each one works by moving the cash requirement somewhere else: into an owner-occupied program, a second lien, your existing home’s equity, a seller’s note, or a partner’s capital. Pure 100% financing on a stand-alone investment property is essentially unavailable from mainstream programs, so “no money down” rarely means “no cost.”
Duane Buziak, NMLS #1110647, has laid out seven approaches below. For each one you’ll see the mechanism, a labelled illustration, the steps, the usual mistake, and the numbers to watch. Some suit buyers who plan to live in the property, others suit investors who already own a home or have a partner. All figures are illustrations, not quotes, and program rules change, so confirm current guidelines before you commit.
1. House Hack With a Low-Down-Payment Owner-Occupied Loan
Owner-occupied financing is where the down payment requirements are lowest, and a 2-4 unit property qualifies as a primary residence if you live in one unit. FHA allows 3.5% down with a 580 FICO score, and some conventional programs go as low as 3% to 5% on one-unit homes, with higher minimums on multi-unit buildings. Other providers, such as Rocket Mortgage and Movement Mortgage, offer owner-occupied programs too, so the question is which structure fits your plan.
Illustration: suppose you buy a $500,000 small multi-unit building and live in one unit.
- FHA at 3.5% down: $500,000 x 0.035 = $17,500. The base loan is $482,500.
- Upfront mortgage insurance premium at 1.75% (as of 2026, confirm with HUD): $482,500 x 0.0175 = $8,443.75, usually financed, for a total loan of $490,943.75.
- Annual premium at an assumed 0.55%: $482,500 x 0.0055 / 12 = about $221 a month.
- Conventional investor-style 25% down: $500,000 x 0.25 = $125,000.
- Cash difference: $125,000 – $17,500 = $107,500 kept in your pocket, before closing costs on either path.
Now assume a total housing payment of $3,600 a month and $2,400 of rent from the other units. Allowing 8% vacancy ($192) leaves a net cost of $3,600 – $2,400 + $192 = $1,392 a month to live there. Your real housing cost drops, and you own an asset that would have taken years of saving to reach.
Duane Buziak, NMLS #1110647, recommends running this math before you look at listings.
Putting it into practice
- Confirm current FHA multi-unit loan limits and the self-sufficiency test for three- and four-unit buildings, where only a portion of projected rent (commonly 75%) is counted against the full payment.
- Start with a NoTouch Credit Pull so you can see where you stand without a hard inquiry on your credit.
- Price rents from comparable listings, then cut the number you plan around.
- Plan to occupy the unit for at least 12 months.
Common mistake: counting 100% of optimistic rent while forgetting mortgage insurance, vacancy, and repairs. Measure: cash to close versus 25% down, net monthly housing cost after rent, and cash-on-cash return (annual net cash flow divided by cash invested).
2. Pair the Purchase With Down Payment Assistance
Down payment assistance programs can fund part of the minimum down payment through a second lien. Dynamo DPA (2.5% or 3.5%, 580 FICO minimum) and Turbo DPA (3.5% or 5%, 600 FICO minimum) both work in this space. The important point for investors is that these programs are for owner-occupied purchases, so they pair with a house hack and not with a pure rental.
Illustration: suppose you buy a $350,000 owner-occupied property with FHA financing. The 3.5% minimum down payment is $12,250. If a DPA second lien covers 2.5% ($8,750), your own cash toward the down payment is $3,500.
The second lien is where the real cost lives, and terms vary by program. Imagine one that is repaid over 10 years at 6%: the payment is about $97 a month, and total repayment is roughly $11,650 against the $8,750 you received, a difference of about $2,900. Another program might defer repayment until you sell or refinance, with no monthly payment. Either way, you owe the money back, and that affects your options when you eventually refinance or sell.
How to evaluate it
- Check FICO minimums (580 for Dynamo, 600 for Turbo) and your debt-to-income ratio.
- Confirm occupancy and property-type rules, including whether a multi-unit building qualifies.
- Compare second-lien terms: interest, monthly payment, deferral, and repayment triggers such as sale, refinance, or paying off the first mortgage.
- Ask how the second lien affects your qualifying ratios and how the first mortgage may be structured.
Common mistake: treating assistance as a gift. It is a loan with its own cost, and it can limit a cash-out refinance later. Measure: the cash saved at closing against the total long-term cost of the second lien over the years you expect to hold the property.
3. Use a VA Loan on a Multi-Unit Primary Residence
For eligible veterans, service members, and some surviving spouses, a VA loan is the one mainstream program that allows 0% down on up to four units, provided you occupy one of them. Unlike FHA, VA charges no monthly mortgage insurance. It charges a one-time funding fee, which can be financed. Veterans United publishes veteran-focused education on this, and the VA’s funding fee page is the source to check for current tiers.
Illustration: suppose a veteran buys a $600,000 fourplex with 0% down, lives in one unit, and rents the other three. If the first-use funding fee with no down payment is 2.15% (as of 2026, verify on va.gov), the fee is $600,000 x 0.0215 = $12,900. Financed, the loan becomes $612,900. Subsequent use with no down payment carries a higher tier, so the fee depends on your history.
Rental income rules matter. Programs often count only a portion of projected rent, commonly 75%, and may require reserves or landlord experience when you rely on it for qualifying. Confirm how your program treats it.
Steps to follow
- Obtain your Certificate of Eligibility.
- Confirm your funding fee tier and whether you qualify for an exemption.
- Verify how rental income counts and what reserves are required.
- Check your remaining entitlement and county loan limits.
Common mistake: not planning entitlement reuse. If you move out and keep the property, you may still have entitlement for a second VA purchase, but the sequence matters, so map it out before the next purchase and not after. Measure: cash out of pocket, total funding fee cost, and remaining entitlement after closing.
4. Tap Equity in Your Current Home
If you already own a home with equity, that equity can become the rental’s down payment. A digital HELCs lets you draw only what you need, while a cash-out refinance replaces your first mortgage with a larger one. The first is usually cheaper to set up and flexible. The second gives a fixed payment but resets your primary mortgage and may cost more.
Illustration: suppose you draw $150,000 from a HELOC to buy a $600,000 rental. A 20% down payment is $120,000, leaving $30,000 for closing costs and reserves. Assume your home is worth $700,000 with a $350,000 first mortgage, so combined loan-to-value is ($350,000 + $150,000) / $700,000 = 71.4%.
Now test debt-to-income. Suppose your gross income is $14,000 a month. Your current payment is $2,800. The HELOC at an assumed 8% interest-only is $150,000 x 0.08 / 12 = $1,000. The rental’s payment is $3,300, offset by 75% of $3,600 rent ($2,700), a net of $600. Your total is $2,800 + $1,000 + $600 = $4,400, and $4,400 / $14,000 = 31.4%. That is workable, but a variable rate could change the picture.
The sequence
- Estimate your home value and available equity.
- Compare HELOC and cash-out structures, including rate type, draw period, and closing costs.
- Run the debt-to-income test with both payments included. A NoTouch Credit Pull lets you do this without a hard inquiry.
- Secure the equity first, then make the offer.
Common mistake: over-leveraging your primary residence and ignoring variable-rate exposure. If the rental sits vacant, your own home is the collateral. Measure: combined LTV, debt-to-income after both payments, and rental cash flow after the equity payment.
5. Qualify With a DSCR Loan, Then Fund the Down Payment Elsewhere
A debt service coverage ratio loan qualifies you on the property’s income rather than your personal tax returns, which makes it a natural fit for self-employed investors and anyone whose income does not fit a standard box. The catch is that DSCR loans usually require a down payment, often 20% to 25%, and the minimum varies by program. They solve the qualification problem, not the cash problem.
Illustration: a property rents for $3,000 a month and its PITIA (principal, interest, taxes, insurance, and association dues) is $2,400. DSCR = $3,000 / $2,400 = 1.25. Some programs accept 1.0 or even lower with more down, so confirm the minimum for yours.
Suppose the property costs $400,000. At 20% down, that is $80,000 plus roughly $8,000 for closing costs, so $88,000 invested. Monthly cash flow is $3,000 – $2,400 = $600, minus $300 for maintenance and vacancy reserves, leaving $300. Annually that is $3,600, a cash-on-cash return of $3,600 / $88,000 = 4.1%. If a HELOC at an assumed 8% interest-only supplied the whole $88,000, that payment is about $587 a month, and cash flow goes to roughly negative $287. The funding source can erase the return.
What to prepare
- Gather the lease or order a market rent appraisal.
- Calculate the DSCR with the full PITIA.
- Confirm the program’s minimum ratio, down payment, and reserve requirements.
- Line up the funding source before you go under contract.
Common mistake: assuming DSCR means no down payment. Measure: DSCR ratio, cash-on-cash return after the cost of the down payment funds, and months of reserves.
6. Bring in Seller Financing or Seller Credits
A seller may carry part of the price as a note or offer a credit toward your costs. Both reduce the cash you bring to closing, but both are negotiated and depend on the seller’s circumstances. Sellers who own the property free and clear, or who want steady income, are the most likely to say yes.
Illustration: suppose you buy a $300,000 property. A first mortgage covers 80% ($240,000), the seller carries a 10% second note ($30,000), and you put down the remaining 10% ($30,000). Compare that to 25% down at $75,000: you save $45,000. If the note is interest-only at 6% with a five-year balloon, the payment is $30,000 x 0.06 / 12 = $150 a month, and $30,000 comes due at the end of year five. You need a plan to refinance or pay it off by then.
Seller credits work differently. Programs commonly cap seller contributions on investment properties at around 2% (verify for your program), so on $300,000 that is $6,000, which helps with closing costs but not the down payment.
Steps to follow
- Review title for existing mortgages and due-on-sale clauses. If the seller has a loan, carrying a note can trigger it.
- Hire a real estate attorney to draft the note and security instrument.
- Record the note so it is enforceable and visible in title.
- Confirm that the first mortgage’s guidelines allow secondary financing and how combined LTV is capped.
Common mistake: handshake agreements and unrecorded notes. They leave both sides exposed and can stop the first mortgage from closing. Measure: cash at closing, your blended monthly payment, and the balloon date relative to your refinance plan.
7. Partner With a Capital Partner or Use a Documented Gift
If you have the credit and the deal-finding ability but not the cash, a co-investor can fund the down payment in exchange for an ownership share. A gift from a relative is a different tool: gift funds are generally permitted for owner-occupied purchases, but under Fannie Mae’s rules they are not permitted for investment properties. See the Fannie Mae Selling Guide on personal gifts, and confirm the rules for your specific program. That makes gifts a fit for a house hack, and partners a fit for a pure rental.
Illustration: suppose a $400,000 rental. A partner funds the 20% down payment ($80,000) in exchange for a 30% equity share, and you hold 70% by arranging the financing and managing the property. If the property nets $6,000 a year after expenses, the partner receives 30% ($1,800) and you receive 70% ($4,200). The partner earns 2.25% on cash plus a share of appreciation and loan paydown, so they may want a preferred return. You put in no cash, but you give up a large share of the upside.
How to structure it
- Draft a written operating agreement covering ownership percentages, capital calls, profit splits, decision rights, and exit terms.
- Document the source of funds with bank statements and a clear paper trail.
- Confirm gift letter and seasoning rules for the program (verify on fanniemae.com).
- Have an attorney review the agreement, since pooled investments can carry legal considerations.
Common mistake: undisclosed borrowed funds, which can sink an approval, or vague profit-split terms that turn into disputes after the first vacancy. Measure: your ownership percentage, your return after the partner split, and documentation completeness before you apply.
Where to Start: Sequencing These Seven Strategies
For most buyers, the house hack is the cleanest true low-down path, and a VA loan is the first choice if you are eligible, since it can mean 0% down on up to four units. Once that first property performs, equity from your home or a DSCR loan can carry you into a second purchase, and seller financing or a capital partner can fill the remaining gaps. Layer them carefully, because every added payment tightens your debt-to-income ratio and your reserves.
Stop overpaying on your mortgage, discover wholesale rates that could save you thousands over the life of your loan. Talk to Duane today for a no-obligation rate comparison with no credit impact and see exactly how much you can save with our independent mortgage expertise. You can begin with a no-credit-impact pre-qualification through Mortgage Shopping (Supra Mortgages / Duane Buziak Mortgage Maestro), using the NoTouch Credit Process.