Know Your Down Payment Before You Start Looking.
Mbanc NMLS #38232 | Equal Housing Opportunity Lender
Down Payment by Credit Score Tier
Higher credit tiers qualify for lower minimum down payments: the program’s lowest minimum applies at the strongest tiers, mid-600s scores require moderately more equity, and the requirement steps up again below that. Your Principal Banker will confirm the exact figure for your credit band.
On the same purchase price, the difference between a mid-600s credit tier and a stronger one can be tens of thousands of dollars in required cash — the tangible value of improving your credit score before applying.
Down Payment by Purchase Price — The Full Table
At 85% LTV (minimum for 680+ credit, primary residence):
Your required down payment scales with the purchase price. Rather than publish a grid that can’t reflect your credit tier and occupancy, run your numbers with a Principal Banker — it takes one conversation.
Why a Larger Down Payment Is Often Worth Considering
Putting down more than your minimum has three direct benefits that often make it the better choice when the cash is accessible:
1. Lower rate. A lower loan-to-value tier generally improves pricing — on a large loan the monthly difference is meaningful. Your Principal Banker can quote the spread for your file.
2. Lower reserve requirement. At 85% LTV: 6 months PITIA in reserves required. At 80% LTV: 3 months PITIA. If reserves are tight, the down payment increase reduces the reserve threshold simultaneously.
3. Better DTI. A lower loan amount means a lower PITIA, which means a lower DTI. If you’re at 48% DTI at 85% LTV, the same purchase at 80% LTV might drop you to 43% — creating cleaner qualification headroom.
The break-even: if the rate savings over the expected hold period exceed the additional cash deployed at closing, 20% wins. For most borrowers holding a loan 5+ years, this math typically favors 20%.
Down Payment Sources — What Qualifies
Eligible down payment sources:
– Personal checking and savings accounts (verified 2 months)
– Investment accounts — stocks, bonds, mutual funds (at 70% of balance for liquidity discount)
– Retirement accounts — IRA, 401k (at 60% of vested balance)
– Proceeds from property sale (settlement statement required)
– Business accounts (with documented ownership)
Gift funds:
On primary residence purchases at lower loan-to-value tiers, your entire down payment may be gifted; at higher tiers a portion must come from your own funds. Investment properties: gifts not permitted.
Down payment assistance programs:
Bank statement loans are Non-QM products and do not participate in most government or agency down payment assistance programs.
Self-employment cash:
Cash generated by the business can be used for down payment when it is documented in the business bank statements as consistent with the operating pattern. Large unexplained cash deposits require sourcing documentation.
Reserves — Separate From and In Addition to Down Payment
Reserves are liquid assets you must demonstrate you will still have AFTER closing — after the down payment and closing costs clear. They are separate from and in addition to the down payment.
Reserve requirements by LTV:
– LTV at or below 80%: 3 months PITIA
– LTV 80.01–85%: 6 months PITIA
– Loan amount above $1.5M: 9 months PITIA
If you’re targeting a $1,200,000 purchase at 85% LTV (680+ credit):
– Down payment: $180,000
– Closing costs (estimate): $18,000–$24,000
– Required reserves: 6 months × estimated PITIA (~$9,700/month) = $58,200
– Total liquid assets needed: approximately $256,000–$262,000
Many borrowers underestimate this. Budget for down payment + closing costs + reserves as the total cash-to-close figure, not just down payment alone.
Investment Property Down Payment
Investment properties require more down payment than primary residences:
Investment properties require more equity than primary residences at every credit tier, and the gap widens at lower scores.
Investment property bank statement loans are available in 46 states.
Frequently Asked Questions
What is the minimum down payment for a bank statement loan?
The minimum depends on your credit score, occupancy, and loan size — the program’s lowest minimum applies at stronger credit tiers, and the requirement steps up at lower scores. Your Principal Banker will confirm the exact figure for your scenario.
Can I use gift money for my entire bank statement loan down payment?
Often, yes — at lower loan-to-value tiers your entire down payment may be gifted; at higher tiers a portion must come from your own funds. Investment property purchases do not allow gift funds.
Can I use my business bank account to fund my down payment?
Yes, with documented business ownership. Business funds used for down payment are sourced through the business bank statements that are already part of your application file.
Does a larger down payment improve my interest rate?
Yes — putting more down generally improves pricing. Your Principal Banker can show you the difference between equity tiers on your file.
What is the total cash I need at closing?
Down payment + estimated closing costs (typically 2–3% of loan amount) + required post-close reserves. Your loan officer provides a Loan Estimate with exact figures after application.
Go Deeper
About the Author
Mayer Dallal — Managing Director, Mbanc NMLS #38232. [Full profile → mbanc.com/blog/author/mayer-dallal/]
Know Your Down Payment Before You Start Looking.
Mbanc NMLS #38232 | Equal Housing Opportunity Lender
| Not a commitment to lend.
Mbanc NMLS #38232 | Equal Housing Opportunity Lender | This content is for informational purposes only and does not constitute a commitment to lend. Not all borrowers qualify.
Down Payment Sources: What Qualifies and What Doesn’t
Acceptable down payment sources:
Checking and savings accounts (full documentation of 60-day history required).
Brokerage investment accounts (post-liquidation settlement funds).
Retirement account withdrawals (proceeds after tax and penalty — note: the retirement account itself counts toward reserves at 70%, but actual withdrawal proceeds count as regular funds).
Sale of real estate (settlement statement documents the source).
Gift funds: Bank statement loans typically do NOT allow gift funds for down payment. Borrower must use own verified funds.
Not acceptable for down payment:
Unsecured personal loans or lines of credit used to fund the down payment.
Funds from business accounts where you’re not a principal (borrowing from a business you don’t control).
Undocumented cash outside the 60-day account history.
The 60-Day Seasoning Rule
Bank statements provided for the down payment must show funds “seasoned” — present in the account — for at least 60 days before application. A large deposit that appeared in the account 2 weeks before application will be questioned. The loan officer will ask for source documentation.
Proactive approach: If you’re planning to liquidate investments (brokerage account, etc.) to fund the down payment, execute the liquidation and transfer the funds to your primary bank account at least 60 days before applying. The funds will then appear as a seasoned balance in the 2 months of statements required at application.
Down Payment Gift From Business (Owner-Occupied 2-4 Unit Exception)
For owner-occupied multi-family properties where the borrower owns the business that generated the deposits: business account funds transferred to personal for down payment may be acceptable when properly documented. The loan officer structures the business-to-personal transfer as a distribution rather than a loan to the owner. CPA confirmation of distribution (rather than loan) is required.
Not a commitment to lend. Mbanc NMLS #38232 | Equal Housing Opportunity Lender
Bank statement loan down payment minimums vary by credit tier, occupancy, and loan size. No PMI at any equity tier. Down payment must come from verified, seasoned funds. Mbanc NMLS #38232 | Equal Housing Opportunity Lender | Not a commitment to lend