What Is Acquisition Financing?
Acquisition financing is the loan used to purchase an investment or commercial property, sized against the purchase price and, for income property, the rent it produces. Unlike a refinance, which replaces a loan on a property you already own, acquisition financing funds a new purchase — and the loan type is chosen to match the property, the timeline, and your exit or hold strategy.
How Much Down Payment Do You Need to Buy?
Buying investment property in 2026 generally requires a down payment of 15% to 25%, depending on the property and loan type. Conventional financing allows as little as 15% down (85% LTV) on a single-family rental, but requires 25% down (75% LTV) on 2–4 unit properties, with the best pricing at 25% down. DSCR purchase loans typically require 20% down (80% LTV) for a borrower with a 700+ FICO. Commercial and value-add purchases usually require more equity — often 20% to 35%.
Acquisition Loan Options: Speed vs. Rate
There are two broad tracks for acquisition financing, and the trade-off is speed versus rate. Conventional and agency loans from banks offer the lowest rates but take 30 to 45 days to close and require full documentation. Asset-based loans from private and hard money lenders qualify you mainly on the property and can close in as little as 5 to 10 business days — ideal when you're competing with cash buyers or racing a closing deadline. The right track depends on your timeline and how the property qualifies.
Qualifying to Buy an Investment Property
Acquisition approval depends on the loan type. Conventional investment loans generally want a credit score of at least 620–680, with the best pricing at 720+, a DTI under about 45%, and roughly six months of reserves. DSCR loans qualify on the property's rental income instead of personal income, typically needing a 660–700 FICO and a DSCR near 1.0 or higher. Hard money and bridge lenders focus on the property's value and your equity, with the most flexible qualification.
Financing a Time-Sensitive Acquisition
When a purchase has to close fast — a seller demanding a two-week close, an auction, or a 1031 exchange deadline — speed matters more than rate. A bridge or hard money loan can close in one to two weeks and get the deal done, after which you refinance into permanent financing. The extra cost is the price of certainty, and it's often the difference between winning the deal and losing it to a cash buyer.
Funding Your Down Payment
The down payment is often the biggest hurdle in an acquisition, and investors use several strategies to fund it. A common approach is borrowing against equity in another property — a HELOC or cash-out refinance on a home or existing rental — to raise the down payment while keeping cash reserves intact. Cross-collateralizing another property you own can also stand in for a cash down payment on some private loans.
Buying Commercial vs. Residential Investment Property
The financing differs sharply between residential and commercial acquisitions. A 1–4 unit rental is financed as a residential investment loan (conventional or DSCR), qualified on rent and capped near 75%–85% LTV. A 5+ unit apartment or a commercial building is financed as commercial debt — agency, bank, bridge, or CMBS — underwritten on the property's net operating income, with leverage typically up to 65%–80% depending on the asset and whether it's stabilized.
