Loan Programs
Two to four units on residential DSCR terms. Five to eight units on commercial-grade DSCR. Same principle either way — the rent roll qualifies the deal — but the underwriting changes materially at the five-unit line, and knowing where that line falls changes how you buy.
Program terms
- 2–4 units: up to 80% LTV purchase, 70–75% cash-out, Form 1025 appraisal
- 5–8 units: 70–75% LTV purchase, 65–70% cash-out, narrative appraisal
- 620 FICO floor on 2–4; 660–680 typical on 5–8
- Non-recourse available on 5–8 at some lenders for +25 to +50 bps
- Mixed-use eligible where residential is 51%+ of square footage
The four-to-five unit line
A fourplex is residential property. A five-unit building is commercial property, and almost everything downstream of that classification changes.
| 2–4 units | 5–8 units | |
|---|---|---|
| Appraisal | Form 1025, sales comparison led | Narrative, income approach led |
| Appraisal cost | $900–$1,500 | $1,200–$2,500 |
| Turnaround | 7–14 days | 14–30 days |
| Max LTV, purchase | 75–80% | 70–75% |
| Value driver | Comparable sales | Net operating income |
| Recourse | Nearly always | Non-recourse sometimes available |
| Prepay restrictions | State law applies | Largely unrestricted |
The value-driver row is the one that reshapes strategy. On a fourplex, raising rents $150 a unit improves your cash flow and your DSCR, but the property's appraised value still tracks what other fourplexes sold for. On a six-unit valued off net operating income, that same $150 across six units adds $10,800 of annual NOI — and at a 7% market cap rate, roughly $154,000 of appraised value. Forced appreciation is real above four units in a way it simply is not below.
What underwriting wants on a rent roll
On 2–4 units the Form 1025 includes the rent analysis and the process resembles a single-family file with more moving parts. On 5–8 units, expect the file to ask for:
- A certified rent roll listing every unit, tenant, lease start and end, current rent, and deposit held
- Trailing 12 months of operating statements, or as much history as ownership can produce
- Copies of all executed leases
- A capital expenditure history — roof, boiler, electrical service, and any recent system replacements
- Certificate of occupancy and evidence of legal unit count
Vacancy and the DSCR denominator
Multifamily DSCR is calculated on gross scheduled rent, the same as single-family — vacancy is not deducted. That helps your ratio on paper. It also means a building with two of six units empty and no signed leases will have those units valued at the appraiser's market rent, which may be optimistic relative to what you will actually achieve at lease-up.
The corollary is a real advantage: partial vacancy at purchase does not automatically break a multifamily DSCR file the way it can strain your actual cash position. Underwrite the financing on the 1025 or the appraiser's rent conclusions, and underwrite your own capital plan on realistic absorption. Those are two different exercises, and running the second on the cash flow calculator is where the real answer lives.
Mixed-use
A building with ground-floor retail and apartments above is financeable when residential square footage is 51% or more of the total. Expect a narrower lender pool, LTV capped around 65–70%, and specific attention to the commercial tenant's lease term and creditworthiness. A vacant storefront in an otherwise full building is the most common reason a mixed-use DSCR file gets repriced.
Send the rent roll
A rent roll, the address, and the price is enough to size 2–8 unit financing and tell you where the appraisal risk sits.
Get a term sheet Call (914) 266-0725Business-purpose loans on non-owner-occupied investment property. Terms and eligibility vary by lender, state, and property, and change frequently. Not a loan commitment.