An apartment building loan (5+ units) is a commercial loan sized by the property's income, not yours. Lenders take the building's net operating income, require it to cover the debt payment by at least 1.20x (1.25x for interest-only), and cap leverage at 75% LTV — whichever produces the smaller loan wins. Structures range from bank hybrids (3/5/7/10-year fixed, then adjustable) to Fannie/Freddie agency loans with 30-year amortization. Our multifamily program runs $500K to $25M+ with no cap on units — in select major metros.
The most expensive misunderstanding in small multifamily is thinking a 6-unit building is just a bigger fourplex. It isn't. The moment a property crosses from 4 units to 5, it leaves the residential mortgage world entirely — different underwriting, different documents, different loan structures, different everything. Investors who show up with a residential playbook waste weeks discovering this one rejection at a time.
This guide is the commercial playbook, written for the investor making that jump: what actually changes at 5 units, how lenders size the loan off the rent roll, which of the five loan structures fits which strategy, and exactly what you need in hand to get a real quote.
The 4-Unit Line: Why 5 Units Changes Everything
Residential lending — including residential DSCR loans — stops at 4 units. That's not a lender preference; it's how the entire financing system is built. One to four units is "residential" collateral. Five or more is commercial multifamily. Three big things change when you cross the line:
- The income that qualifies the loan. A residential DSCR loan tests the market rent against the mortgage payment. A commercial multifamily loan underwrites the building like a business: actual rent roll, actual operating expenses, and the net operating income left over. The building's P&L is the application.
- The appraisal. Instead of comparable home sales, you get an income-approach commercial appraisal — value driven by NOI and the market cap rate. A building that raises its NOI raises its value, which is the entire logic of multifamily investing.
- The borrower test. Your W-2 still doesn't matter (nice), but your balance sheet does: net worth, liquidity, and track record get reviewed alongside the property. Commercial lenders are underwriting an operator, not just a credit score.
What you get in exchange for the extra scrutiny: no cap on units or loan size, leverage set by cash flow instead of comp sales, non-recourse options, and pricing built for large balances. On our program that means $500,000 to $25 million and above with no ceiling on either units or dollars.
How the Loan Gets Sized: NOI, DSCR, and the Two Ceilings
Every apartment loan is sized by two independent ceilings, and you get the lower one:
- The LTV ceiling: 75% of appraised value, maximum.
- The DSCR ceiling: the loan whose annual payment the property's NOI covers at least 1.20 times (or 1.25x if the loan is interest-only).
On a strong-cash-flow building in a normal rate environment, the 75% LTV cap binds first. On a building with soft rents, high taxes, or heavy expenses, the DSCR test binds — and the loan comes in below 75% LTV no matter what the appraisal says. This is the single most common surprise in multifamily financing, and it's why leverage is determined by in-place cash flow appears in every serious program description. We walk through the full math with a worked example in Multifamily DSCR Requirements.
🏢 Illustrative sizing — 12-unit building
- Gross scheduled rents: $21,000/mo → $252,000/yr
- Vacancy + operating expenses (taxes, insurance, management, repairs, utilities): $100,800
- NOI: $151,200
- Max annual debt service at 1.20x: $151,200 ÷ 1.20 = $126,000 (~$10,500/mo)
- At an illustrative rate on a 30-year amortization, that payment supports roughly a $1.5M loan. If the appraisal comes in at $2.2M, the 75% LTV ceiling ($1.65M) is higher — so DSCR sets the loan at ~$1.5M (≈68% LTV).
Illustrative only — rates, expenses, and underwriting adjustments vary by market and file.
The Five Loan Structures (and Who Each Is For)
| Structure | How It Works | Best For |
|---|---|---|
| Hybrid | Fixed for 3, 5, 7, or 10 years, then adjusts (6-mo SOFR / 12-MTA) for the rest of the term | Value-add and medium holds — refi or sell inside the fixed window |
| Fixed | 7 or 10-year fixed rate, 30-year amortization | Stable holds that want payment certainty without agency process |
| 15-Yr Self-Amortizing | Fixed rate, fully pays off in 15 years — no balloon, ever | Owner-operators heading to free-and-clear |
| ARM | Floating from day one, up to 15-year term, adjusts every 6 months | Short holds and rate-down bets — lowest start rate |
| Agency (Fannie/Freddie) | 5–30 yr fixed or floating, 30-yr amortization, typically non-recourse | Stabilized assets, long holds, lease-up take-outs |
Two structural details worth knowing before you pick: adjustable structures carry a lifetime rate cap — the greater of 10.95% or 5% above your initial fixed rate — so the worst case is defined up front. And rate lock is available at application (deposit required, refunded at closing), which matters in a moving rate market because multifamily underwriting takes longer than residential. See the agency-vs-bank decision in detail in Fannie Mae & Freddie Mac Multifamily vs. Bank Financing.
What the Borrower Has to Bring
Commercial multifamily is built for experienced investors and owner-operators, and the borrower review reflects that. Expect the lender to look at:
- Net worth — commonly benchmarked in the neighborhood of the loan amount.
- Liquidity — enough post-closing cash to weather vacancies and surprises; roughly 6–12 months of debt service is a common yardstick.
- Experience — the number of multifamily properties or units you own now. Managing (or professionally delegating) 20 units is a skill, and lenders price the risk that you don't have it yet.
- Credit — reviewed, but there's no residential-style FICO matrix; character of credit matters more than a 20-point score difference.
Coming from 1–4 unit rentals with a strong balance sheet but no 5+ unit track record? That's the most common jump we see — it's a conversation, not a disqualification. Smaller first deals (say, 5–15 units) with professional management in place are the classic entry point. The scaling path from single-family into multifamily is mapped in Scaling From 1 to 10 Rentals.
What It Costs to Get to Closing
Commercial loans front-load differently than residential. On our multifamily program:
- Application deposit: the greater of $2,000 or 0.125% of the loan amount, collected at application and applied as the processing fee at closing. It covers standard loan documents, credit reports, the appraisal, and other third-party reports — you are not writing separate checks for each report as the file moves.
- Phase 1 environmental: required on loans above $7.5 million (standard for institutional-size assets).
- Rate-lock deposit: if you lock at application, the deposit is refunded at closing.
- Standard closing costs: title, escrow, and recording as with any commercial transaction; no legal fees unless outside counsel acts as closing agent.
Not required in most cases — and worth asking any lender about, because these are common cost adders elsewhere: tax and insurance impounds, reserves for capital improvements, engineering reports, seismic/PML reports, and legal opinions.
Markets Matter More Than in Residential
Residential DSCR lenders will finance a rental in nearly any county in America. Apartment lenders won't — multifamily liquidity, valuation confidence, and exit depth concentrate in major metros, and serious programs draw a hard map. Ours lends in: California (Los Angeles, Orange County, San Diego, San Francisco Bay Area, Sacramento), Seattle, Portland, Denver, Minneapolis, Milwaukee, Chicago, New York, Boston, and Washington D.C.
A 5+ unit building outside those metros isn't eligible for this program — and if that's your situation, say so up front rather than after the rent roll analysis. (1–4 unit properties are different: our residential DSCR programs lend in 49 states.)
What You Need to Get a Real Quote
Multifamily quoting is refreshingly concrete. Four items produce real sizing and pricing:
- Property address — market check and comparables.
- Current rent roll — every unit, current rent, lease status. Gaps and month-to-months are fine; hiding them isn't.
- Operating statements — trailing 12 months of actual income and expenses. Year-end statements work to start.
- Borrower snapshot — estimated net worth, liquidity, and how many multifamily properties/units you own today.
No application fee, no credit pull to get numbers. If you have a rent roll and a T-12, you're a day away from knowing what the building supports.
Have a 5+ Unit Deal? Get It Sized.
$500K to $25M+ · No cap on units · Select major metros. Send the rent roll and we'll show you what it supports.
See the Multifamily Program →Frequently Asked Questions
Explore More Resources
The Multifamily Cluster
- Multifamily Loan Program — 5+ Units, $500K–$25M+
- Multifamily DSCR Requirements: The 1.20x Math
- Non-Recourse Multifamily Loans Explained
- Agency Multifamily vs. Bank Financing
Related Guides
- Scaling From 1 to 10 Rentals: The Financing Stack
- How Much Can You Borrow? The Two-Ceiling Math (1–4 Units)
- Glossary: Multifamily · NOI · Cap Rate · Non-Recourse
DSCR Capital Partners is a brand of UTM Financial, LLC (NMLS #2591548), a licensed mortgage broker. The multifamily program described is offered through wholesale and correspondent lender partners in select major metropolitan markets only; terms are subject to change and final terms depend on full underwriting. Worked examples are illustrative, not quotes. Informational only; not a loan commitment or legal/tax advice. Equal Housing Lender.