Multi-Family Mortgage Lenders
Everything changes at five units. Below that, you can buy a fourplex with 3.5% down.
By Mike Basti, Licensed Mortgage Broker (NMLS #377740) · Updated September 2026
The Five-Unit Line
This is the single most important thing to understand about multi-family financing. Properties with two to four units are residential. Five or more are commercial, and almost every rule changes.
| 2–4 units | 5+ units | |
|---|---|---|
| Loan type | Residential | Commercial |
| Owner-occupied option | Yes — FHA from 3.5% down | No |
| Qualifies on | Your income + rental income | Property NOI and DSCR |
| Down payment | 3.5% owner-occupied, 20–25% investment | 25–35% |
| Term | 15–30 year fixed available | Often 5–10 year with balloon |
| Appraisal basis | Comparable sales | Income approach |
House hacking is the best-value entry point
FHA permits a fourplex purchase at 3.5% down provided you occupy one unit for at least a year. You can count a portion of the projected rent from the other three units toward qualifying. On an $1,100,000 fourplex that is roughly $38,500 down for a property generating three rental incomes — the cheapest legitimate route into multi-family in California.
Two-to-Four Unit Requirements
Owner-occupied purchases can use FHA at 3.5% down with a 580 credit score, VA at zero down for eligible veterans, or conventional from 5%. Investment purchases require 20% to 25% down.
Rental income from the other units generally counts at 75% of gross, documented through existing leases or the appraiser’s market rent estimate. FHA applies a self-sufficiency test on three-and-four-unit properties, requiring projected rent to cover the full payment — a test that fails on many high-priced California properties.
Five-Plus Unit Requirements
Commercial multi-family qualifies on the property rather than the borrower. The key measure is debt service coverage ratio, usually needing 1.25 or better, calculated on net operating income after operating expenses rather than gross rent.
Expect 25% to 35% down, a 660 or better credit score, and 45 to 75 days to close. Terms are commonly five to ten years with a balloon rather than fully amortising, so plan the refinance from the outset.
What Lenders Ask For
Beyond standard borrower documentation, a multi-family file needs a current rent roll, existing leases for every unit, trailing twelve-month operating statements on five-plus properties, and a plan for any vacant units.
On older California buildings, also expect scrutiny of deferred maintenance, seismic retrofit status in cities with soft-story ordinances such as Los Angeles and San Francisco, and rent control exposure — which materially affects both value and future income.
Rent Control Matters More Than People Expect
California’s statewide rent cap under AB 1482 applies to many multi-family properties, and local ordinances in Los Angeles, San Francisco, Oakland, Santa Monica and elsewhere are stricter still.
Rent control affects your ability to raise rents, which affects future net operating income, which affects both what a lender will lend and what the property is worth. Confirm the regulatory position before you go under contract, not during due diligence.
Related Pages
Frequently Asked Questions
What changes at five units?
Almost everything. Two-to-four unit properties are residential — owner-occupied options exist, you qualify on personal income plus rental income, and 15 to 30-year fixed terms are available. Five or more units is commercial, qualifying on property net operating income with 25% to 35% down and often a five-to-ten year balloon.
Can I buy a fourplex with 3.5% down?
Yes, through FHA, provided you occupy one unit for at least a year. You can also count a portion of the projected rent from the other units toward qualifying. On an $1,100,000 fourplex that is roughly $38,500 down for a property generating three rental incomes.
How is rental income counted on a 2-4 unit property?
Generally at 75% of gross rent, documented through existing leases or the appraiser’s market rent estimate. FHA additionally applies a self-sufficiency test on three and four-unit properties requiring projected rent to cover the full payment, which fails on many high-priced California properties.
What DSCR do commercial multi-family lenders require?
Usually 1.25 or better, calculated on net operating income after operating expenses rather than gross rent. That is a stricter measure than residential DSCR lending, which typically uses gross rent against PITIA.
What documents do multi-family lenders need?
A current rent roll, existing leases for every unit, and on five-plus properties trailing twelve-month operating statements. Expect additional scrutiny of deferred maintenance, seismic retrofit status in soft-story ordinance cities, and rent control exposure.
Does rent control affect multi-family financing?
Significantly. California’s statewide cap under AB 1482 plus stricter local ordinances in Los Angeles, San Francisco, Oakland and Santa Monica limit rent increases, which constrains future net operating income and therefore both what a lender will lend and what the property is worth.
Educational information only, not a commitment to lend. Program terms vary by lender and are subject to credit approval. Figures reflect 2026 program limits. Sources: FHFA, HUD, VA, CFPB, California DRE. Sponsored by Save Financial, Inc. (NMLS #377740). California DRE #01875766. Equal Housing Lender.
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