Multifamily Loans (5+ Units)
Commercial-grade financing for small apartment buildings. Access Fannie Mae, Freddie Mac, HUD, and diverse lender options for 5+ unit properties.
Multifamily Loans (5+ Units): Commercial-Grade Financing for Small Apartment Buildings
Multifamily loans for 5+ units provide investors with access to commercial-grade financing specifically designed for small apartment buildings, unlocking specialized lending channels and competitive terms not available for residential properties.
This specialized program recognizes that properties with 5 or more units represent a significant step up from residential 1-4 unit financing, requiring commercial underwriting standards and access to institutional lending channels. The financing options available for these properties differ dramatically from residential mortgages.
For experienced investors, small apartment operators, developers, and borrowers seeking to acquire or refinance small multifamily buildings, these loans offer access to Fannie Mae, Freddie Mac, HUD, CMBS, and commercial bank financing with terms designed for income-producing properties.
What is a Multifamily Loan (5+ Units)?
- Definition
- Multifamily loans for 5+ units are commercial-grade financing programs designed specifically for small apartment buildings. These loans differ significantly from residential 1-4 unit loans and unlock access to specialized financing channels like Fannie Mae, Freddie Mac, CMBS, HUD, and commercial banks.
- How it works
- These loans provide commercial-grade financing for properties with 5 or more units, offering diverse lender options including agency loans, HUD financing, CMBS, and bank loans. Terms vary widely, with agency and HUD loans offering 5-30+ year amortizations and bridge or construction options available for acquisitions or rehab projects.
- Key advantage
- Multifamily loans for 5+ units provide access to institutional lending channels with competitive terms, higher loan amounts, and financing structures designed specifically for income-producing properties rather than residential mortgages.
Multifamily Loan Eligibility Requirements
You may be eligible for a multifamily loan if you meet these key requirements:
| Requirement | Details |
|---|---|
| Property type | 5+ unit multifamily buildings minimum |
| Loan-to-Value (LTV) | Up to 80% for Fannie/Freddie, up to 90% for HUD |
| DSCR requirement | 1.20 or higher |
| Net worth | 100% of loan amount for agency loans |
| Liquidity | 6% of loan amount for agency loans |
| Loan size | $750,000 to $5-7 million for small balance |
| Operating history | 2 years of rent rolls and property performance |
| Borrower experience | Track record in multifamily ownership/management |
Did you know: Multifamily loans for 5+ units unlock access to Fannie Mae, Freddie Mac, and HUD financing channels not available for smaller properties.
Why Multifamily Loans Instead of Traditional Financing?
Traditional banks often don't offer programs designed for properties with 5+ units that require commercial-grade financing. They typically focus on residential 1-4 unit loans or large commercial properties, leaving small multifamily investors without access to the specialized financing channels and competitive terms they need.
Your first bank just doesn't offer the right program for you.
Think of it like when a customer asks for something your business doesn't offer. Maybe they want delivery but you only do pickup, or they need a service you don't provide. You're not saying no because there's anything wrong with them—you just don't offer that particular service. Same with mortgages. Traditional banks work great for most people, but they don't offer the programs that small multifamily investors need for commercial-grade financing.
Traditional banks use conventional underwriting that works well for residential properties but struggles with the commercial nature of 5+ unit multifamily buildings. Your investment strategy may involve acquiring small apartment buildings, but conventional programs can't accommodate the commercial underwriting standards and institutional lending requirements.
Multifamily loans for 5+ units are perfect for investors who want access to agency financing, HUD programs, competitive commercial terms, higher loan amounts, or financing structures designed specifically for income-producing multifamily properties.
This isn't about finding loopholes or gaming the system. It's about working with lenders who understand how multifamily investing actually works. These loans are offered by lenders who work with multifamily investors every day. They look at your property's income potential, operating history, and commercial viability—the factors that actually matter for successful multifamily investment—rather than just residential mortgage qualifications.
For a no obligation conversation about your mortgage, contact Bradley Swearingen (#2577725) of Rain City Capital at 214-756-7076.
Example Use Cases and Scenarios
Seasoned Small Apartment Operator
Emma owns a 10-unit multifamily property and secures a Fannie Mae Small Balance Loan with competitive terms.
Developer with Affordable Housing Project
The Green Group uses a HUD 223(f) FHA multifamily loan for a 20-unit affordable housing building.
Investor Needing Fast Closing
Mark opts for a DSCR-focused loan for a 6-unit building to close rapidly and hold as long-term rental.
Portfolio Expansion
An experienced investor acquires a 12-unit building using agency financing for long-term hold strategy.
| Scenario | Description |
|---|---|
| Seasoned Small Apartment Operator | Emma owns a 10-unit multifamily property and secures a Fannie Mae Small Balance Loan with competitive terms. |
| Developer with Affordable Housing Project | The Green Group uses a HUD 223(f) FHA multifamily loan for a 20-unit affordable housing building. |
| Investor Needing Fast Closing | Mark opts for a DSCR-focused loan for a 6-unit building to close rapidly and hold as long-term rental. |
| Portfolio Expansion | An experienced investor acquires a 12-unit building using agency financing for long-term hold strategy. |
Did you know: HUD multifamily loans can offer up to 90% LTV with long amortization terms for qualified properties.
How Multifamily Loans Work
Multifamily loans for 5+ units follow a specialized commercial underwriting process designed specifically for income-producing properties. The key differences are commercial standards and institutional access—these loans use commercial underwriting rather than residential mortgage standards.
The Multifamily Loan Process
- 1. Property Classification & Eligibility
- The process begins with property classification to confirm eligibility for multifamily financing, followed by income analysis including rent rolls, operating expenses, and property performance history. Lenders then assess the property's commercial viability through market analysis, comparable sales, and income approach valuation, ensuring the property meets multifamily classification standards and generates sufficient income to support the loan.
- 2. Lender Selection & Program Choice
- Unlike residential loans, multifamily financing offers multiple lender options including agency loans (Fannie Mae, Freddie Mac) for competitive terms, HUD/FHA programs for high leverage, CMBS/conduit loans for structured debt, and bank or private lending for flexible underwriting. Each option has different requirements, terms, and underwriting standards that must be evaluated based on your specific situation.
- 3. Commercial Underwriting Standards
- Experienced underwriters review your multifamily investment profile using commercial standards instead of residential mortgage criteria. They assess the property's income potential through rent roll analysis and market comparisons, borrower experience through track record and net worth verification, and property performance through operating history and financial statements. The underwriting process includes the same risk assessment as commercial loans, just with a focus on small multifamily properties.
- 4. Institutional Closing & Funding
- Once approved, the closing process follows commercial mortgage standards with additional requirements for agency and HUD programs. You'll complete commercial mortgage documentation, provide environmental assessments and property inspections, and meet institutional funding requirements. The loan terms, interest rates, and repayment structure follow commercial mortgage industry practices for multifamily properties.
Multifamily Loans vs Conventional Mortgages
Understanding the key differences between multifamily loans (5+ units) and conventional mortgages can help you choose the right financing option for your situation.
| Feature | Multifamily Loans (5+ Units) | Conventional Loan |
|---|---|---|
| Who Qualifies | Experienced investors, small apartment operators, developers, borrowers with property operating history, and investors seeking commercial-grade multifamily financing | W-2 employees, salaried workers |
| Income Documentation | Commercial underwriting focusing on property income, rent rolls, and operating history, comprehensive borrower documentation for agency programs | W-2s, pay stubs, tax returns |
| Minimum Credit Score | 680 FICO score minimum | 620 |
| Minimum Down Payment | 20% down payment minimum | 3% |
| Private Mortgage Insurance | Not applicable | Private mortgage insurance (PMI) |
| Occupancy Type | Investment properties only | Primary residences, second homes, investment properties |
| Property Type | Multifamily buildings with 5+ units, small apartment buildings, mixed-use with residential focus | Single-family homes, condos, townhouses, 2-4 unit properties |
| Interest Rates | Competitive commercial rates | Market rates |
| Processing Time | 60 days for agency/HUD, 30 days for bank | 30-45 days |
| Closing Costs | Commercial closing costs, agency fees, appraisal and environmental reports | 2-5% of loan amount |
| Prepayment Penalty | Varies by lender and program type | None |
| Reserves Required | 6% of loan amount for agency loans | 2-6 months of PITI |
| Debt-to-Income Ratio | Not considered | Up to 43% |
| Maximum Loan Amount | $5-7 million for small balance loans | $806,500 |
| Appraisal Requirements | Commercial appraisal with income approach, environmental assessment | Standard appraisal required |
| Occupancy Requirements | Investment property only | Primary residence for 12 months |
| Non-Warrantable Condos | Eligible with additional requirements | Not eligible |
| Manufactured Homes | Not typically eligible | Eligible if on permanent foundation |
| ADU Properties | Eligible as part of multifamily building | Not eligible |
| Barndominiums | Not typically eligible | Not eligible |
| Tiny Homes | Not typically eligible | Not eligible |
| Mixed-Use Properties | Eligible up to 25% commercial usage for HUD | Not eligible |
| Rural Properties | Eligible | Eligible |
| Feature | Multifamily Loans (5+ Units) | Conventional Loan |
|---|---|---|
| Who Qualifies | Experienced investors, small apartment operators, developers, borrowers with property operating history, and investors seeking commercial-grade multifamily financing | W-2 employees, salaried workers |
| Income Documentation | Commercial underwriting focusing on property income, rent rolls, and operating history, comprehensive borrower documentation for agency programs | W-2s, pay stubs, tax returns |
| Minimum Credit Score | 680 FICO score minimum | 620 |
| Minimum Down Payment | 20% down payment minimum | 3% |
| Private Mortgage Insurance | Not applicable | Private mortgage insurance (PMI) |
| Occupancy Type | Investment properties only | Primary residences, second homes, investment properties |
| Property Type | Multifamily buildings with 5+ units, small apartment buildings, mixed-use with residential focus | Single-family homes, condos, townhouses, 2-4 unit properties |
| Interest Rates | Competitive commercial rates | Market rates |
| Processing Time | 60 days for agency/HUD, 30 days for bank | 30-45 days |
| Closing Costs | Commercial closing costs, agency fees, appraisal and environmental reports | 2-5% of loan amount |
| Prepayment Penalty | Varies by lender and program type | None |
| Reserves Required | 6% of loan amount for agency loans | 2-6 months of PITI |
| Debt-to-Income Ratio | Not considered | Up to 43% |
| Maximum Loan Amount | $5-7 million for small balance loans | $806,500 |
| Appraisal Requirements | Commercial appraisal with income approach, environmental assessment | Standard appraisal required |
| Occupancy Requirements | Investment property only | Primary residence for 12 months |
| Non-Warrantable Condos | Eligible with additional requirements | Not eligible |
| Manufactured Homes | Not typically eligible | Eligible if on permanent foundation |
| ADU Properties | Eligible as part of multifamily building | Not eligible |
| Barndominiums | Not typically eligible | Not eligible |
| Tiny Homes | Not typically eligible | Not eligible |
| Mixed-Use Properties | Eligible up to 25% commercial usage for HUD | Not eligible |
| Rural Properties | Eligible | Eligible |
Real-World Example: Multifamily Loans
The Seasoned Small Apartment Operator's Success Story
Emma, a seasoned real estate investor, had successfully built a portfolio of single-family rentals over the past decade and was ready to scale into multifamily properties. She identified a 10-unit apartment building in an emerging neighborhood that was listed at $1.2 million, but the property had multiple separate mortgages that were creating cash flow inefficiencies and administrative burdens.
When Emma approached her traditional bank about financing the acquisition, she faced the familiar roadblock. Despite having excellent credit at 720 and substantial assets, the conventional lender could only offer residential financing for properties with 4 or fewer units. For a 10-unit building, they would require commercial financing that they simply didn't offer.
Frustrated but determined to expand into multifamily investing, Emma discovered multifamily loans for 5+ units through another lender. This specialized program would provide access to Fannie Mae Small Balance Loan financing, offering competitive terms designed specifically for small multifamily properties. By analyzing the property's income potential and her borrower profile, the lender calculated she could qualify for a $960,000 loan at 80% LTV.
The process involved comprehensive commercial underwriting: she provided property operating history, rent rolls, and borrower documentation. The underwriting focused on the property's income potential rather than just her personal financial situation. Within 75 days, she received approval and closed on the Fannie Mae financing.
The benefits were significant: competitive interest rates, 30-year amortization, non-recourse structure, and access to institutional lending channels. This story illustrates how multifamily loans for 5+ units can enable investors to access commercial-grade financing for small apartment buildings that traditional lenders cannot accommodate.
Did you know: Agency loans offer non-recourse terms, meaning the property secures the loan without personal liability.
Benefits & Considerations
Multifamily loans for 5+ units offer significant advantages for small apartment building investors, but they also come with important considerations to weigh.
Key Benefits: Commercial-grade financing, diverse lender options, competitive terms, institutional access
- Commercial-grade financing
- Access to financing designed specifically for income-producing multifamily properties rather than residential mortgages, with terms and structures optimized for commercial real estate.
- Diverse lender options
- Choose from agency loans (Fannie Mae, Freddie Mac), HUD/FHA programs, CMBS financing, commercial banks, and private lenders, each offering different terms and requirements.
- Competitive terms
- Access to competitive interest rates, longer amortization periods (up to 30+ years), and higher loan amounts than typically available through residential financing.
- Institutional access
- Unlock access to Fannie Mae, Freddie Mac, HUD, and other institutional lending channels that provide non-recourse terms and competitive pricing.
- Higher loan amounts
- Loan amounts ranging from $750,000 to $5-7 million for small balance loans, with FHA/HUD and agency programs scaling even higher for larger properties.
- Flexible structures
- Options for acquisition, refinance, construction, and bridge financing, with terms and structures designed for different investment strategies and timelines.
Important Considerations: Complex underwriting, longer timelines, higher requirements, regulatory changes
- Complex underwriting
- Commercial underwriting standards require comprehensive documentation including rent rolls, operating history, environmental assessments, and detailed borrower financial information.
- Longer timelines
- Agency and HUD loans typically take 60 days to close due to complex underwriting and approval processes, compared to 30 days for bank or private loans.
- Higher requirements
- Strong credit scores, substantial net worth (100% of loan amount for agency loans), liquidity requirements, and proven track record in multifamily ownership are typically required.
- Regulatory changes
- Fannie Mae and Freddie Mac are implementing stricter verification standards for rent receipts and income validation, which may affect deal timelines and underwriting requirements.
- Property requirements
- Properties must meet multifamily classification standards, have sufficient operating history, and generate adequate income to meet DSCR requirements of 1.20 or higher.
- Trade-offs by lender type
- Agency loans offer competitive rates and non-recourse terms but are complex and documentation-heavy. HUD loans provide high leverage and long terms but have slow approval and strict eligibility.
Frequently Asked Questions About Multifamily Loans
Get answers to the most common questions about multifamily loans for 5+ units. Whether you're wondering about qualification requirements, documentation needs, or how the process works, we've covered the essential information below.
What are multifamily loans for 5+ units?
How do multifamily loans work?
Who qualifies for multifamily loans?
What are the typical requirements?
How much can I borrow?
What credit score do I need?
What properties are eligible?
What are the different lender options?
How long are the loan terms?
What documentation do I need?
What is the difference from residential loans?
Can I use this for new construction?
How fast can I close?
For a no obligation conversation about your mortgage, contact Bradley Swearingen (#2577725) of Rain City Capital at 214-756-7076.
Bradley Swearingen
Loan Officer at Rain City Capital
Bradley Swearingen Customer Reviews
Read verified customer reviews for Bradley Swearingen at Rain City Capital. This is real feedback from real borrowers who used Bradley Swearingen and their colleagues for a mortgage loan.
"I recently had the pleasure of working with William Guyett at Rain City Capital for a hard money loan on my latest property flip. From the outset, William made the entire process not only smooth but impressively quick, which is crucial in the fast-paced real estate investment world. What stood out to me was the simplicity and efficiency of the rehab draw process. Often, this can be a point of frustration due to complicated procedures and delays, but William ensured everything was straightforward and hassle-free. His professionalism, knowledge, and dedication to customer service significantly contributed to the success of my project. I truly appreciated the personal attention and guidance William provided throughout the loan process. It's clear that he values his clients and goes above and beyond to meet their needs. If you're looking for a reliable and supportive hard money lender, I highly recommend William Guyett and Rain City Capital for your next investment project. Working with him was a fantastic experience, and I look forward to future opportunities to collaborate again."
"Carolina is the most professional, knowledgeable, positive, supportive, responsive, and proactive lender you will find! She makes other lenders look like amateurs. I would highly recommend Carolina for all of your lending needs and now that I have found her, will not be going with anyone else!"
"I had the pleasure of working with Carolina on my recent real estate purchase, and I couldn't be happier with the experience. From start to finish, she was amazing—extremely responsive, knowledgeable, and always available to answer my questions. Carolina made the loan process smooth and stress-free, keeping me updated every step of the way. Her professionalism and dedication truly stood out, and I felt supported throughout the entire transaction. I highly recommend Carolina to anyone in need of a reliable and attentive lender."
Seasoned Small Apartment Operator
Emma owns a 10-unit multifamily property and secures a Fannie Mae Small Balance Loan with competitive terms.
Developer with Affordable Housing Project
The Green Group uses a HUD 223(f) FHA multifamily loan for a 20-unit affordable housing building.
Investor Needing Fast Closing
Mark opts for a DSCR-focused loan for a 6-unit building to close rapidly and hold as long-term rental.
Portfolio Expansion
An experienced investor acquires a 12-unit building using agency financing for long-term hold strategy.
| Scenario | Description |
|---|---|
| Seasoned Small Apartment Operator | Emma owns a 10-unit multifamily property and secures a Fannie Mae Small Balance Loan with competitive terms. |
| Developer with Affordable Housing Project | The Green Group uses a HUD 223(f) FHA multifamily loan for a 20-unit affordable housing building. |
| Investor Needing Fast Closing | Mark opts for a DSCR-focused loan for a 6-unit building to close rapidly and hold as long-term rental. |
| Portfolio Expansion | An experienced investor acquires a 12-unit building using agency financing for long-term hold strategy. |
Similar Mortgage Programs to Multifamily Loans
If multifamily loans are not the right fit, these alternative programs might work better for your situation. Each has different requirements and lenders who specialize in helping borrowers with specific challenges get approved for mortgages.
Construction-to-Permanent Loans
Build your dream home with a single loan that covers construction and converts to permanent financing. Perfect for custom home builders and those wanting to build from the ground up.
DSCR Loans
Debt Service Coverage Ratio loans for real estate investors. Perfect for purchasing rental properties based on rental income rather than personal income.
Important Compliance Information
Disclaimer: This information is for educational purposes only. AnotherLender.com is not a lender and does not make loans. We connect borrowers with licensed mortgage professionals. All loan approvals are subject to lender underwriting guidelines and individual qualification. Rates and terms may vary. Consult with a qualified mortgage professional for personalized advice.