DSCR loans for multifamily properties

A DSCR loan on a duplex, triplex or fourplex works much like one on a house: the lender adds up the rent it will count for every unit and divides it by the building's one monthly payment of principal, interest, taxes, insurance and any HOA dues. If that ratio clears the program's minimum, commonly 1.00, the building qualifies without your tax returns. Two to four units are still residential lending, appraised with a market rent for every unit, and at some programs with a step less leverage than a single-family house.

Five units and up is a different market. Those buildings are financed with commercial loans, sized on net operating income after vacancy and expenses rather than on gross rent, and they need a wider cushion: Freddie Mac's standard minimum is 1.25. This page covers both, with a fourplex worked through unit by unit.

Can you get a DSCR loan on a multifamily property?

Yes, on two to four units, where most DSCR programs draw the line. The split runs through all of mortgage lending. Federal lending rules define a dwelling as a residential structure of one to four units. Fannie Mae's and Freddie Mac's single-family guides, FHA's single-family programs and the residential appraisal forms all stop at four units. Freddie Mac's multifamily business, by contrast, buys loans on apartment buildings with five or more units. A duplex, triplex or fourplex is a house to a residential lender; a fiveplex is a small apartment building to a commercial one.

Some DSCR programs take five to eight units, case by case. Past that, you are shopping commercial lenders: banks, credit unions, agency multifamily lenders and private funds.

One rule does not change with the unit count: a DSCR loan is business-purpose credit for property you do not live in. Federal rules stop treating a property as non-owner-occupied once you expect to stay there more than 14 days in a year. If you want to live in one unit and rent the rest, that is house hacking, financed with a home loan instead.

How lenders calculate DSCR on a 2 to 4 unit building

The formula is the one used on a house, with a sum on top:

DSCR = qualifying rent of every unit, added together ÷ the building's monthly PITIA

PITIA is principal, interest, property taxes, insurance and association dues, all monthly (what PITIA includes). A fourplex has one loan, one tax bill and one insurance policy, so it has one PITIA and one ratio. A strong unit can carry a weak one; the lender reads the building's total. Two duplexes on two loans are two separate tests.

For each unit, the rent the lender counts is commonly:

Short-term units follow their own haircuts, covered in DSCR loans for short-term rentals. The full method for a single property, step by step, is in how to calculate DSCR.

What the ratio leaves out matters more on a multi-unit building. Owner-paid utilities, common where water, sewer and trash are on one meter, are not in PITIA; neither are common areas or the turnover cost of four tenants instead of one. The ratio can look healthy while your cash flow is thin, as the example below shows.

How the rent is documented: leases and the rent schedule

Expect to send a rent roll (each unit, its tenant, lease dates, monthly rent and deposit) and a copy of every lease. On a refinance, lenders commonly ask for proof the rent is actually being paid, such as bank statements showing the deposits.

The appraisal does the rest. For years the form for a 2 to 4 unit building has been the Small Residential Income Property Appraisal Report, Fannie Mae Form 1025 (Freddie Mac Form 72), a report built for two to four unit properties. On top of the value, it carries a rent analysis:

• Comparable rental data. Three comparable rental properties, with each comparable's units broken down by rooms, bedrooms, baths, size and monthly rent, and the utilities included in the rent.
• The rent schedule. For each of the subject's units: the lease's begin and end dates, the actual rent, and the appraiser's opinion of market rent, furnished or unfurnished. Totals follow: the total actual monthly rent and the total gross monthly rent at market.
• The income approach. The total gross monthly rent multiplied by a gross rent multiplier drawn from comparable sales, one more check on the value.
• Occupancy. Whether the property is occupied by the owner or tenants, or is vacant.

Since November 2, 2026, new appraisals submitted to Fannie Mae and Freddie Mac must use the redesigned Uniform Residential Appraisal Report, which retires Form 1025 along with the single-family forms and puts market rent in its own Rental Information section. DSCR lenders do not sell to the agencies, so they move to the new report at their own pace, and some will keep asking for "a 1025" for a while. The number the underwriter reads is the same either way: the appraiser's market rent for each unit, supported by comparable rentals. A 2 to 4 unit appraisal costs more than a single-family one; how a rental property appraisal works covers what to do when the rent comes in low.

How lenders treat vacant units

On a purchase, most DSCR lenders count an empty unit at the appraiser's market rent; the rent schedule exists for exactly that case. In a forum thread on financing a property before it is rented, lenders replying described market rent from the appraisal as the usual basis on a purchase, while noting that not every lender takes vacant property.

On a refinance, the lender wants evidence the building actually rents. Some still count a vacant unit at market rent, but others expect leases on most units, limit how many can sit empty, or lower the maximum loan-to-value. Lenders replying in the same thread said only some lenders take a vacant property on a refinance and that the leverage can be cut, and one said a triplex or fourplex generally cannot be fully vacant even where a house or a duplex can.

During a renovation, a unit that cannot be lived in is a different problem. The appraisal may come back "subject to" completion of the work, and a building that needs heavy rehab is usually bought with short-term money first and refinanced into a DSCR loan once it is leased.

The practical rule: buy on market rent if you need to, but lease the units up before you refinance, at rents the appraiser can support with comparables.

Leverage, pricing and reserves on 2 to 4 units

As of late 2026, the usual ranges across DSCR lenders look like this, and every lender sets its own:

The agencies make a sharper cut. Freddie Mac's published limits for a conventional investment purchase are 85% on one unit and 75% on two to four, and 75% against 70% on a cash-out refinance. A small multifamily building carries more tenants and more turnover, and it may have fewer buyers if the lender ever has to sell it, which is the usual case for giving it less room. In a 2023 forum thread on a first fourplex, a lender replying described a DSCR loan at 20% down for a strong credit score, another reply pointed to a portfolio loan at 15% down, and the only option with less down that anyone raised was an owner-occupied FHA loan, which means living there.

What the extra units buy you is resilience: one vacancy in a fourplex costs a quarter of the rent, not all of it. The guide to the loan-to-value ratio shows how the leverage limit and the ratio interact, and DSCR loan requirements covers credit and reserves.

A worked example: a fourplex with one vacant unit

The same building passes one test at 1.36 and fails another at 1.08. Nothing about the property changed; only the formula did. That gap is the whole difference between the residential and commercial worlds, and it is why a deal that works as a fourplex can fail at five units with similar rents. GoDoor's quote calculator works the residential ratio on your own figures; run the net operating income version yourself before you buy.

Five or more units: the commercial loan world

At five units the property leaves residential lending, and nearly everything about the loan changes.

• The ratio is built on net operating income. Freddie Mac's multifamily standards, as of June 30, 2026, generally take income from the last three months of rent collections or the annualized current rent roll, less a vacancy rate of at least 5%; operating expenses from the trailing 12 months; actual taxes and insurance; and replacement reserves of at least $250 a unit. Fannie Mae's multifamily guide defines its underwritten DSCR the same way in principle: underwritten net cash flow divided by annual debt service.
• The minimums are higher. Freddie Mac's standard is a minimum DSCR of 1.25 and a maximum loan-to-value of 80% on a fixed-rate loan. Banks, credit unions and private lenders set their own minimums; expect a cushion above the residential 1.00 and ask each one.
• The terms are shorter. Freddie Mac's multifamily loans come in terms such as 5, 7 and 10 years, generally amortized over up to 30, so the balance left at the end is a balloon you refinance or pay off. Its loans carry prepayment protection such as defeasance, yield maintenance or a set premium, which can cost a lot when rates have fallen; DSCR prepayment penalties shows how yield maintenance is worked out.
• The appraisal values the income. A commercial appraisal leans on net operating income and a market cap rate, so raising rents or cutting expenses raises the value directly. Cap rate explains the link.
• The documents are a business's. A rent roll, 12 months of operating statements, the leases, and often your track record.

Agency programs serve smaller buildings too (Fannie Mae's small mortgage loans run up to $9 million), but for a first building of five to ten units many investors work with a local bank, a credit union or a small-balance commercial lender.

Mistakes that cost multifamily DSCR borrowers

• Underwriting the listing's rent roll. A pro forma with every unit at a rent nobody has signed is not what the appraiser will use. Check each unit against comparable leases.
• Refinancing with units empty. Lease up first, or expect a smaller loan or a worse price.
• Forgetting the costs the ratio ignores. Owner-paid utilities, common areas and four turnovers a year belong in your own analysis even though they are not in PITIA.
• Buying a building with a storefront. A shop below the apartments makes it mixed-use, which DSCR programs take case by case, if at all.

General education, not financial, tax or legal advice. Figures are examples: rates, rules and programs change, and every lender sets its own. Last checked November 4, 2026. How we research these guides.