Difference Between 2-4 Units Financing and 5+ Units Financing

July 29, 2017


If you’re a first time multifamily investment buyer, getting a loan may seem like a daunting task. There are a lot of confusion regarding the different types of loans, rates, and terms for an apartment building. Here is a basic guide showing the difference between 2-4 units financing and 5+ units financing

2-4 Units Apartment Building Financing: 

•    Residential Loan 
•    Down payments are usually 20-25% of the purchase price for a conventional loan if not owner occupied. Down payment may be less if owner occupied and depending on the type of loan. 
•    Currently, interest rates range between 3.5 – 5%
•    Typically most borrowers opt for the 30 year fixed loan terms. However, there are options that include 5, 7, 10, 12, 15, or 20 years fixed loan terms 
•    Usually 75% Loan to Value ratio (LTV) 
•    Strong FICO score (680+)

5+ Units Apartment Building Financing: 

•    Commercial Loan
•    Emphasis on the experience level of the borrower and the financials of the building
•    Borrower must have a strong FICO score (680+) and net worth
•    Minimum down payment of 30% of purchase price for a qualified borrower. It may increase depending on the financials of the building.
•    Includes 5, 7, 10, 12, 15, 20 or 30 years fixed loan terms. Typically, borrowers opt for the 7 year fixed loan term 
•    Currently interest rates range between 3.5-5%
•    Up to 80% Loan to Value Ratio (LTV)
•    1.2-1.25 Debt Coverage Ratio (DCR)

These are just the basic loan terms for 2-4 units and 5+ units financing. If you are considering purchasing your first apartment building, please contact me and I will walk you through the process of getting a pre-approval and finding the perfect property for you. 

Share on Facebook
Share on Twitter
Please reload

Featured Posts

As published on the RealPage website on September 20, 2018.

Apartment completions in Los Angeles are about to soar to the highest levels in more than t...

Los Angeles Apartment Completions Set to Soar

January 29, 2019

Please reload

Recent Posts