Commercial underwriting takes over at five units
Properties with five or more units are commercial loans, underwritten on the asset — cap rate, net operating income, occupancy, and market comps — rather than your personal debt-to-income. The gold standard for stabilized multifamily is agency debt: Fannie Mae and Freddie Mac Small Balance Loans offer the best rates and longest terms.
For a value-add acquisition that does not yet qualify for permanent agency debt, a bridge loan funds the purchase and renovation interest-only, and you refinance into agency financing once rents and occupancy are stabilized.
The owner-occupied exception
If you will occupy a meaningful share of the building — for example a mixed-use property where you run a business — an SBA 504 or 7(a) loan can put you in with as little as 10% down at below-market rates. It requires owner-occupancy of 51%+ and a paperwork-heavy process, but the terms are hard to beat.
Frequently asked questions
When does a property need a commercial loan instead of residential?
At five or more residential units, or any non-residential use. One-to-four-unit properties are financed as residential; five-plus units are commercial, with property-level underwriting and different documentation.
How much down payment is needed for multifamily?
Commercial multifamily typically wants 25–35% down. The big exception is owner-occupied deals financed with an SBA loan, which can go as low as 10% down if you occupy 51%+ of the property.