Buying 5 or more units: how the loan differs from a 1-4 unit mortgage
Residential mortgage rules, such as Fannie Mae's Selling Guide, cover properties of one to four units. A building with five or more units is usually financed on commercial or multifamily terms, where the lender weighs the building's income more than yours. The terms can differ in ways that matter, such as how long the rate is fixed and what is due at the end, so ask each lender for them in writing.
Where the line falls
Fannie Mae's guide on rental income from the subject property covers one-to-four unit investment properties and two-to-four unit principal residences. A fifth unit takes a building out of that guide, which is why four and five units can feel so different when you shop for a loan. Lenders that lend on larger buildings write their own rules, so the mortgage you can get on a fourplex may not exist on a five-unit building.
How the lender looks at you and at the building
- 1 to 4 units you live in: your income, your debts and your credit matter a great deal, and the lender counts part of the rent. See how lenders count rent on a duplex you live in.
- 5 or more units: the building's income carries more of the decision, using the DSCR, loan-to-value and often the debt yield.
Lenders on larger buildings also review the T12, the rent roll and the leases. See what a rent roll should show.
Terms to ask about on a larger building
- How long the rate is fixed, and what happens after.
- Whether the loan has a balloon, meaning a lump sum due before the loan is fully paid off.
- The amortization period, which sets the payment, and the term, which sets when the balance is due.
- A prepayment penalty and how it is calculated.
- Whether the loan is recourse, meaning you are personally liable if the building does not cover it, and who must sign.
The refinance risk
If a loan comes due before it is paid off, you will have to refinance or sell. Whether you can refinance depends on the building's income then, not the building's income when you bought it.
Example a made-up building earns NOI of $80,000 when the loan comes due, and the new lender wants a DSCR of at least 1.25. Allowed yearly debt service is $80,000 divided by 1.25, which is $64,000. If the new loan's payments would be $70,000 a year, the new lender will lend less, and you must cover the difference in cash.
The 1.25 here is a made-up requirement. Your lender sets its own.
Who owns the building matters too
Larger-building loans are commonly made to an entity such as an LLC. If you already have a loan on a building and want to move it into an LLC, read your loan documents first; see due-on-sale and moving a rental into an LLC.
How to prepare before you talk to a lender
- Collect the seller's rent roll, T12, leases and the last two years of tax and insurance bills.
- Write down your plan for the building: what you will repair and what rents you expect from leases that exist.
- List your other properties and loans, because lenders often want a schedule of what you own.
- Know how much cash you can put in after reserves.
Lenders on larger buildings often ask to see your experience, your other holdings and your cash, as well as the building. A tidy package of documents shortens the review and lets you compare offers on equal terms. Ask each lender for a term sheet, not a verbal summary, and compare the same items side by side: rate type, term, amortization, fees, prepayment and recourse. If any term is unclear, ask them to explain it in plain words and put the answer in writing. This post does not recommend a lender or a loan type; it shows what to ask.
How DoorKeeping fits
Larger buildings are asked for more paperwork. DoorKeeping produces a rent roll and a T12 for each property, each LLC with its own books. It does not arrange loans. It costs $2 per unit per month.
Sources
- Fannie Mae Selling Guide, B3-3.8-02 Rental Income from the Subject Property (one-to-four unit investment properties, 75% of gross rent), read Oct 31, 2026
- Fannie Mae Selling Guide, B2-1.1-01 Occupancy Types, read Oct 31, 2026
- CFPB, What is a loan-to-value ratio?, read Oct 31, 2026
Questions
- Can I get a conventional mortgage on a five-unit building?
- Residential guidelines like Fannie Mae's cover one to four units, so five or more usually means a commercial or multifamily loan. Ask lenders what they offer.
- What is a balloon payment?
- A lump sum due at the end of a loan term that is shorter than the payment schedule, so the balance is not fully paid off by then.
- What does recourse mean?
- It means the lender can come after you personally, not only the building, if the loan is not repaid. Terms differ, so ask.