The Quick Read: The loan amount is set by whichever limit is lowest: the leverage cap on price or appraised value, the amount the building’s income can support at the program’s minimum coverage, or the program’s loan-size band. On a 5-10 unit building, the income limit often binds first, which is why a smaller loan than you expected is common.
- Purchase leverage typically lands at 75%-80% LTV on an investment property, subject to lender guidelines.
- Cash-out refinances top out around 75% LTV on standard rentals.
- Coverage of 1.00 is where select programs start, and stronger ratios open better leverage.
- Standard programs run up to $3,000,000, with reserves around 6 months of PITIA.
- Qualification runs primarily on property-level rental income covering the payment, subject to lender guidelines.
Brokering these files every day shows the same surprise over and over. An investor runs the math on a six- or eight-unit building, expects one number, and the lender’s sizing comes back lower. This guide walks through exactly why, step by step, so you can estimate your own number before you apply. For the full picture of how these loans work, start with Lendmire’s complete DSCR loans guide.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 29, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
What Changes at Five Units?
Five units is where a building stops being residential collateral and becomes multifamily. Conventional loans end at four units, so a five-unit building falls outside that channel. Agency research makes the same cut: Freddie Mac’s multifamily research arm defines small multifamily as 5-50 units.
That classification line is not a DSCR rule. It is a line the lending market draws, and DSCR programs follow it. Across our wholesale network, plenty of programs handle 1-4 units, and a narrower group handles 5-10. Some stop at 8 units, and some go to 10. A 5-10 label does not mean every lender covers every unit count.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. You cannot live in a unit.
Key Terms Defined
DSCR (debt service coverage ratio): the building’s income divided by its monthly debt obligation.
PITIA: principal, interest, taxes, insurance, and association dues, the full monthly carrying cost of the loan.
NOI (net operating income): rental income minus operating expenses, before any loan payment.
LTV (loan-to-value): the loan balance as a percentage of the purchase price or appraised value.
Reserves: liquid cash a lender wants left over after closing, counted in months of PITIA.
Stabilized: a building that is leased up and operating, with units rent-ready and occupied.
The Three Ceilings That Set Your Loan Amount
Every sizing comes down to three ceilings. The loan is the lowest of them.
| Ceiling | What it limits | Where it bites |
|---|---|---|
| Leverage cap | % of price or value | Low-priced, high-rent buildings |
| Coverage cap | Payment the income supports | High-priced, modest-rent buildings |
| Loan-size band | Minimum and maximum balance | Very small or very large deals |
The leverage cap. On a purchase, most files land at 75%-80% LTV, which means 20%-25% down. Select high-leverage programs reach 85% LTV with roughly a 700+ score. The lender uses the lower of the purchase price and the appraised value, so a low appraisal shrinks the loan even when the contract price is higher.
The coverage cap. Divide the building’s qualifying income by the minimum coverage the program wants. The result is the largest monthly payment the building can carry. The loan is whatever balance that payment supports. A higher required ratio means a smaller supportable loan.
The loan-size band. Standard programs run up to $3,000,000. Above $2,500,000 the network generally holds to 30-year fixed structures. Smaller balances route through select lenders in the network.
How Underwriting Treats a 5-10 Unit Building, Step by Step
1. The lender confirms the property type. The building must be an eligible multifamily property, with no owner-occupied unit.
2. The lender establishes income. This is the step that surprises people, and it is covered next.
3. The lender sets the minimum coverage. The common floor is 1.00 on select programs. Stronger ratios open better pricing and leverage.
4. The lender solves for the payment. Qualifying income divided by the required ratio gives the maximum monthly obligation.
5. The lender converts that payment to a balance. The balance depends on the loan’s term and structure.
6. The lender applies the LTV cap. It takes the lower of the income-supported balance and the leverage-based balance.
7. The lender checks the borrower. Credit, reserves, and the loan-size band all get a look before the final number is set.
Why Your Math May Not Match the Lender’s
Programs treat income in two ways at this size. Some use a residential-style formula: monthly rent divided by PITIA. Others use a commercial-style formula, where the lender subtracts operating expenses from rent to reach NOI and then compares NOI to debt service.
The two formulas give different answers on the same building. Expenses lower the numerator, so the commercial-style ratio is lower, and the supportable loan is smaller. If you size a deal on gross rent and the program underwrites on NOI, the loan comes in light.
Ask one question before you commit to a deal: which income formula does this program use? It is the single most useful question at this size.
Here is how the two views play out on a hypothetical eight-unit building. Say the rent roll clears the full payment at about 1.30x on the residential-style formula. Once operating expenses come out, the same building might read closer to 1.05x. The first view says you have comfortable room. The second says you are near the floor, and the loan amount may need to shrink or the leverage drop to compensate.
Which Ceiling Binds? Two Quick Scenarios
Consider an eight-unit building bought at a modest price per door in a lower-rent market. The rent roll is strong relative to price. At 75% LTV the leverage cap is the lower number, so leverage sets the loan, and your down payment is simply the remainder. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Now picture an eight-unit building bought at a high price per door where rents are only moderate. The income-supported balance runs below 75% of the price. Coverage binds, and you either bring more cash to the table, find a stronger rent roll, or choose a structure that lowers the payment.
On 5-10 unit buildings, the second case is the more common one. Prices have climbed faster than rents in many areas, so the coverage cap is usually the tighter wall. A larger down payment lowers the payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
What Shrinks the Number
| Factor | Effect on loan amount |
|---|---|
| Vacant units | Lowers qualifying income |
| Higher expenses (NOI-style) | Lowers supportable payment |
| Low appraisal | Cuts the leverage-based amount |
| Weaker credit | Can lower the LTV tier |
| Higher required coverage | Shrinks the income-supported loan |
Vacancy matters most. Lenders vary on how many vacant units they allow, and those units generally need to be rent-ready. A building that needs heavy renovation usually needs bridge financing first, with the DSCR loan taking out the bridge once the building is stabilized. Our piece How to Meet DSCR Occupancy Standards on a 5-10 Unit Building covers that in detail.
Credit moves leverage too. A 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Purchase, Rate-and-Term, and Cash-Out Sizing
The same building sizes differently depending on the transaction.
- Purchase: typically 75%-80% LTV on an investment property, with select high-leverage programs reaching 85% at roughly a 700+ score.
- Rate-and-term refinance: a ceiling up to 85% LTV on select files, subject to credit and program terms.
- Cash-out refinance: tops out around 75% LTV on a standard rental, and about 6 months of seasoning is the common expectation.
Cash-out gets the lowest leverage because the lender is lending against equity you are taking out. On a stabilized building, a cash-out can fund the next purchase, but the coverage test still applies to the new, larger balance. Lendmire’s page on cash-out refinances on investment property walks through that structure.
Five Units Versus Eight Versus Ten
Unit count changes sizing in three ways.
Program availability. A five- or six-unit building has the widest lender pool. By eight units the pool narrows, and at nine or ten it narrows again.
Loan size. More units usually means a higher price and a larger loan, which pushes you toward the top of the size band. Above $1,500,000, reserves typically step up to about 9 months of PITIA, versus about 6 months below that. On conservative rate-term files at modest leverage under $1,500,000, reserves can be waived. Reserves vary by lender, leverage, loan size, and transaction type.
Concentration risk. On a five-unit building, one vacancy removes a fifth of the income. On ten units, it removes a tenth.
If your target building is above the standard range, Lendmire’s article on super jumbo DSCR requirements for a 5-to-10-unit building takes up the larger loan tier.
How Agency Small-Balance Loans Compare
Agency small-balance multifamily is a different channel with different underwriting. Multifamily Executive reports that Freddie Mac is folding its small-balance program into its conventional platform. The older small-balance range was $1M-$7.5M, and the conventional small loan runs from a $2M minimum to a $10M maximum.
Many 5-10 unit purchases fall below those minimums. That is one reason investors at this size look to DSCR programs, which are built for smaller balances and are underwritten to the building rather than to your tax returns.
Bank commercial loans are the other alternative. They typically carry shorter terms with a balloon payment and look harder at your personal finances. DSCR loans trade that scrutiny for a loan underwritten to the property’s income.
Loan Structures That Change the Math
The spine is the 30-year fixed. Extended terms (40-year) and interest-only periods are available through select lenders in the network, and ARM structures exist for investors who want them.
Structure changes sizing because it changes the payment. A longer amortization or an interest-only period lowers the monthly obligation, so the income supports a larger balance. The tradeoff is that you pay down principal slowly or not at all during that stretch. This is a decision about how you plan to hold the building, not a free lift.
Coverage Below 1.00 and No-Ratio Options
A 1.00 coverage ratio is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. A no-ratio structure also exists, available only through select lenders, generally for borrowers who already own a primary residence.
Both options come with tradeoffs. Expect lower leverage, a bigger cash requirement, or both.
What a Strong ratio Does Not Tell You
Clearing 1.00 is not the same as positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses all sit outside the calculation. A building that barely clears the floor can still lose money after those costs. Size your own reserves and budget separately from the lender’s test.
How to Raise Your Loan Amount
- Raise qualifying income. Fill vacant units with rent-ready tenants before you apply, and make sure leases are in place.
- Lower the payment structure. Ask about a longer amortization or an interest-only period through select lenders.
- Put more down. A larger down payment lowers the payment and can lift coverage.
- Strengthen the credit tier. Moving toward 700+ can unlock higher leverage.
- Pick the right program. Ask which income formula the lender uses before you choose a building.
What Lenders Ask For
Lenders typically expect an LLC borrower in many cases, subject to lender program eligibility, plus a rent roll, current leases, and an appraisal. Residential-style files use rent-schedule forms. Commercial-style files use an income-approach appraisal and often an operating statement. Some programs also want prior experience owning multifamily at 5+ units.
Properties not offered in the network include manufactured homes (single- and double-wide), log homes, and barndominiums.
Frequently Asked Questions
Can I get a DSCR loan on a 5-unit building?
Yes, through a narrower group of programs than the 1-4 unit tier. Availability depends on the lender and the unit count, and eligibility rests on the property’s rent, your credit, reserves, and the appraisal. Typical purchase leverage is 75%-80% LTV on an investment property, subject to lender guidelines.
What is the maximum loan on a 10-unit building?
Standard programs run up to $3,000,000, though the actual number is whichever of the leverage cap, coverage cap, or size band is lowest. Above $2,500,000 the network generally holds to 30-year fixed structures, and reserves typically step up to about 9 months above $1,500,000.
Why did my loan come back smaller than I expected?
Most often the lender used an NOI-based formula instead of gross rent, or the appraisal came in under the price. Vacant units and a lower credit tier can also pull the number down. Ask which income formula applied.
Can a building that needs renovation qualify?
Usually not as-is. Heavily vacant or renovation-stage buildings typically need a bridge loan first, then a DSCR loan takes it out once the building is stabilized.
Are mixed-use buildings eligible?
Some programs accept a small commercial component. Eligibility depends on the residential share and the lease quality, so confirm it with the specific program before you make an offer.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Program terms change, and every file is underwritten individually, so nothing here is a commitment to lend.
Tax treatment varies; consult a qualified professional.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Freddie Mac Multifamily research on small-balance loans
2. Multifamily Executive on Freddie Mac small-balance integration
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a DSCR Loan Need a 1007 Rent Schedule? · How Much a Late DSCR Loan Payment Costs a Landlord · How to Get a DSCR Loan on a Rental Needing Repairs
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.