Some Lenders Stop at 4. Here’s How We Finance 5–8 Unit Buildings.

Many lenders stop at 4 units because their loans are built to Fannie Mae’s rules, which cover 1–4 unit properties. A 5–8 unit building needs a different program. Total Quality Lending finances 5–8 unit buildings through its Multi-Unit & Mixed Use program, which qualifies the purchase on the building’s rent, up to 75% loan-to-value with a 700 minimum credit score.

You own 3 or 4 rentals. You still have a job. Each new loan got harder to qualify for than the last, and the building you want next has 6 units. Your next one doesn’t touch your debt-to-income. It qualifies on what the building earns.

What changes when a building has 5 units instead of 4

The line sits at 4 units because of the secondary market, not the building. Fannie Mae’s Selling Guide, section B2-3-01, says Fannie Mae buys first-lien mortgages on residential properties of 1–4 dwelling units. Add a fifth unit and the loan falls outside that box.

Three things change for you at that point.

The building qualifies, not your paycheck. On a loan built to Fannie Mae’s rules, your personal income and existing debt decide how far you can go. At 5–8 units, the question becomes whether the rent covers the payment. That ratio is the debt service coverage ratio, or DSCR. It divides the building’s rent by its monthly debt payment.

The bar goes up. On a 5–8 unit building the minimum credit score is higher and the maximum loan-to-value, or LTV, is lower than on a standard rental loan. On Total Quality Lending’s program that means at least 25% down on a purchase.

The lender changes. Plenty of the people who financed your first few doors can’t follow you to the sixth. That is the next section.

Why some lenders can’t finance a 5-unit building

Three kinds of lender compete for investors, and each one fails at 5 units in its own way.

The factory. A high-volume lender built to originate loans and sell them to Fannie Mae. It is the most common reason you hear “we stop at 4.” A 5-unit loan has no buyer in that system, so the answer is no before anyone reads the rent roll.

The branch. Your bank, which knows your name and gives real guidance. The bank that financed your duplex usually treats a 5-unit building as a commercial loan and moves it to its commercial lending group. You start over with people who don’t know your portfolio.

The matrix. A lender that lists a 5–8 unit product on its eligibility grid and advises on nothing. It will fund the loan if your file fits. It won’t tell you the rents are under market, or that one vacancy breaks the cash flow. You find that out after closing.

How Total Quality Lending finances 5–8 unit buildings

Total Quality Lending finances 5–8 unit residential buildings, and 2–8 unit mixed-use buildings, through its Multi-Unit & Mixed Use program. The program uses a DSCR structure, so the building’s rent qualifies the loan instead of your personal income. It has its own credit box, separate from our standard DSCR loan, so don’t assume a rule from one applies to the other. For a deeper breakdown of the program, read Multi-Unit DSCR Loans: Financing 5–8 Unit Properties.

Next to the DSCR loan, the numbers tighten. The DSCR loan goes up to 85% LTV on a purchase with a 640 minimum credit score. The 5–8 unit program goes up to 75% LTV on a purchase with a 700 minimum. Short-term rental income can qualify a DSCR purchase on projections alone. On a 5–8 unit building it doesn’t count at all.

Mixed use follows the commercial space, not the unit count. A 2-unit building with a storefront on the ground floor lands in this program, because the commercial component moves it here however few units there are.

The rest of how we work carries over to the bigger building.

Analysis before the offer. We model the deal at no cost before you commit: cash flow, rental projections, DSCR and return on investment. If the numbers don’t hold at today’s rents, we will tell you, and we will tell you which assumption breaks them. Our DSCR loan examples walk through real scenarios, including a six-unit building.

Loan and title in your LLC. You can close the loan and hold title in your limited liability company, or LLC. Many lenders make you take title personally and transfer it later. Ask your attorney and CPA how the entity should be set up, because that is their call, not ours.

One flat fee. A single fee covers underwriting and processing. No points, no origination.

Our own underwriters. Total Quality Lending is a direct lender, so structuring is the first conversation about your building instead of the last.

Loan size limits and state eligibility vary, so confirm both for your building before you write an offer.

Who the 5–8 unit program is not for

Naming the limits up front saves you the work on a deal that can’t close.

First-time investors. The program does not accept borrowers buying their first investment property. If that’s you, talk to us about where to start.

Short-term rentals. Nightly or weekly rental use and income are not eligible on this program. The building has to work on long-term leases.

Owner-occupants. Neither you nor your immediate family can live in a unit. A 6-unit house hack does not fit here.

Foreign national borrowers. They are not eligible for this program. Our Foreign National DSCR loan is built for non-U.S. citizens buying investment property.

Buildings that need a renovation first. We don’t fund rehab. We are the take-out lender on the back end. If the building needs work, you fund the purchase and the renovation, and we can refinance it once the work is done and the units are rented.

Rate shoppers. If the lowest rate is the only thing you want, that is a fair thing to want, and there are lenders built for it. We are built for the investor who wants the whole picture handled, and we price for that work.

Bring us the rent roll

A 6-unit building puts 6 rents behind one loan, one closing and one roof. For an investor building a portfolio who ran out of room at 4 doors, that is 6 units in one transaction, qualified on the building’s rent instead of your debt-to-income.

Send us the address, the rent roll and the asking price. We will run the numbers and tell you whether the building works before you make an offer. Call (800) 304-1925 or send us the deal.

Income pays for your life. Assets change your family’s trajectory.