DSCR Loans for 5-10 Unit Multifamily Are CommercialDSCR Loans for 5-10 Unit Multifamily Are Commercial

A DSCR loan can finance a 5-10 unit property, but it is underwritten as commercial — not like a fourplex. Expect a commercial appraisal, income-based valuation, environmental screens, stricter DSCR floors, and a smaller lender pool.

This guide is written for investors evaluating or acquiring 5-10 unit small multifamily properties with DSCR financing. We cover the commercial DSCR programs that actually fund this product, the key underwriting overlays that differ from residential DSCR, and the common mistakes that slip files into the “no-bid” pile.

Key DSCR parameters for 5-10 unit multifamily

Two things to internalize: (1) the rate premium over SFR is real — plan for 0.50-1.00% higher, which on a $2M loan is $10,000-$20,000 in extra annual interest; and (2) closing costs scale up dramatically. A $2M 6-unit deal can easily see $40K-$60K in total closing costs vs. $12K-$18K on a comparable-loan-size SFR.

The 5-10 unit DSCR lender landscape

The field shrinks dramatically at 5 units. Most of the 30+ DSCR wholesale lenders drop out. The active players in 2026:

National volume leaders for 5-10 unit:

• Griffin Funding — Published 5+ unit DSCR program up to $20M loan size; 1.0 DSCR tier available with rate adds; 65-75% LTV depending on file strength. Among the most aggressive on DSCR floor.
• CoreVest — Small multifamily is a core product. Typical $500K-$15M range; portfolio loans for investors buying 2-5 small-multifamily buildings on one blanket note.
• Lima One Capital — 5-10 unit DSCR up to $7.5M; also offers bridge-to-DSCR for value-add acquisitions.
• Visio Lending — CoreGrowth program quotes 5+ unit at 70-75% LTV, 1.20+ DSCR, up to ~$5M.
• Kiavi — Has pulled in and out of 5+ unit over the years; check current guidelines before marketing their program.
• Ready Capital — Strong on 5-30 unit small-balance commercial; competitive on 5-10 unit sub-$3M loans.
• Arbor Realty Trust — Agency-focused (Fannie and Freddie small-loan programs); minimums vary, so confirm with Arbor; technically not DSCR branding but the math is identical and pricing is often superior.
• Verus / Deephaven (wholesale channel) — Broker-distributed DSCR on 5-10 unit with wider program guidelines.

Agency alternatives (compare side-by-side):

• Fannie Mae Small Mortgage Loans: Loans up to $9 million on 5+ unit properties, LTV up to 80%, 1.25x minimum DSCR, typically cheaper than DSCR on strong files (Fannie Mae Small Loans term sheet).
• Freddie Mac Conventional Small (Optigo): $2M – $10M, 5–50 units, up to 80% LTV, 1.25x minimum DSCR, non-recourse with carve-outs. It replaced Freddie’s Small Balance Loan in April 2026; Conventional Small generally starts at $2 million (Freddie Mac fact sheet).

The agency small-loan programs are not DSCR loans in the non-QM sense, but they’re priced on the same NOI/DS coverage metric and should be part of any 5-10 unit financing conversation above $1M. For a broader look at 5+ unit apartment loan programs beyond DSCR, our sister site covers agency, bank and bridge options.

Qualification details

• Entity ownership: LLC is standard. Commercial multifamily DSCR loans often require a Special-Purpose Entity (SPE) — a single-purpose LLC owning only the subject property. Holding-company structures (parent LLC → subject SPE) are broadly accepted.
• Personal guarantee: Required on nearly every non-agency 5-10 unit DSCR. Agency small-loan programs can be non-recourse above certain loan sizes with carve-out guarantees for fraud/misrepresentation only.
• Experience requirement: Most lenders require 2-3 years of rental property ownership documented via Schedule E or rent rolls. First-time commercial multifamily investors typically see LTV reductions (60-65%) or required co-guarantors.
• Reserves: 6-12 months PITI; 12+ on large loans. Some lenders require an additional replacement reserve (e.g. $250-$350/unit/year) held on the loan ledger.
• Tenant verification: Most commercial DSCR lenders require a signed rent roll, current lease abstracts, and sometimes a 2-3 month trailing rent receipt verification. T12 (trailing 12 months operating statements) is standard.
• Occupancy at close: Most lenders require 85%-90% occupancy at closing. Vacant units are permitted but underwriting uses appraiser’s market rent for pro forma (not an aspirational figure).
• ADA compliance: For properties built post-1991, ADA is implied. Older buildings generally escape ADA scrutiny on DSCR underwriting but may surface in Phase I or property condition report (PCR).

Appraisal and income verification

This is the single biggest operational difference from residential DSCR:

• Appraisal type: Commercial narrative appraisal; typically 60-120 pages.
• Valuation approaches: Sales comparison, cost, and income (direct capitalization). The income approach usually drives value — the appraiser determines market NOI and divides by a market cap rate.
• Cost: $3,000 – $10,000, with most files $4,500 – $7,500. 10-unit in a dense market can run higher.
• Turn time: 3 – 6 weeks typical. Plan the lock/close date accordingly.
• Environmental screen: Required on nearly every 5+ unit deal. Ranges from a desktop screen ($500-$800) to a full Phase I ESA ($1,800-$3,500). Phase I triggered by a history of gas station, dry cleaner, manufacturing, auto repair, or similar within a defined radius.
• Property condition report (PCR): Required by some lenders, especially on loans above $2M. $2,000-$4,500 typical. Engineer walks the property documenting roof life, HVAC condition, and structural items.
• Rent schedule: T12 operating statements plus current rent roll. Lender pro forma DSCR uses appraiser’s market rent adjusted for actual occupancy and underwriter-applied vacancy factor (typically 5-7%).

Rate and fee expectations

See /rates for the October 2026 SFR grid (720 FICO / 75% LTV / 1.00–1.24 DSCR anchor 6.75%; 30-year fixed band ~6.125%–7.375%). 5–10 unit non-QM DSCR typically prices +0.50%–1.00% over an equivalent SFR file — not a surveyed print. 5/1 and 7/1 ARMs keep the same product discounts vs. that overlaid fixed note as the SFR tables (−0.375% / −0.25%), not a separate surveyed band. For commercial multifamily pricing on larger apartment loans, see current 5+ unit loan rates.

• Lender points: 1.50 – 2.50 points
• Appraisal: $4,500 – $7,500
• Phase I (if required): $1,800 – $3,500
• Property condition report (if required): $2,000 – $4,500
• Commercial title / title insurance: $3,500 – $9,000+
• Survey (often required): $1,500 – $3,500
• Legal / loan doc prep: $3,000 – $7,500
• Total closing costs (excluding down payment): 5.5% – 8.0% of loan amount

LTV pricing: 75% LTV typically adds 0.25-0.375% over 70%. Cash-out at 70% adds 0.125-0.25% vs. rate/term refi.

Prepay buydown: Stepping from 5-year prepayment penalty to 3-year typically adds 0.25-0.375%; removing prepay entirely adds 0.75-1.25%.

Common pitfalls on 5-10 unit DSCR loans

1. Underestimating closing costs. A 5% closing cost load on a $2M loan is $100K — significantly more than most SFR investors expect. Model total closing costs above 5% on your pro forma.
2. Appraisal timeline drag. A 4-5 week commercial appraisal can blow a 45-day close. Order the appraisal IMMEDIATELY after contract ratification and environmental scope in parallel.
3. Phase I surprises. Subject property adjacent to a former gas station (even closed 20 years ago) triggers Phase II recommendations and can kill a deal. Scope the environmental history during due diligence, not after contract.
4. Occupancy at close. Buying a 70%-occupied 8-unit with plans to fill up the vacancies post-close? Most lenders require 85%+ at close. You may need to stabilize before financing.
5. Rent-roll discrepancies. Seller-provided rent roll vs. appraiser-verified tenant interview can diverge by 10%+. Underwriting uses the lower.
6. Below-market leases. Long-term below-market leases that don’t expire for 3-5 years are underwritten as-is (to lease, not market). Model DSCR on in-place rents.
7. Shared systems. Master-metered utilities, shared boiler, single water heater for all units — these are red flags in the property condition report and can lead to replacement reserve requirements.
8. Assuming residential-style speed. 45-day close on 5-10 unit is aggressive. 60-75 days is more realistic. Negotiate seller timeline accordingly.
9. Over-leveraging on agency alternatives. At $2M+ loan size, Fannie or Freddie small-loan programs may price 0.25-0.75% better than non-QM DSCR. Always pull both quotes.

Strategy notes

5-10 unit DSCR loans are the right tool when:

• You’re acquiring a stabilized 85%+ occupied small multifamily with DSCR ≥1.20 at 70-75% LTV.
• You want LLC/SPE vesting, which is nearly mandatory in commercial multifamily.
• You’ve done 2-3 years of residential investing and are scaling to your first commercial asset.
• Loan size falls in $500K-$3M range where DSCR is typically as or more competitive than agency small-loan programs.

They’re the wrong tool when:

• Occupancy is below 80% at close (use bridge/value-add financing for stabilization, then DSCR refi).
• DSCR is under 1.15 — the deal doesn’t cash flow enough for commercial DSCR pricing; consider a larger equity check or a different asset.
• Loan size exceeds $3M and the property qualifies for Fannie or Freddie small-loan programs — agency pricing is usually better.
• You’re a first-time investor with no prior rental ownership — program fit is difficult; consider starting with 2-4 unit first.

Related tools

• Run commercial DSCR math on the DSCR Calculator
• Pre-qualify with the Qualification Estimator
• Today’s rate environment on the Rates page
• Compare lenders at Best DSCR Lenders
• Foundational reading: What Is a DSCR Loan
• Requirements deep-dive: DSCR Loan Requirements
• Fee breakdown: Closing Costs and Fees

Ready to source quotes for your 5-10 unit deal? Get matched with DSCR lenders and we’ll surface the 3-4 programs that actually fit this property class.