Difference between 4 units or more

[Daniel Toshner]

Need help understand the difference in mortgages for SFD 4 units or less versus a 5 units or more apartment complex?  What are terms on mortgages for 5 units or more etc... 

I'm in Seattle and SFR seems to be better way to go?

[Jon Holdman]

For four units or less you can get a conventional loan.  That means a loan that meets the guidelines and limitations for a mortgage that are set down by Fannie Mae and Freddie Mac.  Mortgages that meet those guidelines are eligible to be purchased by Fannie and Freddie, and often are.  Those guidelines limit the property size to a maximum of four units.  But they impose a bunch of requirements on the borrower.

Commercial mortgages don't impose the same limits.  So you can get one for a larger property.  You can also get a commercial mortgage for a single family or small property.

Practically, the big difference is that 30 year fixed rate mortgages are only available for conventional loans.  Its Fannie and Freddie's backing that makes 30 year fixed rate mortgages available. Commercial lenders won't do such a loan.  They might do 15 year fixed rate loans, possibly even 20.  More commonly they do loans that balloon or have ARMs.