Commercial financing for primary residence?

Question

I'm evaluating a property that is a portfolio of 8 condos in a community. It classifies as a commercial property. If I use one of the units as a primary residence, can it still be financed with 5% down, since it's technically commercial? What other financing options would be viable for a situation like this? The rent roll covers the monthly mortgage.

Cat Bauer · Answer

From what I understand from speaking to lenders, it’s a pretty unique situation since it’s all separate units. We’ve been seeing products similar to residential but are commercial to 2-3 commercial loan packages. Thanks!

Andrew Postell · Answer

@Cat Bauer yeah, just to confirm the above, anything over 4 units = commercial.  You can certainly get a commercial loan on properties with less than 4 units but anything over 4 you have no residential options for.  Meaning, none of this 3%-5% down stuff.  If you don't occupy it then 20%-30% down will be your requirement.

If you do have some downpayment and want to focus on multi-family then 4 units is your maximum.  And you would be required to occupy the property.

Hope all of that makes sense.

Erik Estrada · Answer

If you plan on living in it, lenders will limit to 4 units max.

Logan Singleton · Answer

Hello,

Commercial lenders don't allow owner-occupied units and will require a 20-25% down payment. The only loans that allow for 3-5% down payments are residential financing on single-asset transactions, not portfolios.

If you have the means and don't intend to occupy one of the units, a DSCR blanket loan would be an excellent option for this transaction since all eight properties would be serviced by one loan.

Please let me know if you have any questions.