Seeking a low down payment loan for 4-8 units
Member since 2022 · 18 posts · 10 votes
Seeking a low down payment loan for 4-8 units
9 Replies
- 1yJason WrayPro MemberBanker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
Jefferson,
Once a property is 5 units or more 5+ it's no longer considered residential and falls under the category of commercial. Commercial requires 20% and above as you get into the higher number of units if it's going to be a DSCR loan. If it's a commercial loan and its considered "Mixed use" I have seen 20% down in some cases.
In most cases a true apartment building 5+ is going to require 20% or more regardless and it comes down to Higher credit scores, landlord experience, Assets/reserves and term. There are some banks/lenders that can use a junior lien or cross collateralization to reduce DP.
- Member since 2022 · 18 posts · 10 votes1y
Quote from @Jason Wray:
Jefferson,
Once a property is 5 units or more 5+ it's no longer considered residential and falls under the category of commercial. Commercial requires 20% and above as you get into the higher number of units if it's going to be a DSCR loan. If it's a commercial loan and its considered "Mixed use" I have seen 20% down in some cases.
In most cases a true apartment building 5+ is going to require 20% or more regardless and it comes down to Higher credit scores, landlord experience, Assets/reserves and term. There are some banks/lenders that can use a junior lien or cross collateralization to reduce DP.
5+ units being commercial is my understanding as well, but there is a huge difference between a true apartment building and an old house that has been carved into 5 units. There’s no real difference between four or five in that case. I was really just hoping there might be a suitable loan product for house hacking a property like that.
- 1yJason WrayPro MemberBanker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
Quote from @Account Closed:
Quote from @Jason Wray:
Jefferson,
Once a property is 5 units or more 5+ it's no longer considered residential and falls under the category of commercial. Commercial requires 20% and above as you get into the higher number of units if it's going to be a DSCR loan. If it's a commercial loan and its considered "Mixed use" I have seen 20% down in some cases.
In most cases a true apartment building 5+ is going to require 20% or more regardless and it comes down to Higher credit scores, landlord experience, Assets/reserves and term. There are some banks/lenders that can use a junior lien or cross collateralization to reduce DP.
5+ units being commercial is my understanding as well, but there is a huge difference between a true apartment building and an old house that has been carved into 5 units. There’s no real difference between four or five in that case. I was really just hoping there might be a suitable loan product for house hacking a property like that.
If you are talking about buying a single family home and adding on creating a duplex or a 3-4 unit then Yes. You can use a renovation loan or a construction loan and purchase it as a primary or investment. Primary home 203K or Fannie Mae or a VA loan can offer 100% construction to build or renovate into a 2, 3 or 4 unit.
Best advice I would offer is find a home that is what we call "Ugly Inventory" and buy it as a primary home. You have two options -If it can pass an appraisal you can buy it and take out a renovation loan after you close and the work or renovation gets included based on the ARV. If it cannot pass an appraisal and is "Subject to" multiple things like roof, termite, damage etc then you purchase it with a renovation loan aka (Construction).
You need to have a builder or GC and the bank must approve them and the builder or GC must supply estimates, and a time frame so they can be approved and the build phase can be approved.
One thing for sure is you are not going to get a bank or lender to offer you financing to build a 5 unit from a 2, 3 or 4 unit. In order to build a residential home 2-4 unit into a 5+ or more units you will need to get a "zoning change or zoning permit" and that is not common in most cases to go from residential to commerical. Mostly because typical homes and neighborhoods are not zoned commercial or "mixed use" in most cases to allow this in most cases.
- 1yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
@Account Closed
Great question! Unfortunately, FHA loans are only available for 1–4 unit properties, so anything 5 units or more is considered commercial and typically requires a commercial loan—with higher down payments (usually 20–25%). There aren't low down payment options for 5+ unit properties that mirror FHA unless you explore creative financing like seller financing or partnering with investors. If low down payment is a must, sticking with 4 units or less may be your best entry point.
Good luck!
NETWORTH BUILDERS5236 Reviews - Member since 2018 · 10 posts · 1 vote1y
Hi Jefferson,
Great question — you're right that FHA caps at 4 units, which can be limiting. For 5-8 unit properties, options with low down payments are a bit more specialized, especially for owner-occupied situations. While the typical commercial or multifamily loan requires a higher down payment, there are some private and portfolio lenders that can structure creative financing depending on your experience, reserves, and the property's income potential.
Lenders work with investors and owner-occupants on deals like this and may be able to help with up to 70% ARV financing for the right project.
Best of luck with your search!
- Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes1y
I've got 34 years under my belt and I've not seen such a product...at least from a legitimate lender. I would think that levering that high would make it difficult to get a positive cash flow anyway. With taxes and insurance as high as they are right now, a lot of larger lenders, including many banks, are pulling out of mult-family completely as, with creeping operating costs, a property that cash flows today might not cash flow well tomorrow. I'm not here to tell you what to do, but I am not sure I would lever that high on a property in this day and age. It might work today, but with rising costs, you might get caught behind the 8-ball in a short period of time.
- Member since 2025 · 116 posts · 52 votes1y
🏢 Owner-Occupied 5–8 Unit Financing Options:
1. Commercial Loan with Seller Financing or 2nd Lien Help
Down Payment: Typically 20-25%, but you can negotiate seller financing for part of the down payment.
Use Case: You occupy one unit, rent out the rest.
Strategy: Ask the seller to carry 10% of the down payment in a 2nd position lien.
2. Bank Statement or DSCR Loans (Alternative Lenders)
Down Payment: 10–20%
Qualify Based On: Property income (not personal W-2s)
Pro: Easier qualification
Con: Higher interest rate than FHA
3. USDA or VA Multi-Unit Loans (Rare but possible)
Only for rural areas (USDA) or if you're a veteran (VA)
Can sometimes go above 4 units with VA if you occupy one and prove feasibility
🧠 Creative Tips:
House Hack a 4-unit now, then use the cash flow to save for a larger multi-family.
Partner with someone who brings the down payment — you bring property management and occupancy.
Look into local credit unions or community banks that sometimes offer better terms on small multifamily (5–6 units) than large national lenders.
- 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
FNMA, FHLMC, FHA & VA mortgages are only for residential 1-4 family properties - ZERO exceptions.
If you want to buy 5+ units with less than 20% down, you options are:
1) Land contract (seller financing)
2) Find a lender that will allow a seller to carryback a 2nd mortgage to make up the difference between what you want to put down and the normal 20%. Then find sellers willing to do so.
Logical Property Management4.9450 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.