Financing barrier on a 4-family I&#x27;ve agreed to at $650k — appraisal isn&#x27;t the issue,

Rotchild Adelson
OP
Member since 2026 · 7 posts · 0 votes
3mo
I appreciate the response.I do intend on living in one of the units its more feasible for me to put the 5% down with a conventional loan than 20% with DSCR Loan. If you know of other potential options without 100k plus down I am all ears

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Riki Hasty
Lender · Tampa FL · Member since 2026 · 8 posts · 2 votes
3mo
Quote from @Rotchild Adelson:

I appreciate the response.I do intend on living in one of the units its more feasible for me to put the 5% down with a conventional loan than 20% with DSCR Loan. If you know of other potential options without 100k plus down I am all ears

No problem. I would ask your lender if they are using the rental income from the additional units. Fannie Mae guidelines allow you to use rental income from the subject property as qualifying income if you have property management experience that can be documented. If no property management experience exists, rental income used in qualifying may not exceed the PITIA. Good luck and please let me know if you need any further assistance. We can help you out in New York.

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Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

As mentioned, I would look into a DSCR loan, and I would also start checking with other lenders for making offers on properties that you currently don't qualify for. If it goes sideways, it is going to leave the agents and those involved a very bad taste in your mouth when dealing with you in the future.

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Valentin Lopez

Investor · Florida, United States · Member since 2026 · 8 posts · 5 votes

Lot of people here jumped straight to DSCR, but before you do, the one question that

actually decides this is whether you're planning to live in one of the units.

If you are, you keep the owner-occupied conventional path (5 to 15% down on a 2-4

unit), but you're stuck under the DTI ceiling, and that's what's holding you around

525k. The second you switch to DSCR to reach 650k, you give up owner-occupancy

completely (DSCR is investment only) and the down payment jumps to 20-25%. So what

feels like a financing gap is really a cash gap. DSCR can get you to 650k, but it's

going to want something like 95 to 100k more out of pocket than the owner-occ route

would. I'd nail that down first, because it decides which lever you even have.

On your actual questions: the 1007 market rents do help on conventional, but they

only count about 75% of it and it still runs through your personal DTI, so it loosens

the cap, it doesn't get rid of it. DSCR is the only one that ignores your DTI

entirely, and on 7,800 market rent against roughly a 5k PITIA you'd land around 1.5,

which is solid. One thing to watch though: some DSCR lenders use the lower of actual

or market on the occupied units, so that under-market tenant can drag your ratio down

until you get them to market.

On the seller second, honestly that's probably your cleanest bridge here. The seller

already came down 349k and sat 143 days, so they're motivated. Just know the

conventional first is going to fight the subordination, and owner-occ rules want your

minimum down coming from your own money. DSCR lenders tend to be more flexible on a

seller second up to a CLTV cap, so get that number in writing before you count on it.

Last thing, and it's the one that gets first-timers: underwrite the rough year, not

the stabilized one. You've got a vacant unit, a rehab to split the heat, and a tenant

under market. Run it with one unit empty and you still covering both heat zones, and

make sure you can actually carry it that long. If it holds up there, you've got a real

value-add. If it only works on perfect numbers, that's where people run out of cash.

1 Reply

Rotchild Adelson
OP
Member since 2026 · 7 posts · 0 votes
3mo
Thank you for your response. This would be my first home I would intend on living in one of the units its more feasible for me to put the 5% down with a conventional loan than 20% with DSCR Loan. If you have any suggestions now that I given a bit more detail I am open thank you.

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Riki Hasty

Lender · Tampa FL · Member since 2026 · 8 posts · 2 votes

If you have 20-25% down and do not intend on occupying the property you can purchase this with a DSCR loan. No personal income needed and therefore you avoid the DTI issue. Lender only cares about the monthly rents and whether or not it is enough to cover the monthly mortgage payment. If it does, it qualifies. Close in a LLC and have the mortgage not report to personal credit. I also have lenders who will also allow seller carried seconds with a CLTV of 90%

Rotchild Adelson
OP
Member since 2026 · 7 posts · 0 votes
3mo
@Riki Hasty: I do intend on living in one of the units its more feasible for me to put the 5% down with a conventional loan than 20% with DSCR Loan

0 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

[email protected]248-209-6824

Quote from @Rotchild Adelson:

I've reached verbal agreement with a seller at $650k on a 4-family in Orange County, NY (originally listed at $999k, sat 143+ days). If it appraises at or above $650k, I believe this is a solid first deal and a strong value-add opportunity: one vacant unit, one long-term tenant significantly under market, landlord-paid heat that can be separated post-renovation.

The problem isn't valuation or appraisal. It's financing. My current lender says my conventional purchasing power tops out around $525-550k based on their DTI/rental income calculation, leaving a real gap between what I've agreed to pay and what I currently qualify for.

A few specifics on why I think the number may be soft rather than a hard ceiling:

Not sure if they're using the appraiser's Form 1007 market rent schedule vs. just the current (below-market) leases for rental income qualification
Haven't yet tried adding a non-occupant co-borrower to the file
Haven't shopped this against other conventional lenders yet

Questions for the group:

Has anyone closed a 2-4 unit conventional deal where one lender capped them well below another lender's number for the same file? What made the difference?
For those who've used the 1007 market rent schedule for owner-occupied conventional qualifying, how much did that move your number versus using actual lease income?
Has anyone added a non-occupant co-borrower specifically to close a financing gap like this on a conventional 2-4 unit purchase?
If the gap can't be closed through a bigger/better conventional approval, has anyone successfully structured a seller-carried second to bridge it, and how did the first-position conventional lender handle subordination?
Any Hudson Valley/Orange County NY lender or broker recommendations who specifically work 2-4 unit owner-occupied value-add deals?

Property details: rent roll currently ~$6,025/mo (one unit vacant), market rent estimate ~$7,800/mo, taxes ~$15,900/yr, landlord pays heat (2 zones). Appreciate any real-world experience closing a similar gap.

Are you trying for an FHA or conforming mortgage?

how much are you trying to put down?

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Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

[email protected]818-269-7983

Quote from @Rotchild Adelson:

I've reached verbal agreement with a seller at $650k on a 4-family in Orange County, NY (originally listed at $999k, sat 143+ days). If it appraises at or above $650k, I believe this is a solid first deal and a strong value-add opportunity: one vacant unit, one long-term tenant significantly under market, landlord-paid heat that can be separated post-renovation.

The problem isn't valuation or appraisal. It's financing. My current lender says my conventional purchasing power tops out around $525-550k based on their DTI/rental income calculation, leaving a real gap between what I've agreed to pay and what I currently qualify for.

A few specifics on why I think the number may be soft rather than a hard ceiling:

Not sure if they're using the appraiser's Form 1007 market rent schedule vs. just the current (below-market) leases for rental income qualification
Haven't yet tried adding a non-occupant co-borrower to the file
Haven't shopped this against other conventional lenders yet

Questions for the group:

Has anyone closed a 2-4 unit conventional deal where one lender capped them well below another lender's number for the same file? What made the difference?
For those who've used the 1007 market rent schedule for owner-occupied conventional qualifying, how much did that move your number versus using actual lease income?
Has anyone added a non-occupant co-borrower specifically to close a financing gap like this on a conventional 2-4 unit purchase?
If the gap can't be closed through a bigger/better conventional approval, has anyone successfully structured a seller-carried second to bridge it, and how did the first-position conventional lender handle subordination?
Any Hudson Valley/Orange County NY lender or broker recommendations who specifically work 2-4 unit owner-occupied value-add deals?

Property details: rent roll currently ~$6,025/mo (one unit vacant), market rent estimate ~$7,800/mo, taxes ~$15,900/yr, landlord pays heat (2 zones). Appreciate any real-world experience closing a similar gap.

Are you able to add someone onto the loan for more income?

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Alex BekezaBusiness Member

Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes

[email protected]818-606-8823

Worth running the numbers both ways to compare. I built a DSCR pricing tool that lets you plug in the market rent, taxes, and purchase price to see what you'd actually qualify for under a DSCR structure, side by side with what your conventional gap looks like. Link's in my signature if you want to run this deal through it.

Either way, a 4-family that sat 143 days and dropped from $999k to $650k with this kind of value-add upside is worth fighting for the financing on.

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Rebecca Willett
Contractor · Hoosick Falls, NY · Member since 2023 · 27 posts · 5 votes
2mo
Quote from @Alex Bekeza:

Worth running the numbers both ways to compare. I built a DSCR pricing tool that lets you plug in the market rent, taxes, and purchase price to see what you'd actually qualify for under a DSCR structure, side by side with what your conventional gap looks like. Link's in my signature if you want to run this deal through it.

Either way, a 4-family that sat 143 days and dropped from $999k to $650k with this kind of value-add upside is worth fighting for the financing on.

This side-by-side pricing layout is a massive asset for evaluating these types of value-add plays, Alex. Appreciate you making the tool available. With a 4-family sitting that long and dropping to $650k, the DSCR structure is almost always the only viable way to bypass the conventional underwriting bottlenecks, especially when factoring in the initial cash-flow stabilization phase. Thanks for putting this matrix together!
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Valentin Lopez

Investor · Florida, United States · Member since 2026 · 8 posts · 5 votes

Rotchild, good, that answers the lever question. Since owner-occ conventional at 5% down is the real path, here's where I'd look next, roughly in order of what actually raises your number instead of just closing the gap with more of your own cash.

Non-occupant co-borrower. You mentioned you haven't tried this yet, and it's probably the one thing on your list that raises your qualifying number instead of shrinking the amount you'd need to bridge. Fannie Mae allows it on owner-occupied 2-4 unit purchases, and the co-borrower doesn't have to live there.

Ask your loan officer directly whether they're capping your rental income at PITIA or actually giving you the 75% market-rent offset off the 1007. Riki's Fannie Mae point above is the catch a lot of first-timers run into: without documented property management experience, some lenders cap the rental income they'll count at PITIA instead of the fuller market-rent number. That alone could be why you're seeing 525 to 550k instead of something closer to 650k. Worth confirming before you treat that as a hard ceiling.

Ask the seller about a permanent rate buydown instead of, or alongside, more price movement. They already came down 349k and sat 143 days, so there's clearly room to negotiate. A permanent buydown lowers your note rate, which lowers your PITIA, and that's one of the few levers that actually moves a DTI cap without you putting in more cash. Just make sure it's permanent, not a 2-1 temporary buydown. Temporary ones usually don't count toward DTI qualifying.

Also shop FHA in parallel with conventional on this exact file. It's built for owner-occupied 2-4 unit purchases at 3.5% down, and the DTI treatment with compensating factors can be more forgiving than a standard conventional AUS run. Doesn't hurt to get the quote before you assume conventional is your ceiling.

None of these alone probably gets you the full 100 to 125k. But stack two or three of them and you might close more of it than you think, without touching the DSCR down payment math.

1 Reply

Jeffrey Abraham

Lender · United States · Member since 2020 · 177 posts · 28 votes

You’re asking the right questions. Before assuming you’ve hit your maximum purchase price, I’d focus on the items that can actually increase your buying power instead of just adding more cash.

A non-occupant co-borrower is one of the strongest options because it can improve your qualifying income. I’d also ask your lender exactly how they’re calculating the rental income. Some lenders limit it more than others, and that can make a significant difference in what you qualify for.

I'd also negotiate a permanent seller-paid rate buydown rather than just a price reduction. Lowering the interest rate can improve your debt-to-income ratio and increase your loan amount. Finally, have a lender run both conventional and FHA side by side. FHA can sometimes qualify borrowers more favorably on owner-occupied 2–4 unit properties.

The key is not to assume the first approval amount is the highest you can get. A second opinion from an experienced lender who specializes in house hacking can make a big difference.

Tom S.

Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes

@Rotchild Adelson Just curious, what did you end up doing for this potential deal?