Which lender will do 80% of the purchase price for a over 5 unit apts?
- Thread starter gld2
- Start date
usctrojancpa
Well-known member
A loan on a 5+ unit residential property is a commercial loan. In my former life, I was an underwriter and lending officer for commercial real estate and construction loans. The underwriting standards are much different than they are on a 1-4 unit residential property. First off, they do not offer 30 or even 15 year fixed loans. They will offer you a 3-year, 5-year, 7-year, and/or a 10-year fixed loan and then your rate will adjust every 3, 5, 7, or 10 years based upon a spread (around 3%) plus CMT (basically whatever the corresponding treasury rate is). Even though the lender will pull your credit score, that is only a tiny piece of the puzzle. They will underwrite the property and then the borrower/s. The property will have to have a debt service coverage rate of either 1.15x or 1.20x so that will drive how much they will lend to you. You will not find many lenders that will lend over 80% LTV on 5+ unit residential properties and if they do then you can expect your interest rate to be higher. I would go to smaller/regional banks to get these type of loans as they are easily to deal with and because there will be more transparency in the process. Keep in mind that you closing costs for 5+ unit properties will be higher than it will be for 1-4 units, especially your appraisal cost.