To get approved for a multifamily loan, match the loan type to the property type first (2–4 units vs five or more units), then build your file around what lenders actually underwrite: your credit score and tax returns, your debt to income ratio (for smaller properties), the property’s rental income and projected rental income, and the deal’s loan to value ratio plus debt service coverage ratio (for larger properties). If you’re buying a multifamily home with up to four units and you’ll live in one unit as your primary residence, an FHA loan (an FHA multifamily loan) can be a strong path for owner occupiers, sometimes more tolerant of lower credit scores than conventional. If you’re buying more than four units or an investor-focused multifamily property, approval is usually driven less by personal DTI and more by DSCR, experience, and commercial underwriting (including agency options like Freddie Mac loans and Fannie Mae, or HUD multifamily loans for certain properties, including affordable housing).

For more details, keep reading.

Pick the Right Multifamily Financing Track (Up to Four Units vs Five or More Units)

The fastest way to get denied is applying for the wrong product. In multifamily financing, the unit count often determines what kind of lender and underwriting you’ll face.

Properties with up to four units (residential-style financing)

If the property has multiple units but is still up to four units, many lenders treat it similarly to single family homes, especially if you’re an owner occupier.

Common loan options in this category include:

• FHA loan (often called an FHA multifamily loan when used for 2–4 units)

• conventional loans

• certain programs through credit unions

This is the zone where your personal profile matters a lot:

• debt to income ratio

• minimum credit score and overall credit history

• verified monthly income

• existing debts and other existing debts

• assets for down payment and reserves

Five or more units (commercial underwriting)

Once you hit five or more units, you’re typically in commercial mortgages territory (even if the building “feels” like a small apartment property). Lenders view this as increased risk because performance depends heavily on property operations.

Approval tends to focus on:

• property cash flow and debt service coverage ratio

• rent roll, leases, and operating history for existing multifamily properties

• management plan and borrower experience

• appraisal and market data

• DSCR-driven sizing for loan amount

Financing options here may include:

• local/regional banks and different lenders

• Freddie Mac loans

• Fannie Mae programs

• HUD multifamily loans / HUD multifamily financing in qualifying scenarios

FHA Multifamily: Requirements, Limits, and What Owner Occupiers Should Know

If you’re asking how to get approved for a multifamily loan and you plan to live on-site, FHA is often the first place to look.

What an FHA multifamily loan is (and what “multifamily” means to FHA)

An FHA multifamily loan for most individual buyers typically means using an FHA loan to purchase a 2–4 unit property under FHA guidelines (the program is backed by the Federal Housing Administration).

Key occupancy rule:

• You must use it as your primary residence (meaning you live there).

• You can live in one unit and rent out the remaining units (the other units) to help offset the mortgage payment.

This is why FHA is a popular entry point for owner occupiers building a portfolio.

FHA multifamily loan requirements (the common approval factors)

While exact overlays vary by lender, FHA multifamily loan requirements typically revolve around:

• minimum credit score (some lenders require higher scores than FHA’s baseline)

• stable monthly income

• manageable debt to income ratio

• documented funds for down payment and closing costs

• property condition meeting FHA standards (safety and habitability)

Also note:

• FHA includes mortgage insurance, which affects your monthly payment and total cost.

• If the property needs major work, FHA may not fit unless you’re using a rehab-oriented structure (more on that later).

FHA multifamily loan limits and loan amount reality

Your loan amount can’t exceed local FHA caps. FHA multifamily loan limits vary by county and by unit count (2, 3, or 4 units). That means a fourplex in a high-cost market may push you above the allowable loan, even if you qualify otherwise.

Practical takeaway:

• Before you fall in love with a property, confirm the local limit for that unit count and make sure the purchase price fits with your down payment.

Rental income and projected rental income: how it helps (and where it doesn’t)

Many borrowers assume rental income automatically “counts.” In reality, lenders will evaluate rental income carefully and may discount it.

To support projected rental income, lenders often want:

• market rent appraisals (rent schedule)

• existing leases if the property is already rented

• a history of rent collection for existing properties when applicable

Even when rental income is considered, you still need enough income to satisfy the overall underwriting model.

If you’re planning to move to Western New York, or if you’re already a local resident, understanding your multifamily financing options—especially how FHA and conventional programs treat 2–4 unit properties—is just one part of your life in Western New York. For more helpful tips on real estate, be sure to check out our latest blog on Carol Klein WNY Homes, where we cover practical guidance for buyers on financing, local market considerations, and next steps when purchasing properties.

Conventional Loans vs Commercial Mortgages: What Lenders Require and Prefer

Not every multifamily borrower should use FHA. Depending on your situation, conventional loans or commercial products can be a better fit.

Conventional loans for 2–4 units

For a 2–4 unit multifamily home, conventional financing may offer:

• no FHA mortgage insurance structure (though PMI may apply with low down payments)

• potentially better long-term cost depending on rate and insurance

• more flexibility in some scenarios

But many conventional lenders also:

• want stronger credit profiles

• apply stricter reserve requirements

• scrutinize DTI and stability

Commercial mortgages for 5+ units and investor profiles

With commercial mortgages, the underwriting is often less about your personal DTI and more about the property’s ability to pay the loan.

This is where DSCR dominates:

• debt service coverage ratio = NOI / annual debt service

• lenders prefer DSCR above a minimum threshold (varies by lender and market)

If the property can’t support debt service at the proposed rate, the lender may reduce the loan amount (even if you have great credit).

Agency and HUD options: Freddie Mac loans, Fannie Mae, and HUD multifamily loans

For stabilized multifamily deals, you may hear about:

• Freddie Mac loans

• Fannie Mae execution

• HUD multifamily loans (and broader HUD multifamily financing), sometimes associated with longer amortizations and specific property requirements, including certain affordable housing structures

These are not always the fastest programs, and they can be documentation-heavy. But they can be compelling for the right borrower and property.

The Approval Checklist: DTI, DSCR, LTV, Credit, and Documentation

No matter which lender you choose, approvals typically come down to a few measurable ratios and a clean documentation package.

Debt to income ratio (common for 1–4 units)

For 2–4 unit residential-style loans, debt to income ratio is central. Lenders compare:

• your gross monthly income

• your total monthly debts (including the new housing payment)

Bring down DTI by:

• paying off revolving balances (even small changes can help)

• reducing new credit inquiries before applying

• avoiding new auto loans or major financed purchases mid-process

Debt service coverage ratio (common for 5+ units, sometimes used for smaller investor loans)

For larger properties (and some investor products), debt service coverage ratio is the gatekeeper. Improve DSCR by:

• raising rents (only if justified by the local market)

• lowering controllable expenses

• documenting stable occupancy and collections

• ensuring your rent roll is clean and realistic

Loan to value ratio and down payment

Your loan to value ratio is driven by:

• purchase price

• appraised value

• your down payment

More equity can solve multiple problems at once: it reduces lender risk and can make DSCR work by lowering the payment.

Minimum credit score and credit profile

Your minimum credit score is the baseline, but lenders also look at:

• payment history

• utilization

• collections

• recent inquiries

• the story your credit report tells

Some lenders are more flexible with lower credit scores, but they may offset that with higher rates, larger down payments, or stricter reserves.

Tax returns and verifying income

Expect lenders to request:

• tax returns (often 2 years)

• W-2s/1099s

• pay stubs

• bank statements

• documentation for any existing loan obligations or existing debts

For investors with multiple properties, lenders may also request schedules showing your existing properties, mortgage statements, and insurance/tax details.