How a DSCR loan for a 2-4 unit property is underwritten

A DSCR loan for a 2-4 unit property is residential lending. One to four units is a residential property in the way lenders, appraisers and the agencies all define it, so a duplex, a triplex and a fourplex are underwritten with the same machinery as a single-family rental.

At five units it stops being residential and becomes commercial multifamily, with a different appraisal, a different set of lenders and a different process. That line, rather than the size of the building, is what people are really asking about when they ask whether this kind of loan covers small multifamily.

The appraisal is different. A two to four unit property is appraised on a report built for small income property, which carries a rent schedule for each unit and comparable rents alongside comparable sales. That document, not your spreadsheet, is what the lender underwrites.

The rent roll gets read rather than totalled. Below-market leases on long-standing tenants, a unit occupied by a family member, a unit sitting vacant, an unpermitted fourth unit in a building taxed as a triplex: each of those moves the file, and the last one can stop it outright.

Insurance is a different product on a multi-unit building than on a single-family house. A quote pulled casually and early can come in materially higher once the property is actually underwritten, and on a four-unit that lands squarely on the payment side of the ratio.

The address, the unit count, the rent on each unit and whether it is leased or vacant, the current tax bill, and the permit position if anything about the unit count looks unusual. That is enough for a first read before you spend money on anything.

Rental lending on a property you do not occupy is business purpose, available in any state. Eligibility and terms vary by scenario and by lender guidelines; nothing here is a commitment to lend.