If you’re looking to finance a duplex, triplex, apartment building, or other multifamily property, a DSCR loan (Debt Service Coverage Ratio loan) may be your best financing option. These commercial-style loans focus on the property’s income rather than your personal finances – making them ideal for growing your multifamily portfolio.
In this comprehensive guide, you’ll learn:
✔ What makes DSCR loans perfect for multifamily properties
✔ Exact credit, down payment, and DSCR requirements
✔ How to calculate DSCR for multifamily properties
✔ Top lenders for multifamily DSCR loans
✔ Step-by-step approval process
✔ Pro tips to boost your approval chances
Let’s break down everything you need to know about DSCR loan requirements for multifamily real estate investing!
Why DSCR Loans Are Ideal for Multifamily Properties
Key Benefits of DSCR Loans for Multifamily
✅ No personal income verification – Perfect for self-employed investors
✅ Loan amounts up to $5M+ (depending on lender)
✅ Can finance 5+ unit properties (commercial multifamily)
✅ Faster approvals than traditional commercial loans
✅ Portfolio growth – Easier to finance multiple properties
Traditional Loan Challenges for Multifamily
Most conventional lenders:
❌ Require personal income documentation
❌ Have strict limits on number of units/properties
❌ Require extensive landlord experience
❌ Have slower underwriting processes
DSCR Multifamily Loan Requirements
While more flexible than conventional loans, DSCR loans for multifamily properties have specific requirements:
1. Minimum Credit Score
| Lender Type | Credit Score Requirement |
|---|---|
| Traditional Banks | 680+ |
| Private Lenders (Truss Financial Group) | 620+ |
| Portfolio Lenders | 600+ |
| Hard Money Lenders | 500+ |
Note: Higher scores get better rates and terms
2. Down Payment Requirements
| Property Type | Minimum Down Payment |
|---|---|
| 2-4 Unit Multifamily | 20-25% |
| 5+ Unit Commercial Multifamily | 25-35% |
| Fix-and-Stabilize Deals | 30-40% |
3. DSCR Ratio Requirements
Most lenders require:
- 1.20-1.25 DSCR for stabilized properties
- 1.00-1.10 DSCR for value-add opportunities
- 0.80-0.90 DSCR for bridge/hard money loans
4. Property Requirements
- Minimum 2 units (some lenders start at 5+ units)
- Occupancy requirements (typically 75-85% occupied)
- No major deferred maintenance
- Professional property management (often required)
5. Experience Requirements
- Some lenders require 2+ years landlord experience
- Others accept first-time investors with strong DSCR
How to Calculate DSCR for Multifamily Properties
DSCR = Net Operating Income (NOI) / Annual Debt Service
Multifamily DSCR Calculation Example
Property Details:
- 8-unit apartment building
- Purchase Price: $1,200,000
- Down Payment: 30% ($360,000)
- Loan Amount: $840,000
- Interest Rate: 7.25%
- Gross Scheduled Income: $180,000/year
- Vacancy: 5% ($9,000)
- Operating Expenses: $72,000/year
Step 1: Calculate Effective Gross Income
$180,000 – $9,000 = $171,000
Step 2: Calculate NOI
$171,000 – $72,000 = $99,000
Step 3: Calculate Annual Debt Service
$840,000 @ 7.25% for 25 years = $6,052/month
$6,052 × 12 = $72,624/year
Step 4: Calculate DSCR
$99,000 / $72,624 = 1.36 DSCR
This strong DSCR would qualify with most lenders
Best DSCR Lenders for Multifamily Properties
🥇 #1 Multifamily DSCR Lender: Truss Financial Group
✅ Accepts DSCR as low as 1.0 for multifamily
✅ Funds loans up to $5 million
✅ Credit scores 620+ accepted
✅ Fast approvals (10-21 days)
👉 Get Pre-Approved for a Multifamily DSCR Loan
Other Top Multifamily Lenders
| Lender | Min. Units | Max Loan | Min. DSCR |
|---|---|---|---|
| Kiavi | 2+ | $3M | 1.20 |
| LendingOne | 5+ | $5M | 1.25 |
| Visio Lending | 2+ | $2M | 1.15 |
| Lima One | 5+ | $10M | 1.10 |
5 Pro Tips for Multifamily DSCR Loan Approval
- Present Professional Rent Rolls
- Show stabilized occupancy (85%+)
- Include all leases and payment histories
- Highlight Value-Add Potential
- Projected rent increases after renovations
- Comparable properties in area
- Use Experienced Property Management
- Lenders prefer professional management
- Include management agreement
- Prepare Strong Reserves
- 6-12 months of payments in reserves
- Additional repair/maintenance funds
- Work With a Multifamily-Specialist Lender
- Not all DSCR lenders understand multifamily nuances
FAQ: Multifamily DSCR Loans
❓ Can I get a DSCR loan for a 100+ unit apartment complex?
Yes, but you’ll typically need a commercial lender rather than standard DSCR loan.
❓ Do DSCR loans work for mixed-use properties?
Some lenders will finance mixed-use with 25-35% commercial space.
❓ What’s better for multifamily: DSCR or Fannie Mae loans?
DSCR loans are easier to qualify for; Fannie Mae offers better rates if you qualify.
❓ Can I include laundry/vending income in DSCR?
Yes, all income streams should be included in your NOI calculation.
🚀 Ready to Grow Your Multifamily Portfolio?
Now that you understand DSCR loan requirements for multifamily properties, it’s time to take action! Truss Financial Group offers some of the most competitive multifamily DSCR loans available: