DSCR loans work on 2–4 unit properties the same way they work on single-family rentals: the property's rent has to cover the payment. The difference is that rent comes from several units, which often makes the numbers work better, especially in high-priced markets.
Why Investors Like 2–4 Units
- More rent per dollar of price. Several units on one lot often produce a higher DSCR than a single-family home at the same price.
- Less vacancy risk. One empty unit doesn't stop all of the income.
- Still residential lending. Up to four units qualifies for residential DSCR loans, with 30-year terms.
How Rent Is Counted
For a purchase, the appraiser estimates market rent for each unit on a small residential income property appraisal report (Form 1025). For a refinance, lenders generally use the signed leases, and many use the lower of the lease or market rent, or allow the higher lease if you can document it's being paid.
Example: a fourplex with units renting for $1,900, $1,900, $1,750, and $1,750 brings in $7,300 a month. If the full payment, including taxes, insurance, and any HOA dues, is $6,100, the DSCR is about 1.20x.
Check your own numbers with the DSCR calculator, using the total rent for all units.
2–4 Unit DSCR Requirements
| Guideline | Typical | Strongest files, at some lenders |
|---|---|---|
| Credit score | 660–680 | From about 640 |
| Max LTV, purchase | 75% | Up to 80% |
| Max LTV, cash-out | 70% | Up to 75% |
| DSCR | 1.00x | Lower with some programs, at lower LTV |
| Reserves | 3–6 months | Fewer on smaller loans |
| Loan size | Up to $2–3 million | Higher at some lenders |
Some lenders reduce the maximum LTV by about 5% for 2–4 units compared with single-family homes. Others treat them the same. That's one of the main reasons to compare lenders on these properties.
Vacant Units
On a purchase, vacant units are common, and lenders usually use the appraiser's market rent. On a refinance, lenders treat vacancies differently. Some use market rent for vacant units, some count only leased units, and some require a minimum number of units to be leased. If you're refinancing a building that's partly vacant, tell me which units are leased so I can match you with the right lender.
ADUs and Extra Units
A single-family home with an accessory dwelling unit (ADU) is not the same as a duplex. Lenders vary on whether they count ADU rent, and many count it only if the ADU is permitted and the appraiser can support the rent. In California, where ADUs are common, see DSCR loans in California.
Living in One Unit?
If you plan to live in one of the units, you're buying a primary residence, not an investment property, so a DSCR loan isn't the right fit. FHA and conventional loans allow owner-occupied 2–4 unit purchases with lower down payments, and rent from the other units can sometimes help you qualify. Once you move out, you can refinance into a DSCR loan if that suits you.
5 or More Units Is Commercial
A building with five or more units is considered commercial real estate. These loans are usually underwritten on the property's net operating income, after operating expenses, rather than gross rent compared with the payment. Terms, appraisals, and loan structures differ. Some DSCR lenders offer separate small-multifamily programs for about 5–10 units, often at lower LTVs. If you're looking at a 5+ unit building, send me the details and I'll tell you what's available.
2–4 Unit Checklist
- Get the current rent roll and copies of every lease.
- Confirm the number of legal units with the city, especially for converted properties.
- Get an insurance quote for a multi-unit rental.
- Check local rent control rules, which affect how much rent can rise.
- Run the total rent against the full payment in the DSCR calculator.
2–4 Unit DSCR FAQ
Can I get a DSCR loan on a duplex?
Yes. Duplexes, triplexes, and fourplexes are eligible at nearly all DSCR lenders, using the combined rent of all units.
Is the down payment higher for a fourplex?
Sometimes. Some lenders reduce the maximum LTV by about 5% for 2–4 units, while others allow the same LTV as single-family homes, commonly up to 75–80%.
What if some units are vacant?
On a purchase, lenders usually use market rent. On a refinance, rules vary: some use market rent, and some count only leased units.
Can I get a DSCR loan on a 6-unit building?
Not a standard residential DSCR loan. Five or more units is commercial, though some DSCR lenders offer separate programs for 5–10 units.
Does an ADU count as a second unit?
Not usually. A home with an ADU is generally still a single-family property, and lenders vary on whether they count the ADU's rent.
In the financial industry since 2015. Licensed loan officer in Los Angeles, California. NMLS #1493724, with UTM Financial, LLC (NMLS #2591548). More about Ivan
This article is general education, not financial, tax, or legal advice. Loan guidelines vary by lender and change often. Not a commitment to lend.