Multifamily DSCR Loans: Requirements and Loan Sizing
A multifamily DSCR loan is a rental property loan approved on the building's income rather than the borrower's personal income or tax returns. The lender checks that the property's cash flow covers the loan payment by a set margin, the debt service coverage ratio (DSCR), and caps the loan at a share of value. For buildings with 5 or more units, the same ratio also sizes agency and bank loans, so the useful question is not "DSCR loan or not" but which lender's formula, minimum ratio, rate and leverage cap fit your deal.
This guide separates the two meanings of "DSCR loan", shows published terms from named lenders, and walks through a maximum-loan calculation you can repeat with your own numbers.
What does "DSCR loan" mean?
The phrase has two meanings, and mixing them up causes most of the confusion in search results.
1. The investor-loan product. Non-bank lenders sell "DSCR loans" to rental investors. The pitch is that approval rests on the property, not on your W-2 or tax returns. Lima One Capital, for example, says it underwrites rental loans "based on the property's cash flow and DSCR" and lists no personal income requirement (Lima One, Rental Loans). These loans grew up around single-family rentals and small multi-unit buildings.
2. The underwriting test. Every commercial apartment lender uses DSCR to size loans. Fannie Mae, for example, defines DSCR as net cash flow divided by principal, interest and certain other required payments, and requires its small-loan lenders to calculate debt service on a level amortizing payment at the higher of the note rate or Fannie Mae's underwriting rate floor (Fannie Mae Multifamily Guide, Section 905.02). Freddie Mac's small-loan term sheet lists a minimum amortizing DCR of 1.25x (Freddie Mac, Optigo Conventional Small).
So when a broker offers a "multifamily DSCR loan", ask which one they mean. For a 6-unit building it is probably the investor product. For 40 units it is almost always an agency, bank or bridge loan sized on DSCR. See bridge loan vs. agency loan for how those two differ.
What are the requirements for 5 or more units?
Terms change often and differ by lender, so treat these as examples of what lenders publish, checked on October 30, 2026:
| Lender and source | Units | Loan size | Maximum leverage | Other published terms |
|---|---|---|---|---|
| Lima One Capital, Rental Loans page | 1 to 9 | $85,000 to $2.5 million | Up to 80% LTV on purchase and rate-and-term refinance, 75% on cash-out | 5/1 ARM, 10/1 ARM and 30-year fixed; interest-only available; no personal income requirement |
| Groundfloor Lending, 5 to 9 unit DSCR program (announced April 2, 2026) | 5 to 9 | $350,000 to $2.5 million and up | Up to 75% LTV on purchase, 70% on cash-out | Up to two vacant units at closing, with market rent used to support the DSCR |
| Freddie Mac, Optigo Conventional Small term sheet (4/26) | Predominantly 5 to 50 | Generally $2 million to $10 million | Up to 80% LTV on 7-year and longer terms (75% under 7 years) | Minimum amortizing DCR 1.25x; non-recourse except standard carve-outs |
Sources: Lima One, Groundfloor Lending, Freddie Mac.
Two patterns stand out. First, the investor DSCR programs we could load stop at 9 units and about $2.5 million. Second, the minimum ratio is often not on the public page at all: ask for it in writing, along with the rate, points, prepayment terms and whether the loan is recourse. Neither investor program above publishes rates we could compare, so we do not quote any.
How do lenders calculate DSCR?
The textbook formula is DSCR = net operating income / annual debt service. But lenders build both halves differently.
- Agency and bank style. Income is net operating income (or net cash flow after reserves), and debt service is principal and interest. Fannie Mae also sizes on its rate floor if that is higher than your actual rate (Fannie Mae Multifamily Guide).
- Investor-loan style. Some lenders compare gross rent with the full monthly payment, including property taxes and insurance. Others use NOI. Ask which one, because the same building can show very different ratios.
Here is one hypothetical 14-unit building measured both ways (hypothetical, for illustration only):
| Line | Amount |
|---|---|
| Gross rent (14 units x $1,500 x 12) | $252,000 |
| Less 5% vacancy | $12,600 |
| Operating expenses, including $30,000 taxes and $14,000 insurance | $99,400 |
| Net operating income | $140,000 |
| Annual principal and interest on the loan | $116,667 |
| NOI / principal and interest | 1.20x |
| Principal, interest, taxes and insurance ($116,667 + $44,000) | $160,667 |
| Gross rent / full payment ($252,000 / $160,667) | 1.57x |
A 1.57x on one lender's sheet and a 1.20x on another's can describe the same loan. Compare loans on the same formula before you compare minimums.
How much can you borrow? A worked example
Keep the same 14-unit building: price $2,000,000 and NOI of $140,000 (a 7.0% cap rate). Here are three hypothetical quotes. The rates, minimum ratios and terms are made up for illustration; real quotes depend on the market and your file.
Step 1: the DSCR test. Divide NOI by the minimum DSCR to get the most debt service allowed. Then divide by the loan constant (the year's payments per dollar borrowed, which depends on the rate and amortization).
Step 2: the LTV test. Multiply the price (or appraised value, if lower) by the maximum LTV.
Step 3: the lower amount wins.
| Hypothetical quote | Investor DSCR loan | Agency-style small loan | Local bank loan |
|---|---|---|---|
| Rate and amortization | 7.25%, 30 years | 6.25%, 30 years | 6.75%, 25 years |
| Loan constant | 8.186% | 7.389% | 8.291% |
| Minimum DSCR | 1.20x | 1.25x | 1.25x |
| Maximum debt service (NOI / DSCR) | $116,667 | $112,000 | $112,000 |
| Loan by DSCR test (debt service / constant) | $1,425,177 | $1,515,847 | $1,350,872 |
| Loan by LTV test | 75% = $1,500,000 | 80% = $1,600,000 | 75% = $1,500,000 |
| Maximum loan (lower of the two) | $1,425,177 (71.3% LTV) | $1,515,847 (75.8% LTV) | $1,350,872 (67.5% LTV) |
In all three, the DSCR test controls, not the headline LTV. That is common when rates are high relative to cap rates, and it is why a lender advertising 80% LTV may lend less than that. An agency loan of about $1.5 million would also sit below Freddie Mac's general $2 million to $10 million small-loan range, so this building would more likely go to a Fannie Mae small-loan lender or a bank; see Fannie Mae and Freddie Mac small balance loans.
The downside case. If NOI falls 10% to $126,000, the investor loan's coverage drops from 1.20x to $126,000 / $116,667 = 1.08x. The building still pays, but the cushion is thin, and a lender's covenant or a refinance could fail at that level. Interest-only makes this look better at the start, not safer: the same $1,500,000 at 7.25% interest-only costs $108,750 a year, a 1.29x ratio on today's NOI, but the payment jumps when amortization begins. Our apartment deal calculator runs the cap rate, DSCR and loan-to-price for your own numbers.
How does a DSCR loan compare with agency and bank loans?
| Question | Investor DSCR loan | Agency loan (Fannie Mae, Freddie Mac) | Bank or credit union loan |
|---|---|---|---|
| Typical building | Small multi-unit, up to about 9 units in the programs above | 5 or more units, stabilized | Any size the bank likes |
| Approval based on | Property income, credit and track record | Property net cash flow, the borrower's financial capacity and experience | The bank's own policy, ask |
| Recourse | Varies by lender, ask | Generally non-recourse with carve-outs for bad acts | Varies by bank, ask |
| Prepayment | Varies, ask | Yield maintenance, defeasance or step-down | Varies by bank, ask |
| Speed | Sold on speed (Groundfloor quotes 1 business day for underwriting feedback) | More third-party reports, such as appraisal, environmental and property condition | Varies |
For sponsors raising money from investors, two rows matter most. Recourse decides who is personally on the hook; see loan guarantors in a syndication. Prepayment decides whether you can sell or refinance on plan; see prepayment penalties. A cheaper rate with yield maintenance can cost more than a pricier loan with a step-down if you sell early.
What should you check before you sign?
- The formula. NOI or gross rent? Principal and interest only, or taxes and insurance too?
- The rate used for sizing. Your actual rate, an interest-only rate, or a floor?
- The minimum ratio and the LTV cap, in writing. And whether they change for cash-out.
- Vacancy rules. How many vacant units the lender accepts and whether it uses market rent for them.
- Recourse and guaranties. Who signs, and what for.
- Prepayment. The exact penalty if you sell in year 2, 3 or 5.
- Your own stress test. Coverage at 10% lower income and at the rate after any interest-only period. See multifamily underwriting basics.
How DoorRaise fits in
DoorRaise does not lend money and does not arrange loans. It helps sponsors raise the equity that sits on top of the loan, from their friends and followers, for apartment buildings with 5 or more units. DoorRaise forms the deal's LLC, prepares the offering documents from the sponsor's inputs, files Form D and verifies accredited investors for 506(c) deals. Investors fund by wire into escrow at Enterprise Bank & Trust, an FDIC-insured bank, and distributions are quarterly by default. Fees are flat: $1,500 to set up (non-refundable), $5,000 at closing (only if the deal closes) and $3,500 a year.
Raise your apartment deal from the people who already follow you.
DoorRaise is built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.
When your loan quote is in hand, start your deal and see how much equity you need to raise.
FAQ
What is a multifamily DSCR loan?
It is a loan for a rental apartment building that a lender approves mainly on the property's income, measured by the debt service coverage ratio, rather than on the borrower's personal income.
What are the requirements for a multifamily DSCR loan?
They vary by lender. Published programs we checked cover up to 9 units with loans up to about $2.5 million and leverage up to 75% to 80% on purchases. Ask each lender for its minimum DSCR, credit score, reserves and recourse terms in writing.
What DSCR do lenders require for apartments?
Freddie Mac's small-loan term sheet lists a minimum amortizing DCR of 1.25x. Investor-loan lenders set their own minimums and do not always publish them. Compare them only after checking each lender's formula.
How do I calculate the maximum loan with a DSCR calculator?
Divide net operating income by the minimum DSCR to get the maximum yearly payment, divide that by the loan constant for the rate and amortization, then compare the result with the maximum LTV times value. The lower number is the loan.
Are multifamily DSCR loan rates higher than agency rates?
Rates move daily and depend on the borrower and property, so we do not quote them. Ask for quotes on the same day and compare the rate together with points, prepayment terms and recourse.
Sources
- Fannie Mae Multifamily Selling and Servicing Guide, Section 905.02 Underwritten DSCR and glossary (effective October 26, 2026)
- Freddie Mac Multifamily, Optigo Conventional Small term sheet (4/26)
- Lima One Capital, Rental Loans (checked October 30, 2026)
- Groundfloor Lending, "Sizing Up: 5 to 9 Unit DSCR Loan Program is Now Live" (April 2, 2026)
This article is general information, not legal, tax or investment advice. Lender terms change often; confirm every term with the lender in writing. DoorRaise is not a lender, law firm, broker-dealer, investment adviser or funding portal.