I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Call (800) 239-1103.
California multifamily financing is more complex than single-family — different loan programs, different underwriting standards, and different documentation requirements depending on unit count. This guide walks you through every step. See also: Multifamily Loans CA | Commercial Loans CA.
Step 1: Choose the Right Loan Type for Your Unit Count
2–4 units: Eligible for conventional Fannie/Freddie financing — treated similarly to single-family residential, with rental income counted toward qualifying income. In high-cost California counties, conforming limits extend to $1,209,750–$1,249,125 for 2-unit properties and higher for 3–4 units. Requires 15–25% down depending on occupancy (owner-occupied vs. investment).
5+ units: Crosses into commercial territory and requires commercial financing — Fannie Small Balance, Freddie SBL, CMBS, portfolio bank loans, or bridge/hard money for value-add acquisitions. Underwriting shifts entirely to property income (DSCR-based) rather than personal income qualification.
Value-add / distressed: Below-market occupancy or below-market rents typically disqualify permanent financing. Bridge loan funds the acquisition and carries the property through lease-up and stabilization, then refinances to permanent agency or portfolio financing.
Step 2: Prepare Your Rent Roll and Operating Statements
For any multifamily loan, you need a current rent roll (tenant names, unit number, monthly rent, lease start and end dates, security deposits), at least 12 months of operating statements (income and expense detail), trailing 3-month bank statements for the property account, and current executed leases. For value-add acquisitions, supplement with a pro forma showing market rents, your renovation plan, and projected stabilized NOI. The better your documentation, the faster and smoother the underwriting.
Step 3: Understand DSCR — The Key Metric for 5+ Unit Properties
Debt service coverage ratio (DSCR) = NOI ÷ Annual debt service. Most California multifamily lenders require a minimum 1.20x–1.25x DSCR. NOI = gross rents minus vacancy (5–10% for stabilized properties) minus operating expenses (35–45% of gross rents is the typical expense ratio for California multifamily). Run your numbers before applying. If DSCR is tight at your target loan amount, either negotiate the purchase price, increase the down payment, or confirm the lender’s expense ratio assumptions before submitting. Surprises at underwriting slow everything down.
Step 4: Appraisal, Underwriting, and Close
Multifamily appraisals use the income approach (cap rate valuation) rather than comparable sales as the primary method. The appraiser applies market vacancy and expense ratios to your in-place rent roll — which may differ from your actual reported numbers. Lenders use the appraised NOI, not your actuals, for final DSCR calculation. Standard close timeline: 21–30 days for portfolio/DSCR loans, 45–60 days for agency (Fannie/Freddie) multifamily financing, 10–14 days for bridge money.
Get a Multifamily Loan Quote
Tell me the unit count, purchase price, and current rent roll — I’ll give you a realistic rate, DSCR analysis, and loan options in the first call.
Frequently Asked Questions
What is the difference between financing a 4-unit and a 5-unit property in California?
The 4-unit to 5-unit line is one of the most important in California real estate finance. Properties with 2–4 units qualify for residential financing: conventional Fannie/Freddie loans with residential underwriting (personal income verification, DTI limits, conforming loan limits that extend to $1,209,750–$1,249,125+ in high-cost CA counties). Properties with 5+ units require commercial financing: DSCR-based underwriting, no Fannie/Freddie conforming loan limits, higher minimum down payments (typically 25–30%), and a different documentation process (rent roll, operating statements, commercial appraisal). The 5+ unit financing market has more flexibility in some ways (no DTI limit, no property count limit) but requires commercial-lender relationships and more sophisticated deal documentation. Call me if you’re deciding whether to buy a 4-unit or 5-unit property — the financing differences are significant and affect your deal structure.
Can I use rental income to qualify for a California multifamily loan?
Yes — and how rental income is counted varies significantly by loan type. For 2–4 unit conventional financing: rental income from the other units is counted toward your qualifying income, typically at 75% of gross rents (after a 25% vacancy factor). For owner-occupied 2–4 unit properties, you may qualify based entirely on the property’s income supplementing your personal income. For 5+ unit commercial financing: the property qualifies based on NOI alone — your personal income is not part of the primary underwriting equation. DSCR loans for investment properties also use property income only, with no personal income documentation required. This is why experienced California investors with complex tax returns prefer DSCR and commercial financing for their investment portfolios — the properties qualify themselves.
What down payment do I need to buy a California multifamily property?
Down payment requirements vary by property size and occupancy. Owner-occupied 2–4 unit (you live in one unit): 3.5–5% with FHA, 5–15% with conventional financing. Investment 2–4 unit (you don’t live there): 15–25% conventional, 20–25% with most lenders. 5+ unit investment property: 25–30% with DSCR or portfolio commercial financing. Value-add or distressed 5+ unit: 30–35% with bridge financing, since as-is value is depressed. The SBA 7(a) program does NOT apply to investment multifamily — it’s for owner-occupied commercial real estate where the business operates. For California buyers purchasing a 2–4 unit property to owner-occupy, FHA financing with 3.5% down is often the most capital-efficient entry point into multifamily investing. Call me and I’ll map out the exact down payment requirements for your specific unit count and occupancy plan.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
