Non-bank DSCR loans for 5+ units and mixed use

Who these loans are for

The DSCR loan grew up in the 1-4 unit rental market and moved up into small commercial property. For a 5 to 50 unit apartment building, a mixed-use building with shops below apartments, or a small strip or flex building, it answers one question: does the rent cover the payment? The lender does not need the borrower’s personal income to qualify the loan, which matters for investors who own through several entities, show low taxable income because of depreciation, or are early in their track record.

One public lender’s filing gives a sense of the market. At June 30, 2026, Velocity Financial’s held-for-investment book had 18,219 loans¹ with an average balance of about $383,000¹, a 64.6%¹ weighted average LTV, and 45.6%¹ in 1-4 unit rentals. Mixed use was 11.0%¹ and multifamily 7.0%¹. That is one lender’s book, not a market average.

What it costs next to the alternatives

Option for a small apartment building	What the public data shows
HMDA-reported loans on 5-24 unit properties, 2025	Median rate 6.75% median rate on 5-24 unit properties2, median loan $725,000 median loan on 5-24 unit properties2
HMDA-reported loans on 25-49 unit properties, 2025	Median rate 6.35% median rate on 25-49 unit properties2
One public non-bank investor lender, whole book	Weighted average coupon 9.74%1
Same lender, loans made in Q2 2026	Weighted average coupon 10.0%3

HMDA covers loans by banks, credit unions and other reporting lenders in 2025, so it is a different year and a different mix. The direction is still clear: when a bank, a credit union or a Fannie Mae small loan will do the deal, it usually costs less. The DSCR loan earns its premium on deals those lenders decline.

Worked example: a 12-unit building

Illustration only. Every rate, ratio and cap rate below is an assumption, not a lender quote.

A 12-unit building rents for $1,500 a unit, or $216,000 a year. Underwrite 5% vacancy and 40% expenses including a replacement reserve.

• Effective gross income: $216,000 x 0.95 = $205,200
• NOI: $205,200 x 0.60 = $123,120
• Value at an assumed 7.0% cap rate: $123,120 / 0.07 = about $1,759,000

Now size it two ways, at an assumed 7.50% rate and 30-year amortization (annual debt constant 0.0839):

Test	Math	Maximum loan
1.20x DSCR on NOI	$123,120 / 1.20 / 0.0839	about $1,223,000
75% LTV	$1,759,000 x 0.75	about $1,319,000

Coverage binds, at about 70% of value. A lender that measures coverage on gross rent instead of NOI would show a much higher ratio on the same building, which is why two DSCR term sheets can disagree by six figures. Ask which method each one uses. Check your building in the DSCR calculator and the payment in the commercial mortgage calculator.

Terms to compare across lenders

Term	What to ask
Coverage method	NOI-based (commercial) or gross rent over payment (residential style)?
Rate structure	Fixed for the term, or fixed then adjustable? What index and margin after the fixed period?
Amortization	Fully amortizing, or a balloon? One public lender describes its loans as fully amortizing, without large balloon payments1, a real difference from short bank balloons
Prepayment	Step-down schedule and length; a buy-down to a shorter schedule for a higher rate
Recourse	Full guaranty, or limited recourse at lower leverage
Fees	Points, underwriting and processing fees, broker fees: compare the total, not the rate

What DSCR lenders check

1. Leases and the rent roll, with a market rent check in the appraisal. Units below market can help; vacant units usually get underwritten at a discount.
2. Credit and background of the guarantors, including prior foreclosures and bankruptcies.
3. Liquidity reserves, usually a set number of months of payments in the bank after closing.
4. Experience owning or managing rental property. First-time owners can qualify at lower leverage.
5. Property condition, because a small building with deferred maintenance can lose income fast.

Common deal killers

• Coverage that only works on gross rent when the lender uses NOI.
• Commercial space dominating a mixed-use building. Many DSCR programs want the residential share to carry the income.
• Recent vacancies or rents far above market that the appraiser will not support.
• A short hold. A step-down penalty can cost more than the rate saved. Compare a hard money or bridge loan for a short plan.

Where it wins and where it loses

DSCR loans win for small-balance investors whom banks turn away or offer only short balloons, and for buildings below the size most agency lenders target. Banks have been easing a little on multifamily (the Fed’s survey found standards eased slightly (Q2 2026)⁴), so ask a local bank or credit union first if your file is clean. If you own several buildings, compare a portfolio or blanket loan. For the head-to-head with a bank, see DSCR loan vs bank loan.