Five units is where home loans stop

Where the line is drawn

HUD's handbook limits FHA's single-family programs to "one- to four-family Properties that are owner-occupied Principal Residences." Fannie Mae buys loans on residential properties "when the dwelling consists of one to four units." VA's definition of a dwelling is "not more than four family units," plus one more unit for each additional eligible veteran who buys with you. So a fiveplex gets none of the things that make house hacking work: no 3.5% down, no counting 75% of rent toward your personal income, no owner-occupant pricing.

Living in one of the units doesn't change that.

What lends on 5-20 units

Banks and credit unions

Local and regional banks and credit unions make loans on small apartment buildings and keep them on their own books. Each sets its own down payment, rate, term and recourse, so there's no national number to quote, and the only way to know is to ask several.

Freddie Mac Conventional Small

Freddie Mac's small multifamily product covers "Predominantly market-rate properties of 5 to 50 units" with loans of "Generally $2 million to $10 million," per its term sheet dated August 2026. Freddie says it moved small loans onto its conventional platform as of April 15, 2026. A loan smaller than that is a bank or credit union conversation.

HUD 223(f)

HUD insures loans on apartment buildings too, under its multifamily programs rather than FHA's home-loan rules. Section 223(f) needs at least 5 units with full kitchens and baths, completed or substantially rehabilitated at least 3 years before the application, and allows terms of up to 35 years.

How the lender sizes the loan

Instead of your debt-to-income ratio, a commercial lender looks at net operating income (NOI): rent collected, less vacancy, less operating expenses like taxes, insurance, repairs, utilities the owner pays and management. Then it divides NOI by the yearly loan payments. That's the debt service coverage ratio, or DSCR. Each lender sets its own minimum.

A made-up example to show the arithmetic: 8 units at $1,400 a month is $134,400 a year. Take off 5% for vacancy ($6,720) and $38,000 of expenses, and NOI is $89,680. If the loan payments are $72,000 a year, DSCR is $89,680 ÷ $72,000 = 1.25. A lender whose minimum is higher than that would cut the loan amount until the ratio clears, which means more cash from you.

Two things catch first-time buyers here. The seller's rent roll and expense numbers rarely match what a lender will underwrite, so ask for the trailing 12 months of actual income and expenses before you offer. And lenders ask what you've owned and managed before, so a fourplex you lived in and ran yourself counts for something on the application.