Definition
Commercial loans for 5+ unit apartment buildings use NOI and DSCR for underwriting. Rates are typically 0.5-1% higher than residential loans.
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Commercial loans for 5+ unit properties use different underwriting than 1-4 unit residential mortgages. Lenders focus heavily on NOI and DSCR. Terms often are 20-30 years (longer than fix-and-flip loans). Rates are typically 0.5-1% higher than residential. These loans are crucial for apartment building investors.
Pro Tip
Multi-family commercial loans require strong NOI. Ensure it clearly supports debt service.
Example
A 10-unit apartment building with $120,000 NOI secures a $800,000 commercial loan at 6.5% based on DSCR