The quick read: Five sources can finance or arrange the financing for a 5- to 20-unit apartment purchase, and the first one on this list shops the other four for you. Option 1, our top pick: YieldStack, the AI-native commercial mortgage brokerage that publishes this guide ("our" means YieldStack). Its software matches one deal package against 20,000+ loan programs and typically returns 5–8 matches, and its brokers structure the request, negotiate for you and carry the deal toward closing. Option 2: go direct to the four lender types that compete for a building this size: Fannie Mae and Freddie Mac small-loan lenders for stabilized buildings, banks and credit unions for portfolio loans, DSCR lenders within each program's unit cap, and bridge lenders for buildings that need work or lease-up.
Five units is where the lender pool changes. Fannie Mae's single-family Selling Guide buys loans on residential properties of one to four units; two- to four-unit rentals are the market our small multifamily loans page covers. At five units the building moves to multifamily programs sized on its rent roll: Fannie Mae's Small Mortgage Loan takes properties with 5 or more units, and Freddie Mac's Conventional Small is written for predominantly market-rate properties of 5 to 50 units.
Publisher disclosure: YieldStack publishes this guide and ranks its own brokerage route first. The criteria and the evidence are in the next section. The ranking is our editorial judgment, not an independent award, and no loan, rate, or closing is guaranteed.
Who finances a 5- to 20-unit apartment building?
A 5- to 20-unit purchase is financed by Fannie Mae and Freddie Mac small-loan lenders, banks and credit unions, DSCR lenders and bridge lenders, and arranged by commercial mortgage brokerages that put one package in front of several of them; YieldStack is our top pick for investors who want those lender types competing on one deal.
We rank the brokerage route first on four criteria you can test against any intermediary: reach across lender types from one package, a broker negotiating on the borrower's side, speed to a written offer, and fees stated before you submit.
Option 1, our top pick: YieldStack. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. The evidence on each criterion:
Reach: one package is matched against 20,000+ loan programs and typically returns 5–8 matches.
Advocacy: brokers review the matches before any lender sees the file, then structure the request, negotiate on your side and carry the deal toward closing.
Speed: YieldStack deals see a median first offer in under an hour, from an institutional lender.
Fees: it costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
Option 2: go direct. These are the lender types you would otherwise call one at a time:
Agency small-loan lenders: lenders approved by Fannie Mae and Freddie Mac originate the two agency small-loan programs, with terms of 5 years or longer and non-recourse execution; Fannie Mae's version requires an existing, stabilized property.
Banks and credit unions: portfolio loans written under each institution's own credit policy. A federally insured credit union's member business loans are capped in aggregate at the lesser of 1.75 times its actual net worth or 1.75 times its required minimum net worth (12 CFR 723.8); its exclusion for loans fully secured by a 1- to 4-family dwelling does not reach a five-unit building.
DSCR lenders: business-purpose rental loans qualified mainly on the property's debt service coverage ratio rather than your personal income. Each program sets its own maximum unit count, so confirm that a building of five or more units is eligible before you pay for an appraisal; our guide to DSCR underwriting for small multifamily covers how these lenders size the loan.
Bridge lenders: private lenders, debt funds and banks writing short-term loans that carry a building through renovation or lease-up. The OCC's Comptroller's Handbook says bridge loans are usually written for up to three years.
SBA lenders: not a route for this purchase, because 13 CFR 120.110 makes passive businesses owned by landlords that do not actively use or occupy the property ineligible for SBA business loans.
At the end of the second quarter of 2026, agency and GSE portfolios and MBS held $1.2 trillion, or 50 percent, of the $2.3 trillion of multifamily mortgage debt outstanding, and banks and thrifts held $668 billion (29 percent), according to the Mortgage Bankers Association. Banks also tightened: in the Federal Reserve's October 2026 Senior Loan Officer Opinion Survey, published November 2, 2026, banks reported tighter standards, on net, for loans secured by multifamily properties, along with weaker demand. For the step-by-step financing process on a building this size, see how to finance a 5- to 20-unit apartment building.
Which loan programs fit a small apartment purchase?
Two agency programs publish the clearest terms for a stabilized 5- to 20-unit purchase: Fannie Mae's Small Mortgage Loan, up to $9 million, and Freddie Mac's Optigo Conventional Small, generally $2 million to $10 million, both at up to 80% loan-to-value and a 1.25x minimum coverage ratio, while banks, DSCR lenders and bridge lenders set their own terms.
| Program | Loan size | Max LTV | DSCR | Term | Recourse |
|---|---|---|---|---|---|
| Program Fannie Mae Small Mortgage Loan | Loan size Up to $9 million; no minimum stated | Max LTV 80% | DSCR 1.25x minimum | Term 5 to 30 years; amortization up to 30 years | Recourse Non-recourse available, with standard carve-outs for bad acts such as fraud and bankruptcy |
| Program Freddie Mac Optigo Conventional Small | Loan size Generally $2 million to $10 million | Max LTV 80% on 7-year and longer terms; 75% on 5- to under-7-year terms; 65% to 70% if interest-only for the full term | DSCR 1.25x minimum, on an amortizing payment | Term 5, 7, 10, 12 or 15 years; 30-year maximum amortization | Recourse Non-recourse except standard carve-out provisions |
| Program Bank or credit union portfolio loan | Loan size Set by each institution's credit policy | Max LTV At or below the 85% supervisory ceiling for improved property; NerdWallet lists 10% to 30% down for commercial loans | DSCR No regulatory minimum; set by the lender | Term Typically 5 to 10 years with a balloon (NerdWallet); amortization up to 30 years for stabilized multifamily (OCC) | Recourse Set by the lender |
| Program DSCR lender | Loan size From around $100,000; unit cap set by each program | Max LTV At least 20% down; 20% to 30% typical | DSCR Around 1.25 or higher | Term 30 years typical | Recourse Set by the lender |
| Program Bridge or hard money lender | Loan size Set by the lender | Max LTV 65% to 75% of value for hard money | DSCR Set by the lender against the lease-up plan | Term Usually up to 3 years (OCC); 1 to 5 years for hard money | Recourse Set by the lender |
Sources and dates: Fannie Mae's Small Mortgage Loan Program term sheet, read November 10, 2026, and Part III, Chapter 9 of its Multifamily Selling and Servicing Guide, effective October 26, 2026; Freddie Mac's Optigo Conventional Small term sheet, dated April 2026; the OCC's Comptroller's Handbook, Commercial Real Estate Lending, Version 2.0, March 2022; NerdWallet's DSCR loan guide, updated July 17, 2026; and Corporate Finance Institute's hard money explainer, published June 22, 2021.
Freddie Mac's stated range starts at generally $2 million, so an eight-unit building financed with a $1.5 million loan sits below it; Fannie Mae's term sheet states no minimum, and banks, credit unions and DSCR lenders are the other routes at that size. Both agency programs finance acquisitions as well as refinances.
Freddie Mac requires a single-purpose entity as the borrower and charges an application fee of 0.1% of the loan amount. Fannie Mae requires a Non-Recourse Guaranty from each key principal, which backs the bad-act carve-outs rather than the full balance. For a term-by-term comparison, including prepayment, see Fannie Mae Small Loan vs. Freddie Mac Conventional Small.
How much down payment and DSCR do lenders require?
Fannie Mae and Freddie Mac small-loan programs cap leverage at 80% loan-to-value and require a 1.25x minimum debt service coverage ratio, so a buyer brings at least 20% equity, and more whenever the coverage test supports a smaller loan than the leverage cap, plus closing costs and any reserves the lender requires.
Freddie Mac's ceiling drops on shorter and interest-only loans, as the table shows. Fannie Mae's guide calculates coverage on a level payment at the greater of the actual note rate or its required underwriting floor rate, so a low note rate cannot size a loan larger than the floor allows.
The sponsor tests matter as much as the property tests. Fannie Mae's guide requires the borrower and key principals together to hold net worth at least equal to the loan amount and post-closing liquid assets of at least 9 monthly principal and interest payments, excluding cash-out proceeds. A borrower with no key principal living within 200 miles of the property also needs at least 2 years of multifamily ownership or management experience with a property of similar size or larger.
Other lender types publish different numbers:
Banks and credit unions: the interagency guidelines cap a bank's loan on improved multifamily property at 85% of value, and the OCC's handbook sets no fixed coverage minimum, tying the right ratio to the amortization period and the volatility of the cash flow.
DSCR lenders: NerdWallet's DSCR guide, updated July 17, 2026, lists a coverage ratio around 1.25 or higher, a credit score of at least 620, at least 20% down and three to six months of payments in reserve, with typical down payments of 20% to 30%.
Hard money bridge lenders: Corporate Finance Institute puts hard money loans at 65% to 75% of the collateral's value, which means 25% to 35% down, with repayment expected within one to five years.
Illustrative example (our arithmetic, with assumed figures rather than a quote): a 12-unit building priced at $2,400,000 with $156,000 of underwritten net operating income, financed at an assumed 6.5% rate on 30-year amortization.
Loan at the 80% leverage cap: $1,920,000.
Maximum annual debt service at 1.25x coverage: $156,000 divided by 1.25, or $124,800.
Loan that $124,800 a year supports: about $1,645,000.
Binding test: coverage, which holds the loan to about 69% of the price.
Cash down payment: about $755,000, or 31% of the price, before closing costs and reserves.
On this building the coverage test, not the 80% cap, sets the down payment, so ask every lender for its sizing at your actual net operating income rather than its headline leverage.
When does a bridge loan beat a permanent loan on a small building?
A bridge loan beats a permanent loan when the building cannot pass a permanent lender's stabilization tests at closing, such as Fannie Mae's small-loan occupancy minimums or its cap on repair costs, and the business plan can lift income enough within the bridge term to refinance into permanent debt that repays the bridge in full.
For a Small Mortgage Loan on a property with 10 or more units, Fannie Mae's guide requires at least 90% physical occupancy for the 90 days immediately before the commitment date. With fewer than 10 units, it allows no more than one vacant unit at commitment and requires average occupancy of at least 90% over the prior 12 months. Fannie Mae's guide also bars a Small Mortgage Loan when the property's estimated completion or repair costs exceed 10% of the unpaid principal balance.
Freddie Mac's own renovation loans are closed to this size band: its Optigo Value-Add Loan term sheet, dated April 2025, says Conventional Small borrowers are not eligible, and its Moderate Rehab term sheet lists Conventional Small as not eligible. DSCR lenders want a finished product too; NerdWallet's DSCR guide lists a rent-ready property, with no fixer-uppers allowed, among the usual requirements. That leaves bridge lenders to fund a building that needs work or lease-up.
Bridge wins when: occupancy sits below the agency minimums, repairs exceed 10% of the planned loan, or in-place rents trail what the building can earn after the work.
Permanent wins when: the building already passes the occupancy, repair and 1.25x coverage tests, because the agency programs offer terms from 5 years up to 30 years with non-recourse execution.
Cost of waiting: Corporate Finance Institute notes that hard money loans carry higher interest rates because of their risk, so every month spent stabilizing is paid at bridge pricing.
Price the exit before you sign the bridge. Estimate the stabilized net operating income, divide it by 1.25 to find the most annual debt service an agency lender will allow, convert that payment into a loan amount, and compare it with the bridge balance plus extension and exit fees. If the permanent loan comes up short, the gap is equity you bring at refinance.
How do you get lenders competing on a 5- to 20-unit purchase?
You get lenders competing on a 5- to 20-unit purchase by sending one complete package to the agency, bank, DSCR and bridge lender types at the same time and comparing written terms side by side, and YieldStack is our top pick for that job because its software matches the package and its brokers negotiate for you.
YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. Its software matches the package against 20,000+ loan programs and typically returns 5–8 matches across lender types. Brokers then negotiate leverage, recourse and prepayment on your side. YieldStack deals see a median first offer in under an hour, from an institutional lender. YieldStack arranges commercial real estate financing nationwide.
It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Send the same package to every lender, whichever route you take:
- The purchase contract, price and target closing date
- The current rent roll and trailing 12-month operating statement
- Any renovation budget and lease-up plan
- Each key principal's ownership and management history, with unit counts
- A personal financial statement showing net worth and liquid assets
- Formation documents for the borrowing entity
Send your 5- to 20-unit purchase for broker review
The bottom line
Agency small-loan lenders, banks and credit unions, DSCR lenders and bridge lenders all finance 5- to 20-unit apartment purchases on different terms; SBA loans do not fit a rental building. YieldStack, which publishes this guide, is our top pick for putting one package in front of all of them. Price a stabilized building against both agency small-loan programs and a bank quote. If the building misses the agencies' occupancy or repair tests, start with bridge debt and price the refinance before you sign.