Affordable target price comparison between business and residential loan

[Zhenyang Jin]

I am a software engineer working in Bay Area. I found out that:

Case 1. When doing business loan for 4+ units multifamily, my W2 can not be used to calculate DSCR. For the top tier area like Palo Alto where cap rate is 4.0%, LTV can only be limited to 40%~45%. For the 1.5M downpayment, the target price is only 2.5~2.73M.

Case 2. When doing residential loan for fourplex, my W2 + my partner's W2 can be used to calculate DTI. LTV can reach 70~80% even the cap rate is only 4.0%. For 1.5M downpayment, the target price can reach 5~7.5M if DTI is allowed.

Due to the big difference on target price, I raise this topic to confirm whether my understanding is correct or not.  I wonder whether expert can confirm this?

Because my DIT is low, maybe Case 2 for fourplex is my preferred loan type than Case 1 if I want to invest locally. Any advice is welcome.

[Clayton Silva]

Quote from @Bill B.:

If it's 4 units you'd always want the residential loan with the 30 year fixed rate, especially if you plan to live there. The commercial loan will be 3-5 or 7 years then you'll need to refinance. Can you imagine your interest rate doubling like it did a couple years ago? Even if it's a 30 year fixed DSCR that allows you to live in it the interest rate will make the "residential" loan a far better choice

Oh the other hand if it’s 5+ you’ll have to go commercial. I’ve often seen 5 units sell for the same or less than 4 units because there are less buyers and the financing is worse. Heck I bought a “four plex” where there was an “owner’s storage area” exactly the same size as the other 4 units. :-). 
. 
 But especially if you plan to live in one unit I would assume you’d save another full point in interest. Almost like being paid to live there. 

So to clarify, you CANNOT live in a DSCR property as DSCR is business purpose only and that is not allowed.  5-10 units can also qualify for 30 year fixed DSCR loans as well.  Just a heads up