5-50 unit small apartment owner occupied loans

[LaTara G.]

Hi, I am having a difficult time finding 5-50 unit small apartment owner occupied loans are there regulations against this or am I just not typing the correct terms to search for a lender that offers this ?

[Jaysen Medhurst]

My guess is that lenders see owner occupancy as a risk factor. They want properties to perform as a business. As a related example, I remember a conversation with my former landlord in Manhattan who told me that there was a clause in his mortgage that prohibited him from discounting rents. He was buying us out of our rent-stabilized lease and I had requested a few months of free rent before we moved out. He couldn't do it, but was willing to tack that on to our buyout amount.

Commercial loans are not as strictly regulated as residential loans, @LaTara G. Each lender develops their own underwriting and lending standards. While there are similarities (DSCR, LTV, etc.), there are plenty of subtle differences, so you have to do the legwork and speak to many potential lenders. Explicitly ask about owner occupancy. Just understand that the underwriting requirements (e.g., 20-25% down payment, DSCR 1.2+) aren't' going to change if you owner occupy.

Additionally, many commercial mortgages are sold off and bundled into Commercial Mortgage-Backed Securities (CMBS), not unlike residential mortgages are by Fannie and Freddie. If a lender plans to sell off their loans, they're going to make sure they adhere to the underwriting standards of the CMBS.