The fourplex pencils better than anything else you have looked at. Four rents, one roof, one tax bill, one insurance policy. The coverage ratio is comfortably above anything a single family house in the same area produces.
Then the loan comes back at leverage you were not expecting, and the extra down payment eats the advantage you were buying.
Here is why, and why the trade is usually still worth making.
The cap
From CMG Financial's Non-QM Sharp Series guidelines (NMLS #1820, revised 09/21/2026), in the property type table for the Sharp DSCR program:
2-4 Units: maximum 75% loan-to-value and combined loan-to-value.
That is a flat cap on property type. It does not improve with coverage, it does not improve with score, and it does not improve with loan size.
Compare it to the single family grid, where a 740 or 720 borrower with coverage of 1.00x or better reaches 80% at or below $1,000,000. The five point difference is the price of the unit count.
Warrantable condominiums and cooperatives carry the same 75% cap, and non-warrantable condominiums are capped at 75% loan-to-value.
So on a $800,000 fourplex, you are planning a $200,000 down payment rather than $160,000, before closing costs and reserves.
Why the trade is usually still good
The cap is a real cost. The rent roll is a real benefit, and it is worth more than five points of leverage on most files.
Vacancy is fractional rather than total. A single family rental at 1.20x coverage produces zero income the month the tenant leaves. A fourplex at 1.20x loses a quarter of its income when one unit turns. Your coverage falls, it does not vanish.
For an investor carrying a mortgage, that is the difference between a soft month and writing a cheque.
The denominator is shared. One roof, one foundation, one tax bill, one insurance policy, frequently one association or none at all across four units. The fixed costs that sit in PITIA are spread across four rents rather than one.
That is precisely why multi-unit coverage ratios tend to look better than single family ratios in the same submarket, and it is why the cap exists: the program is trimming leverage on the property type whose ratios flatter it.
Turnover cost is lower per dollar of rent. Smaller units, shorter make-ready, less vacant square footage per turn.
How coverage is calculated on multiple units
The formula does not change: DSCR = Gross Rental Income / PITIA, or Gross Rental Income / ITIA on interest only, qualified at the original note rate.
What changes is how carefully you have to build the numerator.
Gross income is calculated using the lower of the executed lease agreement or the market rent from the applicable appraisal. On a 2-4 unit that comparison runs across the whole rent roll, and the appraisal will produce a market rent for each unit.
If an executed lease reflects a higher monthly rent than the appraisal, it may be used with sufficient evidence of receipt, and the three most recent consecutive months should be provided.
That last rule matters far more on multi-unit property, because rent rolls are usually uneven. One long-term tenant below market, one recently re-leased at the top of the market, two in between. The below-market leases will govern their units. The above-market lease can be used only if you can prove three months of actual receipt.
So gather the payment records before you submit, per unit. A fourplex where one unit's above-market rent cannot be evidenced loses that gap from the numerator, and on a thin file that can move the coverage column.
Vacant units. Vacant properties are not eligible for refinance, except where the vacancy is due to recent renovation or rehab with the intention of renting soon, supported by the appraiser confirming recent work completed and providing visual evidence, in which case the 1007 market rent may be used.
On a purchase, a vacant unit is handled through the appraisal's market rent. On a refinance with a vacant unit mid-turn, get that documented properly rather than assuming it will be treated as market.
Insurance, and the requirement people forget
Rent loss insurance for the subject property is required and must equal at least six months of local average monthly rents. Blanket policies covering the subject are permitted.
On a fourplex, six months of local average monthly rents is a meaningfully larger figure than on a single family house, and your insurance quote needs to carry it. Get a real quote on the actual property including that coverage before you calculate coverage, because insurance sits in the denominator and an underestimate moves your ratio.
Multi-unit insurance is generally more expensive per dollar of value than single family. Do not carry a single family estimate across.
The rest of the file
- Reserves by loan size: three months from $100,000 to $500,000, six months from $500,001 to $2,000,000, nine months above that. Additional financed properties require no reserves.
- Payment history 0x30x12, housing event seasoning three or more years
- Professional investor requirement: twelve months owning or managing income-producing real estate within the most recent thirty-six months, with a letter of explanation. First-time investors need coverage above 1.0x, a score above 700, no exceptions, a $2,000,000 cap, and may not be first-time homebuyers.
- Personal recourse and a Personal Guaranty Agreement
- 1-4 Family Rider and Assignment of Rents, Fannie Mae Form 3170, in the origination file
- Interest only eligible as 10/20 or 10/30 fixed, minimum 700 FICO, maximum 75% loan-to-value at 1.00x coverage or 70% at 0.75x, not permissible on No Ratio
- Declining markets: 5% loan-to-value reduction, applied on top of the 75% cap
- Cash-out: six or more months of ownership, business purpose only with a letter of explanation, $500,000 cap above 60% loan-to-value and unlimited at or below, $2,000,000 maximum cash-out loan amount
Note the declining market interaction. A 2-4 unit in a market flagged as declining is capped at 75% and then reduced by five points, which is 70%. On a larger property that is a substantial change in down payment arriving with the appraisal, so structure with margin.
Before you write the offer
- Get the actual rent roll with lease copies, not a summary.
- Identify which units are above market and gather three months of payment evidence for each.
- Get a real insurance quote on the property including six months of rent loss coverage.
- Build PITIA and divide the accepted rent roll by it.
- Plan the down payment at 75%, and at 70% if there is any chance of a declining market flag.
Common questions
What is the maximum leverage on a 2-4 unit DSCR loan? 75% loan-to-value and combined loan-to-value. The cap is set by property type and does not improve with better coverage, a higher score or a smaller loan.
Is a fourplex better than a single family rental? On vacancy risk, usually. A single family rental produces no income when the tenant leaves, while a fourplex loses a quarter of its rent roll. The cost is five points of leverage.
How is DSCR calculated on multiple units? The same formula across the whole rent roll: gross rental income divided by PITIA, using the lower of each executed lease or the appraisal's market rent for each unit.
Can I use an above-market lease on one unit? Yes, with sufficient evidence of receipt, supported by the three most recent consecutive months of payments.
How much rent loss insurance do I need on a fourplex? At least six months of local average monthly rents, which on a multi-unit property is a substantially larger figure than on a single family house. Get a real quote before calculating coverage.
Related reading
- DSCR and investor property loans, the full index for this topic
- How to Calculate DSCR Yourself Before You Write the Offer
- DSCR Loan FAQ: The Questions Investors Ask Before Their First One
- Building a Rental Portfolio on DSCR: Sequencing Loans So the Fourth One Still Closes
Why bring this file to us
- We run the coverage on the full rent roll, using the rent the guidelines will actually accept rather than the pro forma.
- We plan around the 75% cap up front, because it applies regardless of how good the coverage is.
- We check the leases for the evidence requirement, which is what lets an above-market rent be used at all.
- Broker model. Multiple investors rather than one bank's shelf, which is what a file like this needs when the first answer is no.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending and a Certified Mortgage Planner, NMLS #173141, originating mortgages since 1999. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Send me the rent roll and the leases and I will run the coverage against the 75% cap before you write anything.
Program figures in this post come from the CMG Financial (NMLS #1820) guideline set named above, as published on the revision date given. CMG Financial is the parent company of EPiQ Lending. These figures describe one investor's program at one point in time. Other investors price and underwrite the same borrower differently, guidelines change without notice, and nothing here is an offer of any specific program or terms. Confirm current eligibility on your own file before you plan around any of it.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Rates, terms, and program guidelines change and depend on credit approval, property appraisal, income and asset verification, and other qualifying factors. Not all applicants will qualify. Non-QM, asset-based and business purpose financing carry different pricing, terms and consumer protections than agency financing. Consult your tax advisor regarding the tax treatment of any income or distribution strategy.
Run the coverage ratio before you write the offer
DSCR files are decided by the rent against the payment. Send the address and the rent and I will tell you where the ratio lands before you are committed.
