Commercial vs. residential loans for San Francisco multifamily buildings

Residential multifamily category

2–4 units

Within the one-to-four-unit program boundary [1]

Conventional multifamily starts at

5 units

Fannie Mae program eligibility [2]

Published minimum coverage

1.25x

Fannie Mae conventional multifamily DSCR; not universal [2]

Data: 2026 FHFA limits and lender/agency guidance checked October 22, 2026; MLS market context through October 22, 2026, extracted October 23.

Two units, four units, or five: why the line matters

In San Francisco, a duplex and a five-unit apartment building can look similar from the sidewalk. They can have very different financing paths. Fannie Mae’s single-family rules cover eligible one-to-four-unit residential properties. Its conventional multifamily program starts at five units and targets existing, stabilized buildings. These are program boundaries, not a claim that every lender uses identical rules. [1, 2]

This guide compares buying an entire building. A loan on one condominium or a tenancy-in-common interest is a different collateral question. Confirm the lender’s accepted unit count and property classification before comparing term sheets. A high purchase price alone does not convert a four-unit property into a five-plus-unit multifamily loan.

The 2–4-unit and 5+-unit purchase markets differ

The 2026 YTD median price per unit is $770,000 for 2–4-unit income listings and $365,000 for 5+-unit listings. That gap is not an automatic conversion profit: unit size, tenancy, condition, legal status, operating costs, financing and location differ. The MLS size classification must also be checked against the lender’s accepted legal unit count. [M]

For 2–4-unit income listings, the median sale-to-final-list ratio is 106.8% in 2026 YTD, compared with 100.0% for full-year 2025. The listing-reported cap-rate median is 4.63% versus 5.19%, based on 194 and 211 reporting sales respectively. For 5+-unit listings, the 2026 YTD median reported cap rate is 5.68% across 121 reporting sales. Different sale mixes and reporting subsets can change these figures; they do not measure same-building yield compression or rent growth. [M]

San Francisco’s 2026 conforming limits are loan amounts

FHFA’s 2026 county file lists the following ceilings for San Francisco County: $1,599,375 for two units, $1,933,200 for three, and $2,402,625 for four. These cap the conforming loan balance, not the price of the building. A balance within the limit still needs to satisfy the relevant mortgage program. Above it, a buyer may need jumbo or portfolio financing. [3]

For example, a $2.5 million four-unit purchase with a $1.8 million loan is below the county’s $2,402,625 four-unit ceiling. That does not establish eligibility: occupancy, LTV, documentation, and the borrower’s finances still have to work. The county limit is one gate, not an approval.

Owner occupancy can change the residential leverage rules

Fannie Mae’s standard Desktop Underwriter purchase matrix lists up to 95% LTV for eligible two-to-four-unit principal residences, but high-balance exceptions are crucial in San Francisco. The matrix’s high-balance note caps two-unit properties at 85% and three-to-four-unit properties at 75%. Standard two-to-four-unit investment purchases are listed at 75%. Other program conditions and lender overlays apply. Do not read “5% down” as a blanket promise for a San Francisco fourplex. [4]

Residential qualification: personal income still matters

Debt-to-income ratio compares qualifying monthly debt obligations with qualifying monthly income. Fannie Mae’s published maximum is generally 36% for manual underwriting, potentially 45% when specified conditions are met, and 50% for Desktop Underwriter casefiles. Those are program limits, not targets or guarantees that a lender will approve a particular applicant. [5]

The purchase rules also do not simply count every dollar of advertised rent. Fannie Mae’s September 2026 subject-property guidance applies a 75% factor to monthly gross rent, then subtracts the property’s qualifying housing payment. Positive adjusted income may be treated differently depending on rental-management experience; a negative amount affects DTI. Lenders must document rents and applicable eligibility conditions. This is a qualifying calculation, not the building’s actual profit-and-loss statement. [6]

Commercial qualification: the income can cap your loan

Loan-to-value compares debt with property value. Debt-service coverage ratio, or DSCR, compares the lender’s underwritten income measure with annual debt service. A stronger appraisal does not automatically solve a shortfall in debt coverage. Ask the lender which expenses, reserves, vacancy assumptions, and debt payment it uses in the calculation.

One published benchmark is Fannie Mae’s conventional multifamily term sheet: maximum 80% LTV and minimum 1.25x DSCR. These figures describe that program, not every bank, bridge lender, or commercial loan. Even under those benchmarks, income may support far less than 80% leverage. [2]

A 30-year amortization is not a 30-year maturity

Amortization describes the schedule used to calculate payments. Maturity is when the remaining balance must be repaid. A loan can have payments calculated over 30 years and still mature much earlier. Read both terms, then ask how a sale, refinance, or extension would work at maturity.

Fannie Mae’s conventional multifamily term sheet offers loan terms of 5–30 years and amortization up to 30 years. It also specifies yield-maintenance or declining prepayment premiums depending on the rate structure. Compare the actual proposed documents rather than assuming commercial debt always has a short balloon or is freely prepayable. Ask separately about recourse and guaranty carve-outs. [2]

“Residential” does not always mean consumer-purpose credit

Property type and legal loan purpose are different classifications. CFPB’s Regulation Z commentary treats acquisition credit for a non-owner-occupied rental as business-purpose regardless of unit count. For owner-occupied rental acquisitions, more than two housing units also triggers its stated business-purpose rule. So a four-unit loan can be in a residential mortgage program without being consumer-purpose credit under that rule. Ask your lender to identify the classification and applicable disclosures. [7]

The San Francisco diligence that belongs beside the loan quote

For units covered by San Francisco’s rent rules, lawful rents may differ from a seller’s projected market rents. The city’s rent-limitation framework includes conditions and exceptions; a lender’s pro forma is not a legal determination. Review leases, rent histories, and applicable restrictions with an appropriate local adviser before relying on an increase. [9]

• Confirm the building’s legal unit count and the collateral being financed. Resolve discrepancies among marketing materials, records, and the appraisal early.
• Give lenders the same rent roll, leases, operating history, vacancy assumptions, and renovation scope so their proposals can be compared.
• Request a property-specific insurance quote and a realistic maintenance and capital-work budget rather than relying on the seller’s prior costs.
• Ask how occupied, vacant, or owner-occupied apartments are treated in underwriting. Do not assume a proposed move-in or future rent change is automatic.
• Compare cash to close, cash reserves after closing, prepayment costs, maturity, and guarantees alongside the interest rate.

Questions to take into the lender conversation