Commercial Real Estate Financing: Where Residential Rules Stop Applying

Residential mortgage rules — the ones covered throughout this site — generally apply to properties with up to four units. Buildings with five or more residential units, or properties used for business purposes (retail, office, industrial, mixed-use), fall under commercial financing instead.

Commercial underwriting is built primarily around the property's own income-generating capacity (using metrics like the Debt Service Coverage Ratio — how much the property's net income exceeds its debt payments) rather than solely your personal income and credit, which is the reverse emphasis from residential lending.

Commercial mortgage terms also work differently: shorter terms (often 5 years or less), amortizations up to 25 years but sometimes shorter, and rates and fees that vary more by property type, tenant quality, and lease terms than by a borrower's personal credit score alone.

This is genuinely specialized lending — a commercial mortgage broker or lender, not a residential one, is the right starting point once a property crosses this line, since the underwriting, documentation, and risk assessment are built around fundamentally different questions.