Opening of Ace Hardwood Store. Loan provided by Commercial Loan Direct.
The Fannie Mae Multifamily Loan Program is one of the most utilized funding resources for apartment owners nationwide because of its attractive interest rates, variety of loan structure options, high loan-to-values, and non-recourse guaranty structure.
With both fixed and floating rate options available, it is a great product for most multifamily property types, including affordable housing, senior independent living, student housing, cooperative housing, traditional market rate apartments, and manufactured housing. It can also be used for mixed-use buildings where the other commercial units make up 20% or less of the gross income. For those looking to compare the current Fannie Mae Multifamily interest rates to other multifamily products, it can be done on our apartment interest rates page.
Fannie offers both fixed and variable products for all property types and can go nationwide, although primary and large secondary markets are preferred (i.e. MSA populations of at least 200,000). There are 2 major FNMA programs under which the majority of the products fall:
Standard DUS Mortgage: The Standard DUS product is for the purchase or refinance of existing, stabilized properties with 5+ units that have a minimum loan amount of $5 million (or $7 million in eligible markets*).
Small Loan Program: The Small Loans product is for the purchase or refinance of existing, stabilized properties with 5-50 units and loan amounts between $750,000 - $5 million ($7 million in eligible markets*).
* Eligible markets are Baltimore, Boston, Chicago, Los Angeles, New York, Sacramento, San Diego, San Francisco, San Jose, Seattle, Washington D.C.
1: Loan terms range from 5-30 years with amortizations up to 30 years (depending on the type, location, and condition of the collateral). Unless the loan is “self-amortizing”, it will “balloon” at the end of the term, meaning at the loan balance will need to either be refinanced or paid off; if the loan is self-amortizing, the term and amortization match and the loan will be fully paid off when the loan matures, so there is no loan balance to pay off (unless the loan is prepaid before it matures).
Fannie Mae loans are priced based on the corresponding treasury and a spread, which takes into account the loan amount, term, LTV, and property location. Pricing considerations the borrower should be aware of are the following:
* Not available for all properties in all markets* Small Loan Program: The Small Loans product is for the purchase or refinance of existing, stabilized properties with 5-50 units and loan amounts between $750,000 - $5 million ($7 million in eligible markets*).
In order to get a Fannie Mae rate quote and formal application, plan on submitting the following documents*:
*It is important to understand that the rate will fluctuate until it is locked (typically the day before or of closing) and is determined by not only the current corresponding treasury rate, but also by the spread (which may change) and satisfactory due diligence and third party reports. The rate can be locked ahead of time, but depending on how far in advance, it may involve paying a fee or a higher interest rate.
The Fannie Mae process is very similar to the CMBS and Freddie Mac loan application processes since the mortgages are also pooled together and sold as bonds to investors. Because of this, there is usually a little more paperwork, longer loan documents, and more third party report requirements than a conventional mortgage, but the process isn’t prohibitive and well worth it for the right investor. Loans typically close 45-60 days after the application and deposit have been furnished to the lender. The due diligence deposit is approximately $8,500-$10,000 for small loans and $15,000 for DUS, which covers the appraisal, environmental engineering report, structural engineering report, zoning report, and all lender and agency inspections, but doesn’t include the legal costs for closing and securitizing the loan (which is typically another $6,000-$12,000) as well as any origination fee. Assuming no additional reporting or legal work is required, borrowers can expect to spend about $15,000 for small balance loans and $25,000 for DUS loans (exclusive of title, escrow, or any doc stamp taxes). The diligence items required to close the loan usually include the following:
Mortgages that conform to the Fannie Mae underwriting standards are funded by the originating lender, then pooled together, securitized (i.e. converted into mortgage-backed security bonds), and sold to investors. A multifamily mortgage-backed security (MBS) may be backed by fixed-rate mortgage loans or adjustable-rate mortgage loans, but not both within the same offering. When the multifamily MBS is issued, Fannie Mae guarantees timely payment of principal and interest to the MBS certificate holders. Fannie also issues Discount Mortgage-Backed Securities (DMBS), which are non-interest bearing securities having terms of one year or less and purchased at a discount. Multifamily MBS may be placed into Megas, REMICs, or other mortgage-related securities.
Fixed-Rate Mortgage: The Fixed-Rate product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.25x DSCR requirement. Loan terms are from 5-15 years.
Structured Adjustable-Rate Mortgage: The Structured ARM product is for the purchase or refinance of existing, stabilized traditional and manufactured housing communities. Senior housing, student housing, and moderate rehabilitation mortgages may be eligible on a case-by-case basis. Affordable housing, bond credit enhancements and substantial rehabilitation are not eligible. The minimum loan amount is $25 million, maximum LTV is 75%, minimum DSCR is 1.0x and terms range from 5-10 years.
Adjustable Rate Mortgage 7-6: The ARM 7-6 product is for the purchase or refinance of existing, stabilized properties including: traditional, affordable housing, seniors housing, student housing, and manufactured housing communities. Maximum LTV is 80% for purchases and 75% for refinances with a 1.00x DSCR requirement at the loan cap rate. Loan terms are 7 years with a 1 year lock-out period and a 1% prepayment premium thereafter.
M-PIRE Mortgage: The M-PIRE product provides first lien and supplemental mortgages for conventional, affordable and cooperative housing that support additional loan proceeds for energy and water efficiency renovations within New York City’s five boroughs. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.
Supplemental: The Supplemental Loans product is subordinate financing for properties with a pre-existing fixed or adjustable Fannie Mae Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.
Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS mortgages to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.
Bulk Delivery Program: Fannie Mae’s Apartment Mortgage Business program provides a bulk delivery structuring option that gives borrowers the ability to arrange financing terms for a group of properties.
Credit Facility Program: Fannie Mae’s Multifamily Mortgage Business provides a credit facility structuring option that gives the ability for borrowers to arrange financing terms for a group of properties on a cross-collateralized and cross-defaulted basis, with property release, property substitution, property addition, borrow-up, and expansion capabilities.
Student Housing Financing: The Student Housing product provides financing options for the finance or refinance of stabilized student housing properties, which is defined as a conventional multifamily property where 20% or more of the units are leased to undergraduate and/or graduate students, or a property that is specifically built or leased for student housing. Properties may be rented on a per-unit or per-bed basis. Maximum LTV is 75%, minimum DSCR is 1.30x.
Supplemental: The Supplemental Loans product is subordinate financing for properties with a pre-existing fixed or adjustable FNMA Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.
Affordable Housing Preservation: This Affordable Housing product provides options for preserving the availability and affordability of subsidized rental housing for low-income renters. It is for expiring Low Income Housing Tax Credit (LIHTC) deals, refinancing of tax-exempt bond deals, properties with Section 8 HAP contracts, properties with existing RD 515 and RD 538 loans, and mortgages insured under Sections 202 or 236 of the National Housing Act. Maximum LTV is 80%, minimum DSCR is 1.20x, and loan terms range from 10-30 years.
Green Preservation Plus: The Green Preservation product provides additional loan proceeds to finance energy and water efficiency improvements for existing Multifamily Affordable Housing (MAH) properties that are 10 years or older and meet MAH income and rent restrictions during the loan term. The Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.
M-PIRE Mortgage Loan: The M-PIRE product provides first lien and supplemental mortgage loans for conventional, affordable and cooperative housing that support additional loan proceeds for energy and water efficiency renovations within New York City’s five boroughs. Properties must have a minimum of five units (50 pad sites for manufactured housing) and the Borrower must be a single-asset U.S. entity with all U.S. principals. Maximum LTV is 85% for purchases and 80% for refinances with a 1.20x DSCR requirement.
Tax-Exempt Bond Credit Enhancement: The Bond Credit Enhancement program provides credit enhancement for tax-exempt bonds issued to finance the acquisition, new construction, refinancing, or moderate to substantial rehabilitation of Multifamily Affordable Housing (MAH) properties with Low Income Housing Tax Credit (LIHTC) rent restrictions. Maximum LTV is 90%, minimum DSCR is 1.15x, and loan terms range from 10-30 years.
Choice Refinance Program: The Choice Refinance product is a streamlined refinance process with more limited documentation for existing DUS Cash or MBS loans to be refinanced by the same Lender. Properties must be stabilized and well-maintained and mortgages must be in good standing.
Senior Housing Financing: The Senior Housing product is for the finance or refinance of existing properties that provide Independent Living (IL), Assisted Living (AL), Alzheimer’s/Dementia Care (ALZ), or any combination thereof (e.g. IL/AL/ALZ, AL/ALZ) for senior citizens. Sponsors and Operators must have a minimum of five years experience in the seniors housing industry and a minimum of five stabilized properties. Maximum LTV is 75%, minimum DSCR is 1.30x. for IL, 1.40x for AL, and 1.45x for ALZ.
Manufactured Housing Mortgages: The MHC product provides financing options for the purchase and refinance of stabilized communities where the Borrower owns the Manufactured Housing Community (MHC) sites and associated common amenities and infrastructure. Communities must be professionally managed, with or without age restrictions, and have a minimum of 50 pad sites. Maximum LTV is 80%, minimum DSCR is 1.25x.
Supplemental: The Supplemental Mortgage product is subordinate financing for properties with a pre-existing fixed or adjustable FNMA Mortgage Loan that has been in place for a minimum of 12 months. Maximum LTV is 75% and minimum DSCR is 1.30x. New third party reports may not be required and early rate lock is available for a fee.
Cooperative Property Financing: The Cooperative Property product provides financing options for the purchase and refinance of stabilized properties in eligible markets in which the residents collectively own the building(s) and property through their shares in the cooperative corporation. The cooperative corporation grants occupancy rights to the shareholder tenants through proprietary leases. Maximum LTV is 55%, minimum DSCR is 1.0x.
What Clients Say About Us
Fernando and Leanne are amazing. I had many small businesses that need refinancing over the years. I have met many Brokers and there is always a catch. ALWAYS!… Use them! Once you do you will work with them forever
- Nirav Patel
If you searching for a great experience Commercial Loan Direct is the place. Leanne took care of me and honestly had the greatest experience. She handled all of my needs in a smooth and timely manner listened and addressed any concerns I had about the process and was very patient. I can be quite a handful at times and Leanne was so professional and kind hearted. I'd 100% recommend this company. Thank you again.
- Vincent Arias
We were in unfamiliar territory when it came to refinancing. Commercial Loan Direct streamlined the whole process for us. Leann connected us with lenders that were the right fit for us. The money and time we saved was so worth it. I highly recommend them
- Rita Pisarski
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