- The Fannie Mae Affordable Housing loan program makes financing affordable for investors who hold low-income residential properties. For properties that meet the program's strict low-income housing requirements, this program offers some of the most generous lending terms.
Fannie Mae Affordable Loan Highlights
Loan amount range: $750,000+ (no fixed maximum).
Loan Term: 5-30 years, with up to 35 year amortizations.
Leverage: Maximum 80-90% LTV.
Prepayment Penalty: Yield maintenance or 1% prepayment.
Assumption: Assumable with lender approval.
Processing: $12,500 application fee and $3,000 processing fee common.
Advantages of Fannie Mae Affordable Loans
- No Limit: No set maximum amount borrowed.
- Availability: Available for acquisition or refinance.
- Interest Rates: Highly competitive fixed or variable interest rates.
- Terms: Up to 30 years, and amortization up to 35 years.
- Non-Recourse: For all principals invested in the property.
Disadvantages of Fannie Mae Affordable Loans
- Strict: Affordable housing criteria must be met.
- Processing Time: Underwriting takes a little longer because criteria must be verified.
- Features: Interest-only and ballooning short-term loans are not available.
- Prepayment penalties: Can be high during the first few years.
- Fees: High application and processing fees.
What Are Fannie Mae Multifamily Affordable Housing Loans?
For qualifying properties, Fannie Mae Multifamily Affordable Housing Loans offer advantageous financing solutions.
The affordable housing loans have Fannie Mae's usual list of features, such as competitive interest rates, non-recourse protection (with standard carve-outs) and generous terms.
Most loans are for at least 10 years and have maximum 80% loan-to-value ratio (LTV), but there are some exceptions that go as short as 5 years or as high as 90% LTV.
Can Investors Seek Supplemental Funding in Addition to Fannie Mae Multifamily Affordable Housing Loans?
Fannie Mae Multifamily Affordable Housing loans are intended to act as the primary mortgage on a property, and therefore typically can't be used as additional financing on a property that's already mortgaged.
Supplemental financing may be pursued after securing a multifamily affordable housing loan, however. Lenders typically require a 1-year period before supplemental funding can be obtained.
Do Fannie Mae Multifamily Affordable Housing Loans Have Fixed or Variable Interest Rates?
Fannie Mae Multifamily Affordable Housing Loans can come with fixed or variable interest rates, and both types of rates are available for up to 30 years.
Borrowers may choose a long-term fixed rate if the current market rates are historically low. An adjustable rate might be preferable for shorter-term loans, or if borrowers need a long-term primary mortgage now but expect interest rates to fall.
Interest-only and ballooning loans generally aren't available through the affordable housing loan program. Thus, these loans often aren't suitable as a bridge or short-term loans for a property that won't be held at least 5 years.
How Much Do Fannie Mae Multifamily Affordable Housing Loans Cost to Obtain?
Fannie Mae Multifamily Affordable Housing Loans come with fairly high initial fees, partly because additional eligibility information must be checked.
Application fees of $12,500 and processing fees of $3,000 aren't uncommon. These don't include the downpayment of 1-3% of the loan balance. Of course, such costs become more affordable when considered alongside the total value of a loan that's at least $750,000 (and likely much more).
Can Fannie Mae Multifamily Affordable Housing Loans Be Used for Mixed-Use Properties?
While Fannie Mae Multifamily Affordable Housing Loans are intended for low-income residential properties, terms typically allow for a certain amount of commercial space. Most of these loans allow for up to 35% of the rentable area to be commercial space, and up to 20% of the gross income to come from commercial rents.
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