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The Guide to the Types of Fannie Mae Multifamily and Commercial Real Estate Loans

Fannie Mae Essential Guide to Commercial real estate loans

When you’re ready to finance a multifamily property, the last thing you want to know the different options you have available and what documentation you will need for each of them, no matter what you decide. Having the right options when your financing a multifamily home can make the difference between a very smooth commercial real estate loan experience or a very start and stop process other loan companies are known to provide.

By using state of the art commercial underwriting pricing index data (CUPIDTM), some companies can provide you with commercial Federal National Mortgage Association (Fannie Mae) multifamily financing at the touch of a button. It’s that easy to sift through and process hundreds of lenders and loan programs that fit your specific multifamily loan needs best. Read on if you want to learn about the different types of Fannie Mae multifamily and commercial real estate loans.

There’s one that meets your financial needs best in your quest for a multifamily home property.

Fannie Mae Multifamily

Fannie Mae has a variety of options when dealing with multifamily and apartment financing. These options include multifamily loans that are non-recourse, offer you a 30-year fixed-rate financing deal offer up to 80% leverage. Fannie Mae Multifamily and commercial real estate loans have almost all commercial investors seeing the viability of these commercial loans.

That being said, Fannie Mae defines multifamily housing as any rental housing that has five or more dwellings within it. These units can be one room-efficiencies, or it can be a two-story garden apartment attached to another garden apartment. There is a standard feature most of the commercial multifamily units share, and that is no matter the size, shape, or what extra amenities the apartment offers, it is home to its residents.

The Fannie Mae multifamily guide below offers real estate investors a one-stop shop informational guide to commercial real estate loans in a consistently straightforward manner. This makes it easy for anyone seeking informative guidelines to the Fannie Mae Apartment and Multifamily loan guidelines.

Fannie Mae Commercial Loans

If you ever thought there was limited money to be made as an investor in commercial real estate or multifamily real estate loans, the top five multifamily affordable housing DUS lender companies may change your mind. In 2019, a couple of the top five made over $8.1 billion.

It’s a long-held and known investor truth that apartment and multifamily building investors have some of the best rates and terms with some rates being fixed for five to thirty years. But like all proper investment criteria, there are structured guidelines that go along with multifamily loan financing, and you need to know those guidelines if you want to wade into the commercial real estate market.

Commercial Real Estate Loan Financial Rewards

A multifamily property commercial loan offers various financial rewards to investors, and any other type of investment cannot receive many of these financial rewards.

  1. If you finance a multifamily home or property, it’s an innovative opportunity to generate income from one side of your investment from a unit you’re renting out. While providing you with passive income from a unit you’re living in but not having to pay rent while living there although your mortgage and other property payments will need to be made in kind. 
  2. Another way the investor has more control over the value of their investment is the more income a property receives, the higher the value is. That means multifamily properties give investors streams of income. This is always rated of higher value than a single-value home.
  3. Every time someone moves out of one of your single-property homes as an investor, you lose money. But as a multifamily and commercial real estate investor, your loan is secured through the larger pool of tenants. When you consider it, you come to the realization it”s a win-win when you have numerous units that help you lower your loss concerns as an investor when your loan note comes due.

Then you need to remember that when you purchase individual properties, you have to count one transaction at a time, and it’s quite exciting, and your real estate portfolio starts to grow, but it is slow-growing. That’s why purchasing commercial real estate your loan is scalable so you can have a multifamily mixed-use that gives you business and investment dollars you need.

Fannie Mae DUS Multifamily Loan Program

DUS Fannie Mae offers loan properties where 35% of space that can be filled by commercial tenants, but that’s capped at 20% of rental income. DUS loans for multifamily properties require a large student or military population with up to eighty percent allowed. But if for any reason, your concentration of military or student population goes over 80%, you must start using Fannie Mae’s military or student housing program.

Your loan size minimum is $3 million; although there is no upper limit, you do have to have at least a five-unit multifamily housing building or property. You can leverage 80% maximum of your LTV allowance, and usually, Mezzanine financing is available. There is a non-recourse standard, but there are rate locks both secure and extended, and the Debt Service Coverage Ratio Calculator (DSCR) is a minimum of 1.25.

It is your DSCR that is often the number one criteria used in analyzing your risk level for investment purposes for your business or property loans.

Some Guidelines for Multifamily Commercial Loans

Almost any multifamily dwelling apartment or commercial unit will require a minimum loan amount of at least $750,000. That means you have to have 80% of which 75% with cash out.

  • You also will have a non-recourse availability written into your agreement
  • You’ll have five – thirty-year fixed rates/term
  • Thirty years Amortization
  • No debt to income ratio
  • Your minimum credit score must be 680 or above
  • Your minimum net worth needs to be equal to the loan amount you’re asking for
  • You must have a 1.25 minimum DSCR

Some things many people don’t know if you must have 90% occupancy within ninety days. Another thing that’s often missed in the fine print is 35% can be used for commercial space. It almost always comes down to analyzing the DCSR risk level, and that’s the number one factor all investors need to look at when considering Fannie Mae loan Guidelines and programs.

Commercial Real Estate Investment Guide

High-net worth investors looking to invest in commercial real estate often know that streams of passive income will build empowerment over time that makes them financially free. Wealth is built much the same way. The most significant financial returns come to those that wait.

A multifamily property commercial loan offers some financial rewards to investors; many other real estate loans don’t come close to providing.

  1. If you finance a multifamily home or property, it’s an innovative opportunity to generate income from one side of your investment from a unit you’re renting out. While providing you with passive income from a unit you’re living in but not having to pay rent while living there although your mortgage and other property payments will need to be made in kind. 
  2. Another way the investor has more control over the value of their investment is the more income a property receives, the higher the value is. That means multifamily properties give investors streams of income. This is always rated of higher value than a single-value home.
  3. Every time someone moves out of one of your single-property homes as an investor, you lose money. But as a multifamily and commercial real estate investor, your loan is secured through the larger pool of tenants. When you think about it, it”s a win-win when you have numerous units that help you lower your loss concerns as an investor when your loan note comes due.

It’s good to remember that when you purchase individual properties, you’re adding up the transactions one at a time. That’s why purchasing commercial real estate your loan is scalable so you can have a multifamily mixed-use that gives you business and investment dollars you need when you’re seeking more than one at a time investment growth.

Fannie Mae Commercial Loan Life Cycle

Most Fannie Mae Investors and loan companies have a full-lifecycle that offers you lending resources that will help you with your estimated cash flows, your pricing, and terms. Most of Fannie Mae lenders and investment companies offer stabilization status, underwriting loans in-house, which allows the execution of funding on time and more. The goal of multifamily loan companies is to build a profitable and sustainable book of business.

But you want to build that book of business while supporting your commercial real estate property that bringing in anywhere between $22.8 billion to $75 billion to the economy between 2010 and 2019.

Fannie Mae Small Loan Program

Not every multifamily loan or investor has to be in the millions. Sometimes it is the smaller and more personal lender who is building their portfolio that starts to make a difference along the way. The Fannie Mae Small loan program offers several incentives for multifamily real estate programs.

They have a streamlined real estate program that offers lower loan expenses for the purchase and refinancing of apartment complexes that range from $750,000 – $3,000,000. If you live in a major city, it can go up to five million dollars. Some of the incentives include but aren’t limited to:

  • Your commercial space is 35% of rent space or 20% of gross income
  • The loan is assumable for 1% fee
  • There are no tax returns required
  • Up to 80% of your loan to value available to you
  • The loans are amortized for thirty years

Finally, there is a non-recourse, and the loan is assumable for a 1% fee.

Fannie Mae Specialty Property Loans

Almost all Fannie Mae specialty property loans are ones most investors may be unaware of but which have excellent terms and conditions. The specialty property loans include but aren’t limited to military housing loans, which offer properties with more than 20% tenant concentration based on the market’s military base location. There’s no doubt the military base location plays into what your tenant concentration levels will be for military multifamily real estate loans.

There is also cooperative apartment loans that provide you with financing options for multifamily properties in which the resident collectively own the building(s) and property. This may sound confusing on the face of things, but the residents own the building(s) and property through their shares in the cooperative corporation. The cooperative corporation provides rights to the shareholders through proprietary investor leases.

The manufactured community housing loans are considered multifamily or commercial because it is a manufactured housing community with a minimum of fifty sites. There are always flexible loan financing terms with competitive pricing for the ground leases for investors.

Fannie Mae Apartment and Affordable Housing Loan Program

Fannie Mae has commercial real estate loans that fit apartments and affordable multifamily housing projects. These housing loans are provided permanent, long-term fixed-rate debt for financing or even refinancing needed. The financing or refinancing is for the stabilization of multifamily housing properties that are provided with rent control or income restriction terms.

Most come with a $1 million minimum loan size at 1.20 DSCR. You can also get up to 80% LTV and receive flexible underwriting that helps with your specific housing property needs. There are various eligible property types like Section 8 contracts or expiring low-income housing tax credits that are available for you to use.

Many times if you are refinancing, you can use tax exempt-bonds for properties that have existing RD 515 loans or loans insured under Section 202 or 236 of the National Housing Act. This is an economy that’s challenging to read and get ahead in with investments, real estate, stocks, and more. Sometimes changing economies are instrumental in providing for upticks and increased interest in investments for multifamily or commercial real estate.

Let Fannie Mae Multifamily Guide Lead Your Way

Fannie Mae multifamily real estate options open up doors to investors that previously may not have considered this type or method of investment financing. The spending habits of Americans in this shifting economy can be traced to more online spending, online trading, real estate purchasing and selling as well as the building of investment portfolios. It’s crucial whether you’re interested in financing a multifamily home or investing in a commercial real estate loan; you use the guide above as a starting point.

Then reach out to CommLoan. CommLoan will provide you with state-of-the-art technology combined with concierge service, where you will have access to capital markets. What’s more, CommLoan’s commercial real estate lending marketplace means you can find what kind of Fannie Mae Commercial Real Estate loan that best fits your needs.

It’s only by knowing your options you wield power in the world of commercial real estate. CommLoan helps you find a way to get into multifamily investing, acquire another commercial property, or refinance an existing one. No matter what you need, CommLoan has the platform to make it happen with market data and lender comparisons.

Feel empowered with your next multifamily real estate investment by using CommLoan.