Published March 12, 2012
If you are in need of a multifamily loan to refinance your apartment building or to purchase an apartment building of five units or more, what lending sources are available to you in America today? Which are the best? Some of the available loan sources are the corner commercial bank, credit unions, regional banks, national bank commercial divisions (such as Wells Fargo Commercial and Chase Commercial), Fannie Mae, Freddie Mac, FHA, real estate investment trusts, insurance companies, hedge funds and private funds.
So which are the best? Well, let’s start with the corner bank. Most commercial banks buy money wholesale (often overnight) and sell it to you retail. It is best for them to sell the money to you on as short of a term as possible (like a monthly adjustable). It is very risky for them to fix a rate for more than three or five years, because they have borrowed the funds on a short-term basis and don’t really know what rates will adjust to in the distant future when they have to pay it back.
So first of all, their short-term 3-to-5-year fixed rates are almost always higher than many of the other sources mentioned above, because they have to add more margin to today’s rates, just in case the rates go the wrong way when they have to pay the money back.
Credit unions, on the other hand, lend out their own money from deposits and can charge whatever the market will bear, but they usually have decent rates. But they also prefer not to fix the rates on commercial loans for more than five years. If they do so, the rate will be substantially higher.
So what are the best commercial loan sources in America? The following commercial loan sources have better rates than the corner banks and will fix the rates for 10, 15, even 30 years: regional banks, national bank commercial divisions, Fannie Mae, Freddie Mac, FHA, real estate investment trusts and insurance companies. Keep in mind that with the exception of FHA, the longer you fix the rate, the higher the rate will be. Most of these sources do not originate loans directly to the public but only through affiliated mortgage bankers and mortgage brokers.
To get the best rates and terms on your apartment loan, I highly recommend that you find a competent, highly experienced commercial mortgage banker or commercial mortgage broker to assist you with financing your apartment building or commercial property. They have established relationships with the best commercial lending sources, know the underwriting for each source, and will save you a lot of valuable time shopping.
Apartment Loan Store has 14 years experience, and is both a mortgage banker and a mortgage broker. We have a highly skilled staff that lives and breathes commercial lending. We love what we do! You can reach us at 866-811-9515.
By Terry Painter, President