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Apartment Loan Rates

Apartment Loan Store's Multifamily Conventional Loan Rates as of: 05/24/2020
For Loans $1,000,000 and above. Call for rates for loans under $1M.
Fixed Term Rate Amortization LTV
5 Years 3.17% - 4.65% 30 Years 75% - 80%
7 Years 3.29% - 4.32% 30 Years 75% - 85%
10 Years 3.26% - 4.19% 30 Years 75% - 80%
15 Years 3.35% – 4.65% 30 Years 75% - 80%
30 Years 3.86% - 4.88% 30 Years 75% - 80%
35 Years 3.15% - 3.55% 35 Years 80% - 85%
Bridge/Rehab 4.95% – 9.95% Int. Only 70% - 80%

 

The Coronavirus Impact on Commercial Loan Rates and Guidelines

By Terry Painter/Mortgage Banker                            April 8, 2020

Author:  The Encyclopedia of Commercial Real Estate Advice (A Willey Book) Release date:  September 2020.

 

To our valued borrowers:  Apartment Loan Store remains a reliable source of capital during this challenging economic time.  As we enter a global recession due to the coronavirus, we are still providing lower rate multifamily financing nationwide for those in need. As a mortgage-banking firm, we can remain agile in our ability to utilize funds from FHA, Fannie Mae, Freddie Mac, and our strong regional banking presence. 

 

As a reaction to the global threat of the coronavirus, the DOW dropped 28% in one month from February 12 to March 13. On March 24, the stock market dropped 12.93% in one day. Unemployment set a new two week record on March 29th with 10 million workers filing. This set off a chain reaction that has caused everything related to mortgages to be uncertain. Usually when the stock market tanks, investors flee to the safety of United States Treasury Bonds. This almost always causes treasury yields to drop which is based on supply and demand. Most long term interest rates are tied to treasury yields. In this case the yields were already at a historical low with the 10 year being below 1.00%. Interest rates should have dropped like a stone. But they have not. Because of the uncertainty about where the market is headed, rates have gone up. Uncertainty to lenders means a higher risk. Higher risk in the mortgage world always equates to higher interest rates and more stringent underwriting guidelines. 

 

Fannie, Freddie and HUD Raise their Rates

In Mid-March 2020, Fannie Mae and Freddie Mac raised rates on a ten year fixed mortgage from an average of 3.45% to 4.85%.  HUD/FHA rates followed suit. While the 10 year treasury was trading at 0.80%, Fannie instigated a treasury yield floor of 1.10%. These loans are converted to mortgage backed security bonds which are sold to investors on Wall Street. The problem was that although all these mortgages are guaranteed, no one was buying them. Interest rates went up because the bond trading desks had to increase the earnings on them drastically to try and get investors more interested. This caused rates on these mortgages to skyrocket.    

On March 26, 2020, the Feds announced that they would be purchasing 200 Billion Dollars of mortgage backed security bonds over the next two months. The next day when they made their first purchase, the rates on Fannie Mae, Freddie Mac, and HUD/FHA dropped considerably. They are still good today. 

 

Commercial Interest Rates at Banks and Credit Unions

Smaller community banks and large banks have plenty of money to lend, but have put in interest rate floors (lowest rate). Where most floors were at around 4.00% for a 5 year fixed commercial mortgage, these have been raised to 4.50 – 4.75%. 

 

Underwriting Guidelines are Tightening

Most economists agree that due to the impact the corona virus has had on jobs, that we have entered a recession with the worst yet to come. This is causing commercial mortgage lenders to be much more conservative. A recession causes property values to drop. Lenders are concerned that if they make a loan at 75% LTV today, the loan will be at 80% LTV in six months if the property goes down in value. Banks will almost certainly be lending at lower LTV’s. Freddie Mac has also made their underwriting guidelines more stringent by removing its rate lock for smaller loans, and lending a maximum of 75% instead of 80% with cash out. For mixed use buildings, commercial space will be underwritten as vacant. Life Companies and most Commercial Mortgage Backed Security (CMBS) lenders are not lending right now.    

 

Commercial Construction Loans

Construction loans are always considered a higher risk for lenders. When a recession begins, many lenders eliminate them all together.  This is because they really don’t know what the need will be for the property or what rents will be like when it is completed and filled with tenants an average of 18 months later. If you are in need of a larger construction loan for a multifamily property call us about HUD construction financing. We are specialists with this loan product since 1999. HUD will still be lending at 85% Loan to Cost with great non-recourse construction loan rates that roll over to a 40 year fixed fully amortizing non-recourse permanent loan. 


 

Multifamily/Apartment Loan Rates change daily.  Many Regional Bank Loan Programs allow you to lock the rate at application.  Government Agency programs like HUD/FHA, Fannie Mae and Freddie Mac have  the lowest rates and fix rates for the longest duration from 10 - 35 years and can lend up to 85% LTV. With the lowest rates since 1997, Apartment Loan Store can do the majority of our 26 Multifamily Loan Programs in your submarket. Let us do the shopping for you. Call one of our friendly loan specialists today to get prequalified. 

Multifamily loan rates usually change daily. Therefore, once you have chosen an apartment loan program it is imperative to lock the rate at loan application. Many of our multifamily loan programs allow this. As with all commercial loans the rate will be based on an index plus a spread. An example of an index would be prime rate. An example of the spread would be 2.00%. In this case your rate would be prime rate plus 2.00%.  Most of our apartment loan rates are determined by taking the current 3- to 30-year treasury yield plus a spread of 1.50% to 2.60%. 

 

Here are Some of Our Best Multifamily Loan Program Terms:

 

1. FHA Multifamily Purchase or Refinance Loan

With a 35 year low fixed rate and a 35 year amortization this is by far our best Apartment Loan Program. FHA multifamily has non-recourse, and assumable financing for both purchasing and refinancing of apartment buildings that are already existing for a minimum of 3 years since completion. The maximum loan is 85% LTV for a purchase, 85% for a rate and term refinance, and 80% for a cash out refinance.  The smallest size loan is $2,000,000. There is no maximum on loan size. If you are planning on keeping this loan forever this could be the best loan for you.

 

FHA Multifamily Purchase or Refinance Loan Terms

  • Up to 85% LTV
  • Low 35 year fixed rate
  • Amortization has a maximum of 35 years
  • Term 35 years
  • Loans are non-recourse
  • For a fee of .50%, loans can be assumed
  • For properties to qualify, there must be at least 3 years lapsed since the date of certificate of occupancy.
  • Senior Living Properties that have the age restriction of 62 years old or older are permitted.
  • There is an occupancy requirement of at least 90% for a 90-day period.
  • $15,000 for each unit is the maximum allowed for repairs.
  • Mortgage Insurance Required

 

2. Fannie Mae Multifamily loans:

Rates are tied into the 5,7,10, and 30 year treasury yields. Fannie Mae also known as the Federal National Mortgage Association is a corporation that is publicly traded. It creates mortgage pools that are securitized on Wall Street. Lenders originate apartment loans using their own monies, and afterwards they sell the loans to Fannie Mae. This gives them their money back to lend again. In the United States, Fannie Mae multifamily mortgages give the borrower access to some of the lowest fixed rates available in America.

 

Fannie Mae Multifamily Loan Terms

  • $750,000 is the minimum amount loaned with no maximum
  • 80% is maximum LTV, or 75% if you want cash out
  • 5, 7, 10, 12, 15, 20 and up to 30 year fixed rate terms available.
  • 30 year amortization period
  • Interest Only Available
  • Assumable with a 1.00% fee
  • Non-recourse loans available
  • Fannie Mae can do student housing
  • Fannie Mae can also do independent senior living
  • Net worth minimum is the size of the loan
  • Minimum credit score needed is 680
  • No Tax Returns Required
  • Minimum DSCR is 1.25
  • Post Closing Liquidity required is 9 – 12 months mortgage payments
  • Occupancy requirement is 90% for 90 days
  • Fannie Mae allows up to 35% commercial space. This would be for mixed use property.
  • Prepayment penalty is yield maintenance or declining
  • The loan is assumable
  • There are affordable housing programs allowed

 

3. Freddie Mac multifamily loans: 

Rates are tied to the 5, 7 and 10 year treasury yields. Freddie Mac multifamily loans also have some of the lowest rates available in America. Once the loan is made, it is sold to Freddie Mac where securitization takes place on Wall Street using mortgage pools. Within the Freddie Mac loan program is market rate, student housing, affordable housing, and senior housing. The fixed rate periods for Freddie Mac are 5 years, 7 years, or 10 years. Interest only options are available 1 year to 10 years. Loans are amortized for 30 years. Qualification is not as strict for Freddie Mac loans as it is for conventional bank loans. This is because with Freddie Mac, loans are mostly made to the property. For the majority of Freddie Mac loans, borrowers do not need to submit tax returns. Most Freddie Mac loans are non-recourse. The minimum credit score requirement is 660.

 

Freddie Mac Multifamily Loan Terms:

  • $1,000,000 is minimum loan size
  • 30 year amortization period
  • Full term interest only payments available
  • 80% is maximum LTV rate and term, 80% maximum with cash out
  • Rates are fixed 5 years, 7 years, or 10 years.
  • The loan can convert to an ARM (adjustable rate mortgage) for an additional 10 years for a total 20 year term
  • The loan is assumable
  • There is an occupancy requirement of 90% for 90 days
  • 680 s the minimum credit score accepted
  • Net worth minimum is the loan size
  • Liquidity required post-closing is 9 to 12 months
  • You don’t need to submit tax returns for the majority of Freddie Mac loans.
  • Loans are non-recourse
  • Your loan can be step-down prepayment
  • 1.2 to 1.25 DSCR
  • Declining or Yield Maintenance Prepayment Penalty

 

4. CMBS (Commercial Mortgage Backed Security) Loan:

What are commercial mortgage backed security (CMBS) loans? These loans are bundled with loans with the same maturity in mortgage pools and sold as mortgage backed serurities on wall street. The rates are tied into 5 and 10 year treasury yields.

 

CMBS Loan Terms

  • $2,000,000 is the minimum amount loaned with no maximum
  • 75% is maximum LTV with or without cash out
  • 5, and 10 year fixed rate terms available.
  • 30 year amortization period
  • Interest Only Available
  • Assumable with a 1.00% fee
  • Non-recourse loans available
  • Net worth minimum is negotiable
  • Minimum credit score needed is 660
  • No Tax Returns Required
  • Minimum DSCR is 1.25 to 1.35
  • Post Closing Liquidity required is negotiable
  • Occupancy requirement is 90% for 90 days
  • The type of prepayment penalty is yield maintenance or defeasance
  • The loan is assumable

 

5. Regional Bank Loan:

Rates are tied to treasury yields, or COFI. With many regional banks to choose from we can often lend you more money because of a lower debt coverage service ratio.

 

Regional Bank Terms:

  • $1,000,000 minimum loan size
  • 25 - 30 year amortization period
  • 75%  is maximum LTV
  • Rates are fixed 3 – 5 years. Sometimes up to 10 years.
  • The loan can convert to an ARM (adjustable rate mortgage) for an additional 10 years.
  • The loan is assumable
  • 680 is the minimum credit score accepted
  • Net worth minimum is the loan size
  • Liquidity required post-closing is 12 months
  • Tax Returns are required
  • Loan is Recourse
  • Step down prepayment penalty
  • 1.2 to 1.25 DSCR
  • Occupancy Requirements flexable

 

6. FHA New Multifamily Construction Loan:

FHA new construction loans have incredibly great rates and terms. With an 85% of Cost 2 year construction loan and then a 40 year low-rate fixed perm loan with a 40 year amortization, you can see why this is the best construction to perm loan in America.   Apartment Loan store has specialized in FHA new construction apartment loans in all 50 states since1999. FHA Multifamily Construction Loans are guaranteed by the US Department of.Housing and Urban Development.

What is the reason that FHA apartment new construction rates are so low? It is that FHA provides the mortgage insurance for these new construction loans. This allows the loans to then be sold on Wall Street in the form of Gennie Mae bonds. The American government guarantees these bonds. This makes them attractive to investors who are looking for low risk investments in the national as well as the international arena. One of the best features is that the loan is non-recourse and assumable. It can also be used for heavy rehabilitation.

 

FHA Multifamily new construction loan terms:

  • $5,000,000 is the minimum loan size
  • 85% of Cost
  • No Appraised Value except for the land
  • 40 year fixed rate perm loan
  • 40 year amortization
  • 49 year term
  • Mortgage Insurance is required
  • Declining prepayment penalty the first 10 years

 

Please Call for additional Multifamily Loan Programs. Our Funds come from Fannie Mae, Freddie Mac, Wall Street Hedge Funds, CMBS, Insurance Companies, Private Finance Companies, Real Estate Investment Trusts, Pension Funds, National Banks, Regional Banks, and Community Banks.