Multifamily Loans

Apartment – Multifamily Loans require strong finances, credit and experience. They are offered by HUD/FHA which has the lowest long term fixed rates, community banks, Credit Unions, Fannie Mae, Freddie Mac, Life Companies, Hard Money Lenders and more.

By Terry Painter/Mortgage Banker,  Author of “The Encyclopedia of Commercial Real Estate Advice”(link is external) Publisher – Wiley.  Member of the Forbes Real Estate Council

 

Why All Lenders Love Multifamily Loans

Having financed apartment – multifamily properties nationally for the past 24 years, I can tell you that this is the easiest commercial property type to obtain a loan on.  Why?  Because all commercial lenders love them. Why? Because people need a roof over their heads during good and bad economic times and occupancies tend to stay full during a recession.  Keep in mind that lenders abhor risk.  Toward the end of this article, I will be going over the seven risks lenders hate so you can make sure you have these covered before you apply for a loan.                                                                                  

Office, retail, and industrial properties have a much higher risk level than apartments, and so many moving parts to qualify for underwriting guidelines that lenders get dizzy just trying to get all of these to line up.  These include: the remaining time on the lease, the covenants in the lease itself, the type and credit rating of each business tenant, and the time it takes to fill a vacancy.  The average time for a strip mall or office property to find a new tenant and negotiate a lease is downright scarry to a lender - 5 months.  And it’s going to take even longer to start collecting rent if new tenant improvements have to be made. And then there is the uncertainty of who will be paying for those.

 

Conversely, there is such a large pool of potential tenants to fill most apartment buildings, and the loan underwriting is simple, friendly and uncomplicated. Multifamily Rental contracts average two pages, and are all the same.  If the lease terms for multifamily tenants are less than a year and some even month to month – well, no problem to the lender. This is because they know management can check a new tenant’s employment, and rental references in less than an hour and a vacant unit can be cleaned, painted, and made ready for them in a week.

14 Top Apartment/ Multifamily Loan Programs with Details

(Listed Alphabetically)

Commercial Mortgage-Backed Security (CMBS) Loans

These loans are bundled or pooled with other loans with the same maturities and sold on Wall Street as mortgage-backed security bonds.  On the positive side - these non-recourse loans have competitive 5- and 10-year fixed rates, 30 year amortizations, and can utilize a blanket loan to include multiple properties. Lenders close with their own funds and then sell the loans in securitized pools as mortgage-backed security bonds. Tax returns are not collected so these loans are great if you do not show much income on your taxes.

On the negative side you have a defeasance prepayment penalty which can create a prohibitive – unaffordable prepayment penalty if mortgage rates go down lower than your current rate and you prepay before 3 months prior to loan maturity.   

 

Types of Loans: Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $2,000,000–50,000,000

▪ LTV: 75% with cash out

▪ 25–30-year amortization

▪ Nonrecourse

▪ 5- or 10-year fixed rates/term

▪ Tax returns not required

▪ No global or debt to income ratio

▪ No ground-up construction

▪ Loan fee: 1%

▪ Primary and secondary markets preferred

▪ 675 minimum credit score

▪ Minimum net worth negotiable

▪ Post-closing cash negotiable

1.25–1.35 minimum DSCR

▪ Yield maintenance or defeasance prepayment penalty

▪ Occupancy required: 85%, or market occupancy

▪ Assumable with a 1% fee

▪ Interest-only available

▪ Rate lock at loan approval

▪ Refundable rate-lock deposit require

For More on CMBS Loans go here

Community Banks

If you don’t have experience owning an apartment building, or a high net worth or much cash left over after the loan closes, but you do good credit and have solid income showing on tax return, this where you will qualify. These are small banks that make loans in their own backyard.  On the negative side these banks have a smaller limit they can lend to each customer, their rates are based on credit score and your deposit relationship, and they are not fond of cash-out refinancing.

Types of Loans: Permanent, construction, rehabilitation, mini-perm, and credit Lines

 

Program Guidelines and Requirements

▪ Loan size: $150,000––$6,000,000

▪ LTV: 75%; 65% with cash out

▪ 25-year amortization

▪ Recourse

▪ 3–5 year fixed rates

▪ 10-year term

▪ Tax returns required

▪ Global ratio and debt to income ratio

▪ Loan fee: 1.00%

▪ Lend in local market

▪ 680 minimum credit score

▪ Minimum net worth: negotiable

▪ Post-closing cash: negotiable

▪ 1.25–1.40 minimum DSCR

▪ Declining prepayment penalty

▪ Occupancy required: 85%, or market occupancy

▪ Assumable: no

▪ Interest-only: no

▪ Rate lock at loan approval or documents

▪ Refundable rate-lock deposit: no

 

Credit Unions

 

If you have strong personal income and don’t want a prepayment penalty, this is the place to shop.  You will need good credit and good income showing on tax returns. Rates can be fixed for 5 – 10 years, and sometimes 15 years fully amortizing.  On the negative side, credit unions only make loans to members who live close by.

 

Types of Loans: Permanent, rehabilitation, construction, and credit lines

 

Program Guidelines and Requirements

▪ Loan size: $75,000–15,000,000

▪ LTV: 75%; 65% with cash out

▪ 25-year amortization

▪ Recourse

▪ 3–10 year fixed rates

▪ 10-year term

▪ Tax returns: required

▪ Global ratio: required

▪ Loan fee: 1.00%

▪ Most lend in local markets

▪ Borrower required to join the credit union

▪ 675 minimum credit score

▪ Minimum net worth: negotiable

▪ Post-closing cash: negotiable

▪ 1.25 minimum DSCR

▪ Usually no prepayment penalty

▪ Occupancy required: 85%

▪ Assumable: no

▪ Interest-only: no

▪ Rate lock at loan application

▪ Refundable rate-lock deposit: no

 

Crowdfunding Loans

 

 If you only have 15% - 20% to put down, this can work here.  They can offer higher leverage by also doing equity participation greatly lowering your down payment.  But be careful -  if you choose to do equity participation, these lenders will want a preferred return and ownership equal to the percentage of the down payment they contribute. These loans can fund quickly in as little as 4 weeks and are easier to qualify for than bank loans. Crowdfunding platforms are lenders that allow investors to invest in larger properties by pooling their money with other investors. Investors choose the properties they want to invest in, so be wary; sometimes they change their mind prior to closing and the crowdfunder has to find a replacement. On the negative side they often have to raise the money first from investors which can take time. 

 

Types of Loans: Short-term, bridge/rehabilitation, and construction

 

Program Guidelines and Requirements

▪ Loan size: $250,000–12,000,000

▪ LTV: 75–80%

▪ Up to 80% cost of construction

▪ Interest-only

▪ Recourse

▪ 1–3 year term

▪ Tax returns: required

▪ Loan fee: 2–3%

▪ 640 minimum credit score

▪ Minimum net worth: negotiable

▪ Post-closing cash: negotiable

▪ 1.00–1.25 minimum DSCR

▪ 6–12 months prepayment penalty

▪ Assumable: no

▪ Primary, secondary, and small markets

▪ Experience a plus

 

Fannie Mae Multifamily Loans

 

These low-rate nonrecourse loans can be fixed from 5 – 30 years.  They have some of the lowest long term fixed rates.  If you are planning on keeping the property for the full loan term, this could be a great loan for you.  Fannie can also lend in remote low population towns and do not increase the rate for this as Freddie Mac does.

 

Fannie Mae, short for Federal National Mortgage Association, is a government sponsored enterprise (GSE) and has some of the lowest rates and best terms around for apartment properties of five units or more. Fannie Mae does not actually originate loans, but is a publicly traded corporation that guarantees and securitizes them to be sold as mortgage-backed security bonds. Authorized lenders close with their own funds and then sell the loans to Fannie Mae.

 

These non-recourse loans have competitive 5- and 10-year fixed rates and can do a blanket loan to include multiple properties. Lenders close with their own funds and then sell the loans in securitized pools as mortgage-backed security bonds.

 

On the down side, you need a net worth equal or greater than the size of the loan and at least 12 months in post-closing cash and a minimum of 2 years of multifamily ownership experience.

 

Types of Loans:   Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $1,000,000—unlimited

▪ LTV: 80%, 75% with cash out

▪ 30-year amortization

▪ Non-recourse available

▪ 5–30 year fixed rates/term

▪ No tax returns

▪ No global or debt to income ratio

▪ No ground-up construction

▪ Loan fee: 0.50–1.00%

▪ 680 minimum credit score

▪ Lend in any size market

▪ Minimum net worth equal to loan amount

▪ Post-closing cash: 12 months’ loan payments

▪ 1.25 minimum DSCR

▪ 35% commercial space allowed

▪ Yield maintenance prepayment penalty

▪ 90% occupancy required for 90 days

▪ Affordable housing programs

▪ Assumable with a 1.00% fee

▪ Interest-only available

▪ Rate lock at loan approval

▪ Refundable rate-lock deposit required

For more on Fannie Mae Loans go here

 

Freddie Mac Multifamily Loans

 

5 – 10 Year Non-recourse, low rates, and full-term interest only

 

Freddie Mac is a GSE that securitizes loans from their approved lenders. These are put into mortgage pools and sold to investors as mortgage-backed security bonds on Wall Street. These loans have some of the lowest long-term fixed rates.  Get a loan term up to 20 years and fix the rate up to 10 years.

 

On the downside, the rate will be higher based on the size of the market and how much you are putting down.  Expect much higher rates if you are going for 80% LTV on a purchase.

 

Types of Loans: Permanent loans only

 

Program Guidelines and Requirements

▪ Loan size: $1,000,000–50,000,000

▪ LTV: 75% with cash out

▪ 30-year amortization

▪ Non-recourse available

▪ 5- or 10-year fixed rates

▪ 5–20 year term

▪ No tax returns

▪ No global or debt-to-income ratio

▪ No ground-up construction

▪ Loan fee: 0.50–1.00%

▪ Higher rates for smaller markets

▪ 660 minimum credit score

▪ Minimum net worth equal to loan amount

▪ Post-closing cash: 12 months’ loan payments

▪ 1.20–1.25 minimum DSCR

▪ 35% commercial space allowed

▪ Yield maintenance or declining prepayment penalty

▪ 90% occupancy required for 90 days

▪ Affordable housing programs

▪ Assumable with a 1% fee

▪ Interest-only available

▪ Rate lock at application

For more on Freddie Mac Loans go here

 

Hard Money Bridge and Construction Loans

 

These are expensive temporary loans, but do not require great credit and net worth; they are fast and for many projects they pencil. You have to have a great exit strategy to get one of these loans like selling the property or refinancing the loan at loan maturity. It’s much better to use a hard money lender that gets their funding from a warehouse line of credit or from a fund they have put together from investors.  Stay away from hard money lenders that raise money from private investors for each deal.  Often these private investors change their minds right before closing if they find a sweeter deal to invest in.

 

Types of Loans: Construction, rehabilitation/bridge

 

Program Guidelines and Requirements

▪ Loan size: $750,000–25,000,000

▪ LTV: 65–75%

▪ Up to 75% of cost of construction

▪ Interest-only

▪ Recourse and non-recourse

▪ 1–2 year term

▪ Tax returns: not required

▪ Global ratio: no

▪ No minimum credit score

▪ Net worth requirement: minimal

▪ Post-closing cash: minimal

▪ 6–12 months prepayment penalty

▪ Post-closing cash: negotiable

▪ Debt service ratio: 1.00 or less

▪ Assumable: no

 

HUD/FHA Multifamily

 

The US Department of Housing and Urban Development (HUD) approves and guarantees loans made from its approved lenders that are sold as the highest credit-rated, lowest risk mortgage-backed security bonds on Wall Street. These loans go up to 85% LTV and have the lowest long-term fixed rates in the US.  35 year fixed rates on this program are almost always lower than a banks 10 year fixed rates. As a plus, these loans are fully amortizing and non-recourse.

 

On the negative side they take a long time to close -  7 months or more, so they are not practical for purchasing properties unless you close with a temporary bridge loan first.  HUD loans also have higher closing costs.

 

Types of Loans: Permanent loans for refinancing, acquisition, and rehabilitation; also major rehabilitation and construction rollover to permanent loans.

 

Permanent Loan Guidelines and Requirements

▪ Loan size: $2,000,000–100,000,000 plus

▪ LTV: 85%; 80% with cash out

▪ 35-year amortization

▪ Non-recourse

▪ 35-year fixed rates

▪ 35-year term

▪ No tax returns

▪ No global or debt to income ratio

▪ 25% commercial space of total sf

▪ Loan fee: 1.5%–

▪ HUD fee: 0.30%

▪ Mortgage insurance: 0.25–1.00%

▪ Prior similar property ownership experience needed

▪ Primary, secondary, and small markets okay

▪ Good credit required with no specific score

▪ No minimum net worth requirement

▪ Post-closing cash required not specified

▪ 1.176 minimum DSCR for market rents

▪ 1.15 minimum DSCR for affordable housing

▪ Declining prepayment penalty

▪ 90% occupancy required for 90 days

▪ Affordable housing programs

▪ Assumable with a 0.50% fee

▪ Interest-only not available

▪ Rate lock at loan approval with a 1/2-point refundable deposit

▪ Minimum six months for loan approval

 

Construction and Major Rehabilitation Guidelines and Requirements

▪ Loan size: $5,000,000–100,000,000 plus

▪ LTV: 85% of cost

▪ 40-year amortization

▪ Non-recourse

▪ 40-year fixed rates

▪ 40-year term

▪ No tax returns

▪ No global or debt to income ratio

▪ 25% commercial space of total sf

▪ Loan fee: 2.00%

▪ HUD fee: 0.70%

Mortgage insurance: 0.25–0.70%

▪ Prior development experience required

▪ Primary, secondary, and small markets okay

▪ Good credit required with no specific score

▪ No minimum net worth requirement

▪ Post-closing cash required not specified

▪ 1.176 minimum DSCR for market rents

▪ 1.15 minimum DSCR for affordable housing

▪ Declining prepayment penalty

▪ Affordable housing programs

▪ Assumable with a 0.50% fee

▪ Interest-only not available

▪ Rate lock at loan approval

▪ Minimum six months for loan approval

▪ Refundable rate-lock deposit required with a 1/2-point refundable deposit

For more on HUD/FHA Financing go here

 

(6 more multifamily programs listed at the end of this article)

 

For the Newbie, Multifamily is easy to Get Started, but a Bear to Run

Apartment buildings are a much easier type of commercial property to get started in for the newbie, but a bear to run.  Unlike a strip mall, office or industrial property, where tenants are businesses that have a pride of ownership and keep their spaces in tip top shape;  apartment properties can be occupied by individuals and families that can easily make noise after 10 pm, leave junk on their patios, pay the rent late, or not at all and get away with this nonsense.  This is because in most states it takes more time to evict a residential tenant.   

 

And keep this in mind.  To own an apartment building and manage it yourself, you have to have the personality and skill level of an army drill sergeant, an office manager and a repair person combined.   Lenders know this and this is why they are often hesitant to make a loan to a first-time owner unless they hire professional management.  To convince your lender that you can self-manage, it’s really going to help if you have owned one or more single family rental homes.  That way you can start the conversation by telling them what you have done to run these properties successfully, and how you repeat this tested recipe with your new apartment building.

The Top 7 Risks Apartment-Multifamily Lenders Dread

Before you apply for an apartment building loan, start out by putting yourself in the lender’s shoes.  This means understanding the 7 risks that all multifamily lenders dread and going into your first meeting with the lender prepared to sell them on why they do not have to worry about these risks with your project.

 

1. High Leverage -  All investment property owners know that their highest risk is having borrowers that have little skin in the game.  This means they have put less than 25% down.  It’s interesting, but hard money lenders that make loans to people with poor credit and low incomes almost never have a default.  Why?  Because they require 35% or more down.  No one risks that much of their own by losing the property if they don’t make the payments. 
2. Poor Quality Borrowers – Multifamily lenders prefer making loans to people with good credit (680 FICO score or above), with no bankruptcies, tax liens, foreclosures, mortgage lates, or criminal backgrounds.  If you have any of these be sure to tell the lender ahead of time to determine if you will qualify.  Having a net worth between 50% and 100% of the loan amount and not being broke when the loan closes is paramount.  If you do not meet these criteria, you will likely have to accept a higher-priced “Bad Credit Loan, or Hard Money Loan.   If this is a purchase, having proof of the down payment and closing costs is a must.  Here’s a tip to get off to a good footing with your lender.  Go into your first meeting with them with a copy of your bank or security statements showing proof of the down payment and closing costs.  They will sigh with relief knowing you are not wasting their time.
3. Poor Borrower Experience – Most lenders will want you to have multifamily ownership experience.  If you do not have this, be prepared to sell yourself based on your excellent business ownership experience or rental homeownership experience.  If you don’t have prior experience, its better to go for financing telling the lender you plan on having professional property management.
4. Poor Property Net Operating Income – If the property is not going to cash flow today the size loan you want, and you need to make major costly improvements to get it to where it needs to be, this represents a substantial risk to lenders. Be sure to ask the lender what the minimum Debt Service Coverage Ratio is. 
5. Poor Property Location – Lenders dislike making loans in bad or dangerous neighborhoods.  Most will pull a crime report. Also small isolated towns that have no major industries are considered much riskier. The property having access to major freeways, and shopping or being able to walk to just about anywhere if it is an urban location is preferable. Being close to public transportation is a great sell. 
6. Poor Historical Occupancy and Rent Collections – Think about it.  If you were buying a business you would want it to have historical success, not under a year of success.  –  Lenders prefer 2 years or more of strong gross rental and net income showing good income showing on property financials. If the property you want to buy has under market occupancy, and less than a year of good net income, be sure to tell the lender what you are going to do about it and how much this will cost if you need to renovate the property to get it to where it needs to be.  Also, just about all lenders will investigate rent collections to make sure all tenants are paying the rent and paying on time.
7. Poor Property Physical Condition – Its really important that you have a good estimate of the physical condition of the property before you apply for a loan. If you are planning on doing cosmetic or major rehab, be sure to get an idea of what the total project costs will be, before you talk to the lender. As you can imagine, it is a turn off to a lender if you get your foot in the door by telling a lender that the property only needs minor repair, and when they get a property condition report in that shows major neglect and that the property has health or safety issues.

 

(14 Top Apartment/ Multifamily Loan Programs with Details Continued)

 

Large Commercial Banks

 

If you are a high-net-worth experienced borrower, have large deposits with the bank, and are competing, they will break the bank to give you the lowest rate

 

These are banks such as Chase, Bank of America, Bank of the Ozarks, Wells Fargo and US Bank, can lend very large amounts in larger cities nationally. They have higher net worth, liquidity, and experience requirements than regional banks. Because they have so much of their own money to lend they can be very competitive on rates and fees.

 

On the down side, they prefer LTV’s at 70% or lower.

 

Types of Loans: Permanent, construction, rehabilitation, mini-perm, and credit Lines

 

Program Guidelines and Requirements

▪ Loan size: $250,000–75,000,000

▪ LTV: 75%; 70% with cash out

▪ 25- or 30-year amortization

▪ Recourse

▪ 3-, 5-, 7-, 10-year fixed rates

▪ 10-year term

▪ Tax returns: required

▪ Global ratio: required

▪ Loan fee: 1%

▪ Primary, secondary, and small markets

▪ 700 minimum credit score

▪ Minimum net worth: equal to loan size

▪ Post-closing cash: 10–15% of loan amount

▪ 1.25–1.35 minimum DSCR

▪ Yield maintenance or declining prepayment penalty

▪ Occupancy required: 85%, or market occupancy

▪ Assumable: no

▪ Interest-only: no

▪ Rate lock at loan approval

▪ Refundable rate-lock deposit: no

 

Life Companies

 

They prefer low LTVs, strong borrowers, and large cities. But they have the very lowest long-term fixed rates next to HUD.

 

These large insurance companies have capital divisions that lend on commercial real estate. They prefer lending at 65% LTV or less, but during strong economic times can go up to 70%.  They have very low rates that can be locked for up to 25 years. They prefer large cities and absolutely require financially strong experienced borrowers that already own 2 or more multifamily properties.  Life companies lend their own money, with many doing CMBS executions.

 

The negatives with life companies is that they start at $10,000,000, prefer 65% LTV or lower, and only lend to financially strong experienced borrowers.

 

Types of Loans: Permanent, bridge, and construction loans

 

Program Guidelines and Requirements

▪ Loan size: $10,000,000–150,000,000 plus

▪ LTV: 70%

▪ 25–30 year amortization

▪ Non-recourse

▪ 5–25 year fixed rates

▪ 5–25 year term

▪ Tax returns required

▪ No global or debt-to-income ratio

▪ Strong borrower experience required

▪ Loan fee: 1%

▪ Primary and secondary markets

▪ 720 minimum credit score

▪ Minimum net worth equal to 1.5 times loan amount

▪ Post-closing cash: 20% of loan amount

▪ 1.25 minimum DSCR

▪ Yield maintenance prepayment penalty

▪ 90% occupancy required

▪ Assumable with a 1% fee

▪ Interest-only available

▪ Rate lock at loan approval

▪ Refundable rate-lock deposit required

 

National Bank Capital Divisions

 

Loan size is not a problem here—and they have the lowest construction loan rates for strong experienced developers.  Borrowers must own 2 or more multifamily properties and have a net worth equal to 2 times the loan amount and at least 25% of the loan in post-closing cash.

 

These subsidiaries of large banks such as JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup have the best loan programs for stronger, experienced borrowers. Along with lending their own money, many can do Fannie Mae, HUD, and CMBS lending.

 

The main negative is the fact that these loans are only made to exceptionally financially strong experienced borrowers and start at $10,000,000.

 

Types of Loans: Permanent, construction, and rehabilitation

 

Program Guidelines and Requirements

▪ Loan size: $10,000,000–250,000,000

▪ LTV: 70%

▪ 25- or 30-year amortization

▪ Recourse or non-recourse considered

▪ 5-, 7-, 10-year fixed rates

▪ 10-year term

▪ Tax returns required

▪ Global ratio and debt-to-income ratio: required

▪ Loan fee: 1%

▪ Primary markets preferred

▪ 720 minimum credit score

▪ Minimum net worth of twice the loan’s size

▪ Post-closing cash: 25% of loan size

▪ 1.20–1.25 minimum DSCR

▪ Yield maintenance prepayment penalty

▪ Occupancy required: 90%

▪ Assumable: no

▪ Interest-only: no

▪ Rate lock at loan approval or documents

▪ Refundable rate-lock deposit: no

 

Bad Credit Secondary Market Commercial Lenders

 

 

Yes, rates are high, but if you have bad credit you can get the project funded here and work on building a higher credit score so you can refinance at a much lower rate in the future. 

 

If your credit is less than perfect, these loan programs have much better rates and terms than hard money lenders which is usually your only choice.  Commercial mortgage brokers specialize in these loans.

 

The main negatives are the high interest rates

 

Types of Loans: Permanent and bridge loans 

 

Program Guidelines and Requirements

▪ Loan size: $500,000–6,000,000

▪ LTV: 70% with cash out

▪ 25- or 30-year amortization

▪ Non-recourse

▪ 2–5 year term

▪ Tax returns: not required

▪ Loan fee: 1–2%

▪ Rates based on credit score

▪ 540 minimum credit score

▪ Minimum net worth: negotiable

▪ Post-closing cash: negotiable

▪ 1.25 minimum DSCR

▪ Declining prepayment penalty

▪ Assumable: no

▪ Primary and secondary markets

For more on Bad/Poor Credit Multifamily Loans go here

 

Private Debt Funds

Rates: 6.95 – 8.25 (Full Term Interest Only)

 

If you are getting turned down at banks and have a strong deal, decent net worth and some cash left over after the loan closes, this is the place to get your loan. They have simple make-sense underwriting in larger cities.

 

These are private lenders that are regulated by the SEC. They pool money from investors and lend it at moderate to moderately high rates on commercial real estate. Loans are made more on the strength of the property than on the borrower. Commercial mortgage brokers specialize in these loans.

 

The negatives of these loans are that they only lend in larger markets and have much higher rates. 

 

Types of Loans: Construction, bridge/rehabilitation

 

Program Guidelines and Requirements

▪ Loan size: $3,000,000–75,000,000

▪ LTV: 75% with cash out

▪ Up to 80% cost of construction

▪ Interest-only

▪ Non-recourse

▪ 1–4 year term

▪ Tax returns: required

▪ Loan fee: 2–3%

▪ 640 minimum credit score

▪ Minimum net worth: negotiable

▪ Post-closing cash: negotiable

▪ 1.00–1.20 minimum DSCR

▪ 6–12 months prepayment penalty

▪ Assumable: no

▪ Primary and secondary markets

For more on private debt fund bridge loans go here

 

Regional Bank Income Property Divisions

 

 

You can get a low 3–10-year fixed-rate and lock the rate immediately at application for a 1.00% refundable rate lock deposit.  They have a favorable declining prepayment penalty and a 30-year amortization

 

These lenders are capital divisions of banks and lend in the larger cities in the states they are located in; some lend in neighboring states as well. They generally have lower rates than community banks, can fix a rate for up to 10 years, and can lend large amounts. Many sell their loans on the secondary market.

 

The main negative is that they require stronger borrowers with higher net worth and cash.

 

Types of Loans: Permanent loans only

The US Department of Housing and Urban Development (HUD) guarantees loans made from its approved lenders that are sold as the highest rated mortgage-backed security bonds on Wall Street.

 

 

Program Guidelines and Requirements

▪ Loan size: $1,000,000–15,000,000

▪ LTV: 75% with cash out

▪ 30-year amortization multifamily

▪ 25-year amortization commercial

▪ Recourse

▪ 3-, 5-, 7-, 10-year fixed rates

▪ 25- or 30-year term

▪ Tax returns: required

▪ Global ratio: required

▪ Primary and secondary markets preferred

▪ Loan fee: 1%

▪ 680 minimum credit score

▪ Minimum net worth equal to loan amount

▪ Post-closing cash: 12 months’ loan payments

▪ 1.20–1.25 minimum DSCR

▪ Declining prepayment penalty

▪ Occupancy required: 90%

▪ Assumable: yes, with a 1% fee

▪ Interest only: no

▪ Rate lock at application

▪ Refundable rate-lock deposit: no