USDA Loans for Apartment/Multifamily complexes of 5 units or more are administered by the United States Department of Agriculture – Rural Development Program. USDA Loans for apartments are mandated to increase the amount of quality affordable housing in low population markets. USDA Financing is for new construction, rehabilitation and the purchase of affordable rent multifamily properties. The program is eligible only in rural communities of less than 50,000 population. Property cannot be in close proximity to a major population area. USDA financing features very low down payments (finance up to 90% LTV, 97% for non –profit entities), and rates can be fixed for the entire loan term - 30 years for purchase financing and 40 years for new construction loans.
Why apply for a USDA apartment loan? Most multifamily construction lenders require the property to be in a larger market with a minimum population of 250,000. USDA multifamily financing is exactly the opposite as it is only for low population markets. These very high leverage loans (up to 90% LTV) are easier to qualify for lower net worth investors.
USDA Loan Terms:
- For Purchase, Rehab, or New Construction of Multifamily Properties
- Eligible Properties must be in rural areas of less than 50,000 population
- Rehab if needed must be at least $6,500 per unit
- Commercial Space cannot exceed 10% of gross SF, and/or 10% of total income
- Average rents cannot exceed 30% of 115% of AMI (Area Medium Income)
- Income for Tenants cannot exceed 115% of AMI
- Interest rates are fixed for the life of the loan. Rates based on 30 year treasury bond rate.
- Amortization: 30 years. Maximum 40 years for new construction.
- LTV up to 90% for profit entities. 97% for non-profit entities
- Minimum Loan: $1,000,000 Maximum Loan: None
- Interest Rates fixed for up to 30 years. 40 years for New Construction
- Term: 30 years for purchase loans, 40 Years for New Construction
- Recourse: Loan is Non-Recourse
- DSCR: 1.15
- Prepayment penalty: Declining for the first 10 years.