Fannie Mae Rural Development Guaranteed Rural Rental Housing Program Loans
To help encourage rural multifamily investment, Fannie Mae and the USDA's Office of Rural Development (RD) have teamed up to provide the Fannie Mae Rural Development Guaranteed Rural Rental Housing Program Loan.
Fannie Mae Insured Loans for Building, Purchasing, or Renovating a Rural Multifamily Property
While they may not be incredibly popular, rural multifamily properties are crucial to the housing infrastructure and are still sound investments. Developers and investors looking to finance the construction, acquisition, or renovation of a rural development will find that the Fannie Mae Rural development Guaranteed Rural Rental Housing program is not just a mouthful, but a program with some incredible terms. Offered through the United States Department of Agriculture (USDA) Office of Rural Development's (RD's) Section 538 program, the program offers fixed-rate loans with terms between 25 and 40 years. In addition, LTV allowances of up to 90% for for-profit organizations, and up to 97% for non-profit organizations are allowed.
2021 Sample Fannie Mae Terms For Rural Development Guaranteed Rural Rental Housing Loans
Size: Varies
Terms: 25-40 years
Amortization: 25-40 years (both fully amortizing loans and balloon loans allowed)
Interest Rate: Fixed-rate only
Maximum LTV: 90%, up to 97% for non-profits with Fannie Mae approval
Minimum DSCR: 1.15x
Recourse: Loans are recourse, except for the portion of the loan covered by the USDA Office of Rural Development's (RD's) 90% guaranty
Eligible Properties:
- Lenders must be approved by the USDA RD and Fannie Mae
- Property transactions with rent subsidies allowed
- For properties undergoing rehabilitation, a minimum of $6,500 per unit is required
- Rent must be restricted to 30% of the area median income (AMI), adjusted for family size
Advantages:
- Fast underwriting/approval process
- Flexible amortizations
- Competitive interest rates
- 90% USDA guaranty
Disadvantages:
- Loans are partially recourse
- Only available in rural areas