Maximum LTV/Minimum Debt-service Coverage Ratio (DSCR):

• 5- to 7-year Loans:
• Amortizing: 75%/1.30x
• Partial Term Interest-Only: 75%/1.30x
• Full Term Interest-Only: 65%/1.40x
• 7-year Loans:
• Amortizing: 80%/1.25x
• Partial-term Interest-only: 80%/1.25x
• Full-term Interest-only: 70%/1.30x
• 7-plus Year Loans:
• Amortizing: 80%/1.25x
• Partial-term Interest-Only: 80%/1.25x
• Full-term Interest-Only: 70%1.35x

Recourse: Nonrecourse with standard “bad boy” carve-outs

Prepayment Options: Yield maintenance until securitization, 2-year lockout period following securitization, and defeasance allowed after securitization; Yield maintenance for securitized loans is permitted for an additional fee; no prepayment premiums required in the last 90 days of the loan

Eligible Borrowers:

• Eligible borrowers include limited partnerships, limited liability companies, corporations, or tenancies in common (TICs) with 10 or fewer members
• In some circumstances (and with specific requirements), general partnerships, real estate investment trusts (REITs), limited liability partnerships (LLPs), and some trusts may also be eligible
• Typically, borrowers must be single-purpose entities (SPEs); however, on loans of less than $5 million, borrowers may be able to be single asset entities (SAEs) instead
• For TICs, each member needs to be an SPE

Eligible Properties: Conventional multifamily properties, manufactured housing communities, seniors housing developments, cooperative housing, student housing developments, and targeted affordable housing, including Low-Income Housing Tax Credit (LIHTC) Year 4-10 and 11-15 and Section 8 properties

Refinancing Test: No test needed for amortizing loans with a DSCR of at least 1.40x and an LTV of less than or equal to 65%; interest-only loans must pass a refinancing test before they are approved

Assumability: Loans are assumable with lender approval and require a 1% assumption fee. May also require an underwriting fee paid to the lender (typically $5,000)

Timing: Borrower will typically receive a commitment 45 to 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process

Advantages:

• Very competitive interest rates
• Up to 80% LTV for some properties
• Loans are nonrecourse
• Supplemental loans allowed
• Mezzanine financing available
• Early rate-lock options allowed, between 60 and 120 days before purchase, index locks are also available to eligible borrowers
• Eligible mixed-use properties permitted

Disadvantages:

• Requires replacement reserves
• Requires third-party reports including Phase I Environmental Site Assessment, Appraisal, and Physical Needs Assessment; Seismic Report may be required for properties in Seismic Zones 3 and 4
• Application fees required: $2,000 or 0.1% of the loan amount (whichever is larger) for conventional first mortgages, $5,000 or 0.15% of the loan amount ― whichever is larger ― for seniors housing, $3,000 or 0.1% of the loan amount ― whichever is larger ― for (TAH) loans
• Typically requires a loan origination fee
• Typically requires between $8,000 and $12,000 in legal fees
• Lender application fees also required, with an average of $15,000, including third-party reports, but may vary based on the specific lender
• 2% rate lock fee usually required, which is refunded after Freddie Mac purchases loan, usually around 30 days post-closing
In this article:
1. Fixed-rate Multifamily Loans for Conventional Apartment Buildings and Multifamily Developments
2. 2023 Sample Freddie Mac Terms for Fixed-rate Conventional Loans
3. Get Financing