Freddie Mac Small Balance Loans

How the Freddie Mac Small Balance Loan Program Worked

The Freddie Mac Small Balance Loan (SBL) program was, until April 2026, one of the most widely used agency programs for smaller apartment properties. Freddie Mac has typically been thought of as the industry leader for larger multifamily loans, but when faced with a growing demand for a smaller multifamily loan, the small balance loan program was created as a direct competitor to Fannie Mae’s small loan program for apartment financing under the $10 million mark. When Freddie retired SBL, it moved small loans onto its conventional platform as Conventional Small ($2 million to $10 million, up to 80% LTV, 1.25x minimum DSCR, 50 units or fewer), which means Freddie no longer lends below $2 million. Existing SBL loans keep the terms they closed with, so the guidelines below still matter to owners holding one.

The small balance loan program from Freddie Mac targeted apartment financing between $1 million and $7.5 million. Much like the Fannie Mae Small Loan program, Small Balance Loans offered LTVs up to 80% and DSCRs as low as 1.25x. Small Balance Loans did not support fully-amortizing terms, but offered fixed and variable rate terms between 5 and 20 years with 30-year amortizations, and an early rate lock. SBL generally priced best in larger markets, while the Fannie Mae Small Loan program, which is still originating, typically offers its best terms in smaller markets.

Why Borrowers Chose the Small Balance Loan

For a multifamily property in the $1 million to $7.5 million range, SBL was often the first execution a broker priced, mostly because of how competitively it priced. The program offered assumable, non-recourse loan options, an interest-only option, up to 80% LTV, and even declining prepayment options.

SBL offered six hybrid ARM and fixed-rate structures plus the interest-only option. None were fully amortizing; amortization ran 30 years.

SBL also addressed the cost problem that makes small loans expensive. Normally, the third party costs and fees that generally don’t change regardless of how big or small the loan amount is can cause the fixed origination cost of a $1 million dollar loan to be eerily similar to the costs of a $10 million dollar loan. SBL used a streamlined process with compressed third-party costs.

Borrowers with credit scores of 650 and above were eligible without providing tax returns, rate locks ran 60 to 120 days, and the program financed both acquisitions and refinances.

How SBL Underwriting Worked

Every small balance loan was reviewed and approved by Freddie Mac itself, which Fannie Mae does not do for loans of this size.

SBL was available nationwide but priced by region, with its own rates in each. There were 5 regions: the Northeast, Southeast, North Central, South Central, and finally the western region. The differences between regions were small.

Unlike most secondary-market programs, SBL fixed rates were not tied to a swap or Treasury index; the program priced off a coupon bond, which was unusual even within Freddie Mac.

Other SBL requirements:

• Asset quality and condition carried real weight in underwriting.
• In most cases Freddie Mac sent a regional manager to inspect the property.
• Non-local owners needed professional third-party management.
• Lender legal was required on every loan.
• Borrowers and key principals went through bankruptcy, lien, and litigation searches.
• Major markets had no underwriting interest rate floor, which produced higher loan amounts.

Freddie Mac Small Balance Loan Guidelines (as of retirement, April 2026)

• Loan Size - Small balance loans ranged from $1 million to $7.5 million. Loans between $6 million and $7.5 million were only available in top and standard markets and reserved only for properties with 100 or fewer units.
• Eligible Properties - Multifamily properties with 5+ units. There are no restricted markets, however, eligibility for properties in higher risk submarkets varies.
• Eligibility for non-contiguous properties depends on them being operated as one single property, with each property meeting the minimum occupancy requirements, LTV, and DSCR.
• Mixed-Use residential commercial properties are eligible only if the gross rents and gross rentable square feet are less than 40% of the total gross
• LURA and HAP contract properties can be eligible, but the decision is typically up to the lender.
• Ineligible Properties - Usually, a property that hosts a high concentration (at least 25%) of tenants that fall into a specific category such as elderly, military, or student. However, when that specific population is still under 50%, exceptions can still be made at the lender’s discretion.
• Borrowing Entity - a single asset entity is required (no prior multifamily experience necessary)
• Exceptions can be made for Trusts and Corporations
• Eligibility can be extended to Tenants in Common (TIC) if each tenant is a single asset entity, and there are no more than 5 co-tenants
• Sponsor Requirements -
• A credit score of 650 or higher
• The total net worth of all key principals must exceed the loan amount
• Non-local owners must have a minimum of 1-year multifamily ownership experience
• Non Local owners with strong mitigates may see an exception in top, standard, or small markets.
• Foreign nationals must have prior multifamily ownership experience, and 2x the program’s required minimum net worth/liquidity.
• Principals That Require Underwriting -
• All managers of the borrowing entity
• Any general partners of the borrower
• Any member or limited partner with no less than a 25% interest in the borrower
• Regions -
• Northeastern
• Southeastern
• North Central
• South Central
• Western
• Markets - The SBL program recognizes each county as one of 4 different market tiers based on census data portraying the size of the rental population.
• Top - largest rental population
• Standard - the average rental population
• Small - Less than average rental population
• Very Small - the smallest available market tier
• Fixed-Rate Terms -
• 5 year Fixed
• 7 year fixed
• 10 year fixed
• ARM Terms - The SBL program includes 3 hybrid ARM products that float over SOFR (the index that replaced LIBOR). These Hybrid ARMs have a lifetime cap set at 500 basis points higher than the original rate and 1% periodic rate adjustments that occur at 6 month intervals. ARM terms include:
• 5 year fixed / 15 year ARM
• 7 year fixed / 13 year ARM
• 10 year fixed / 10 year ARM
• Amortization - 30 years
• Interest Only Option -
• Full term for loans with an LTV less than 65%, and a DSCR greater than 1.4
• 1 year for the 5 year fixed term
• 2 years for the 7 year fixed term
• 3 years for the 10 year fixed term
• DSCR Requirements - A minimum in the range of 1.2 - 1.4 depending on the market tier.
• Maximum LTV - Between 75% and 80% depending on the market tier
• Occupancy - 85% Minimum
• Prepayment Penalty - The SBL program offers declining prepay options (which can be reduced with a rate increase) or yield maintenance.
• For a 5 year fixed term: 5,4,3,2,1.
• For a 7 year fixed term: 5,5,4,4,3,2,1.
• For a 10 year fixed term: 5,5,4,4,3,3,2,2,1,1.
• 1% prepay during ARM term
• Can be waived if selling the property
• Can be waived when refinancing with Freddie Mac
• Guarantee - Non-Recourse with standard “bad boy” carve-outs.
• Escrows -
• Insurance escrow deferred
• Replacement reserves deferred
• Real estate tax escrow deferred for loans with an LTV of 65% or less
• Rate Lock - Available for 60 -120 days at the time of application
• Assumability - allowed with a 1% assumption fee and lender approval

Freddie Mac Small Balance Loan Prepayment Terms

Aiming to meet their promise of more flexible loan terms that best meet the needs of their customers, the Freddie Mac SBL program provided an array of different prepayment options to choose from. With the SBL program, borrowers can choose between yield maintenance and three different declining prepayment options. The prepayment schedules are as follows:

• Yield Maintenance Prepayment Term - Interest rate adjustment. There are no adjustments to the interest rate.
• 5-year fixed term: 5-years
• 7-year fixed term: 7-years
• 10-year fixed term: 10-years
• Declining Prepayment Term - Interest rate adjustment. Add 15 bps for 5-year fixed term and 20 bps for 7-year and 10-year fixed terms.
• 5-year fixed term: 5-4-3-2-1
• 7-year fixed term: 5-5-4-4-3-2-1
• 10-year fixed term: 5-5-4-4-3-3-2-2-1-1
• Declining Prepayment Term Option 1 - Interest rate adjustment. Add 35 bps for 5-year fixed term and 40 bps for 7-year and 10-year fixed terms.
• 5-year fixed term: 3-2-1-1-1
• 7-year fixed term: 3-3-2-2-1-1-1
• 10-year fixed term: 3-3-3-2-2-2-1-1-1-1
• Reduced Declining Prepayment Term Option 2 - Interest rate adjustment. Add 45 bps for 5-year fixed term.
• 5-year fixed term: 3-1-0
• 7-year fixed term: None
• 10-year fixed term: None

Freddie Mac Small Balance Loan Market Tiers

Under Freddie Mac’s SBL program, the nation is divided into five regions comprised of the Northeast, Southeast, Western, North Central, and South Central. Those five regions each have their own unique interest rates and are further split into markets. There are 4 defined “tiers” of markets in the small balance loan program.

Freddie Mac has given each and every county in the United States a market tier designation. A county can be designated as either a Top, Standard, Small, or Very Small market. The designation is based on the size of the rental population, as determined by the U.S. Census Bureau.

When comparing your loan options for apartment financing it's important to understand how the Freddie Mac small balance loan market tiers affect loan terms. Subject properties that are located in Top and Standard market tiers qualify for more aggressive loan terms than those located in the Small and Very Small tiers. Normally, subject properties in Small and Very Small markets will have slightly higher interest rates, higher DSCR, lower LTV, and fewer years of interest-only payments.

Because of this, properties located in the Small and Very Small market tiers may qualify for more competitive terms through the Fannie Mae Small Loan Program. This is only due to the fact that rates and terms are typically unaffected by the size of the market with Fannie Mae. Still, the Freddie Mac small balance loan is the go-to choice for most borrowers.

For more information on how a property’s region and market tier will affect small balance loan terms, please contact us here at Apartment.Loans for a risk-free consultation with one of our multifamily loan specialists.

Freddie Mac SBL Market Tiers Defined:

• Top Markets: Certain (but not all) counties in the following MSA’s: Miami, New York, Los Angeles, Chicago, Washington D.C., San Francisco, Boston, Seattle, San Diego, Denver, Portland, Minneapolis, San Jose and Stamford.
• Standard Markets: Greater than 60k rental population which includes most MSA’s of significant size.
• Small Markets: Rental population between 30k and 60k
• Very Small Markets: Rental population under 30k.

Leverage / DSCR:

• Top Markets: Max LTV 80% for purchases, 80% for refinances, 1.20x DSCR minimum.
• Standard Markets: Max LTV 80% for purchases, 80% for refinances, 1.25x DSCR minimum.
• Small Markets: Max LTV 75% for purchases, 70% for refinances, 1.30x DSCR minimum.
• Very Small Markets: Max LTV 75% for purchases, 70% for refinances, 1.40x DSCR minimum.

Freddie Mac Small Balance Loan Linked Program

The SBL program offers limited apartment financing for non-contiguous subject properties through its Linked Property Program. Only properties in Top and Standard market tiers are eligible for the linked program. Each property must have no less than 5 units, and there must be a minimum of 10 total units.

In addition to the requirements above, there is a $2 million minimum loan size that must be met. The subject properties must also be within 3 miles walking distance of at least one other subject property, and share similar or comparable characteristics such as rent amount, construction type, and unit configuration. Borrowers must be aware that all subject properties must be owned in or by a single asset entity.

Freddie Mac Optigo and the Small Balance Loan Program

For borrowers interested in the small balance loan program that Freddie Mac offers, there are a few ways to go about getting one. One of the more notable methods of getting an SBL that fits the unique needs of each borrower is through Freddie Mac Optigo. Optigo is a Freddie Mac rebranding of its multifamily seller/servicer network and selection of loan offerings. Through the Optigo network, finding flexible financing terms for a small balance loan is as simple as finding a Freddie Mac approved lender, or simply reaching out to us for a free consultation.