Freddie Mac Small Balance Loans Between $6 Million to $7.5 Million: What You Need to Know
Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank$1.2M offered by a Bank$2M offered by an Agency$1.4M offered by a Credit UnionClick Here to Get Quotes!Additional Requirements for Small Balance Loans Over $6 Million
While the Freddie Mac SBL program permits loan sizes between $750,000 and $7.5 million, there are additional requirements for the smallest loans ($750,000 to $1 million) and the largest ($6 million to $7.5 million). Specifically, SBL loans above $6 million are generally only permitted in Top & Standard Markets. Plus, they can have no more than 100 units, and will require a borrower to order additional third-party reports, including a survey report and a zoning report. Finally, loans of more than $6 million also require a minimum DSCR of 1.25x, and require that borrowers form a Single Asset Entity (SAE).
Related Questions
What are the requirements for Freddie Mac Small Balance Loans between $6 million to $7.5 million?
For Freddie Mac Small Balance Loans between $6 million to $7.5 million, there are additional requirements. These loans are generally only permitted in Top & Standard Markets, can have no more than 100 units, and will require a borrower to order additional third-party reports, including a survey report and a zoning report. Additionally, loans of more than $6 million also require a minimum DSCR of 1.25x, and require that borrowers form a Single Asset Entity (SAE).
What are the advantages of Freddie Mac Small Balance Loans between $6 million to $7.5 million?
The advantages of Freddie Mac Small Balance Loans between $6 million to $7.5 million include:
- Up to 80% LTV allowance
- Streamlined application process
- Loans are non-recourse
- Interest-only options
- 30-year amortizations
- Variety of hybrid ARM and fixed-rate options available
- Loans are assumable with approval and 1% fee
- 60-120 day rate locks typically available
For more information, please visit https://www.multifamily.loans/freddie-mac-small-balance-apartment-loans or download our easy-to-read Freddie Mac Small Balance Loan term sheet here.
What are the disadvantages of Freddie Mac Small Balance Loans between $6 million to $7.5 million?
The disadvantages of Freddie Mac Small Balance Loans between $6 million to $7.5 million include:
- Loans are generally only available for standard multifamily properties; the program does not allow properties with a 50% or more concentration of student or military housing, Section 8 properties with below-market rents, LIHTC properties still in their compliance period, and a variety of other housing types
- Requires significant third-party reports, including a Freddie Mac Multifamily Appraisal, a Property Condition Report, and a Phase I Environmental Assessment
- Freddie Mac requires an application fee of $4,500 for Top Markets and $8,500 for Standard Markets
- Leverage and DSCR requirements become significantly stricter in small and very small markets (1.30x and 1.40x DSCR, respectively, and between 70-75% LTV)
- Certain limits on subordinate financing
- Replacement reserves of up to $300/unit are often required
What are the eligibility criteria for Freddie Mac Small Balance Loans between $6 million to $7.5 million?
For Freddie Mac Small Balance Loans between $6 million to $7.5 million, the additional requirements include:
- Loans must be in a Top Market or Standard Market
- Eligible borrowers include:
- Previous Freddie Mac Multifamily borrowers
- Borrowers taking out multiple loans simultaneously
- Borrowers who will are likely to engage Freddie Mac for 2+ additional loans within the next 12 months
- Borrowers with significant multifamily experience in the area (2+ years local multifamily experience and 2+ multifamily properties owned)
- Loans that were initially approved for $1 million+ but were later constrained by property NOI or other factors
- Properties must underwrite a vacancy of at least 5% and an expense ratio of at least 30%
- 10-15 bps will be added loans in Top Markets, while 15-20 bps will be added to loans in Standard Markets
- Cash-out refinances for these loans are typically subject to stricter leverage requirements (LTV/DSCR)
- Seller/servicers may not market Small Balance Loans less than $1 million
- Freddie Mac generally requires 3 additional business days for commitments and inspections
What are the interest rates for Freddie Mac Small Balance Loans between $6 million to $7.5 million?
The interest rates for Freddie Mac Small Balance Loans between $6 million to $7.5 million vary, but are typically lower for properties in Top and Standard Markets and higher for properties in Small and Very Small Markets. Right now (July 2019), interest rates for Freddie Mac Small Balance Loans range from 4.08% to 5.16%. We have broken down rates by region and market size below:
Source: https://apartment.loans/posts/interest-rates
Additional requirements for Small Balance Loans over $6 million include that they are generally only permitted in Top & Standard Markets, can have no more than 100 units, and will require a borrower to order additional third-party reports, including a survey report and a zoning report. Loans of more than $6 million also require a minimum DSCR of 1.25x, and require that borrowers form a Single Asset Entity (SAE).
Sample terms for the Freddie Mac Small Balance Loan in 2023 include a loan amount of $1 million minimum, $7.5 million maximum, loan uses of acquisitions or refinances, loan terms of 20-year hybrid ARM with initial 5, 7, or 10-year fixed-rate period, OR 5, 7, or 10-year fixed-rate loan, ARMs typically based on 6-month LIBOR with up to 1% rate adjustments every 6 months, and a lifetime cap set 5% over starting rate, amortization of up to 30 years, partial interest-only options available, full-term interest-only options may also be available in certain circumstances.
Source: https://www.multifamily.loans/freddie-mac-small-balance-apartment-loans