Whether you are looking to invest in a 5-story apartment building, develop an aging quadruplex, or originate your first mobile home park loan, multifamily financing is going to be of great interest to you.

In short, financing allows investors with limited liquid assets to acquire properties, made available by commercial lenders across the country.

Often times, even individuals with available cash in-hand prefer to finance a real estate purchase instead of tying up hundreds of thousands or millions of dollars in one deal.

The benefits of real estate ownership typically outweigh the cost of a mortgage, plus allow for more present-day capital flexibility.

That’s especially true in the multifamily sector.

Regardless of your reason for researching property debt and financing, if you’re in the industry, it’s crucial to familiarize yourself with the process of multifamily lending.

The Ins and Outs of Multifamily Financing

There are multiple loan options and each one comes with a specific set of terms and conditions. Understanding the terminology of the industry is also important in order to ensure you are making smart investment decisions.

Here, we’ll review important terms, loan requirements, and types of financing applicable to multifamily real estate investing.

We will also review some of the top lenders in the United States that offer financing for multifamily assets.

About Multifamily Financing

Terms, Rates, and Loan Amount Limits

The interest rates, terms, and loan amount limits can vary quite a bit depending on the type of lending product and the financing institution offering it.

For example, conventional multifamily mortgages have terms of 15 or 30 years, whereas government-backed multifamily loans can be issued for periods of 5 to 35 years.

Short-term loans can range in terms of 6 months to 3 years, with one year being the most popular term.

Apartment Building

Interest rates and loan amount limits are subject to change based on the current real estate market and overall economic conditions.

Conventional and government-backed multifamily mortgages offer pretty similar interest rates, while portfolio loan rates are often times slightly higher.

Short-term multifamily loans usually have the highest rates although they vary widely by lender and borrower’s credibility.

Conventional and government-backed loan amount limits are based on location and the number of units in one-to-four-unit properties, however the tiers are pretty standard across the board.

Portfolio and short-term loan maximum amount limits on the other hand are determined by each individual lender.

Mortgage Loan Requirements

Mortgage approval requirements also vary widely depending on the type of loan and lender, however financial institutions typically base their decisions on some or all of the following factors:

  • Required number of units in the multifamily property
  • Credit score of the borrower
  • DSCR or debt service coverage ratio
  • The current occupancy rate of the property
  • The borrower’s experience in the multifamily field
  • Available cash reserve to support the loan’s principal and interest, and the property’s taxes and insurance
  • Owner occupancy for one-to-four-unit properties

Types of Multifamily Financing

Multifamily investors and developers have a variety of options when it comes to securing financing for their prospective real estate acquisitions.

The available lending products depend on factors such as the type and size of the multifamily project and the intended purpose of the funds.

Apartment Building Financing

A residential property needs to have five or more separate dwellings in order to be considered an apartment building. Because of the larger size of the asset, the loan underwriting process is a little more stringent.

The lender will take into consideration property metrics such as net operating income, debt service coverage, and loan-to-value (LTV) ratio.

They will also look at the borrower’s credit score, income, and industry experience.

The most popular types of apartment building loans include government-backed and bank balance sheet loans.

Government-backed loans are funded under the Fannie Mae, Freddie Mac, and the FHA programs and typically offer low down payment options and affordable interest rates.

Balance sheet or portfolio loans are originated by banks and remain on their balance sheets with no government backing.

multifamily housing

Multifamily Housing Financing

Duplexes, triplexes, fourplexes, and condos fall in a category of multifamily housing referred to as one-to-four-unit properties.

The financing options for this type of real estate assets include conventional mortgage loans and loans backed by government programs such as FHA.

Owners who intend to reside in one of the units in the multifamily property can choose either loan option, whereas investors who will not be occupying a part of the property are limited to conventional financing only.

Conventional mortgages are the same type of loans individuals use to purchase single-family homes and are not backed by the government.

Multifamily Construction Financing

As the name suggests, multifamily construction loans are used to finance the development or rehabilitation of multifamily projects.

Construction loans typically have very short terms, usually just one year.

In some instances, the borrower may only need to make interest payments on the construction loan while the project is underway.

Once work is completed, the loan must be repaid, or alternatively, it could be refinanced into a permanent mortgage or a new loan. Construction loans are typically offered by regional banks and credit unions.

Top Multifamily Lenders in the United States

The lenders we review in this section are some of top providers of government-backed and balance sheet funds for multifamily projects in the United States.

In addition to boasting multi-billion dollar portfolios of multifamily real estate loans, these financial institutions have been consistently ranked as top Fannie Mae & Freddie Mac lenders:

Each are covered below in more detail.

Wells Fargo Multifamily Capital

Wells Fargo Multifamily Capital offers multifamily financing under the Fannie Mae, Freddie Mac, and the FHA programs as one of the first approved servicers.

The lender works with multifamily developers, investors, and owners nationwide and has specialists in affordable housing, manufactured home community, senior and student housing, and cooperatives, in addition to market rate properties.

Wells Fargo Multifamily Financing

Some of the benefits of its Fannie Mae and Freddie Mac loan programs include flexible and low interest rate options, early rate lock, supplemental loans, and prepayment options.

Wells Fargo’s FHA loan programs provide consistent capital through all credit cycles and eliminate interest rate, permanent conversions and refinancing risks.

The lender also offers balance sheet financing and a wealth of supportive products and services to its multifamily customers.

Walker & Dunlop

With $21.3 billion of completed transactions in 2018, Walker & Dunlop is one of the largest multifamily lenders in the country.

The company offers financing under Fannie Mae, Freddie Mac, and HUD/FHA, as well as conduit loans, bank, and life company capital. As a matter of fact, Walker & Dunlop was the 3rd company to receive a Fannie Mae license.

Walker & Dunlop can help multifamily investors, buyers, and developers with construction financing for new properties, capital for purchasing existing assets, and refinancing of other mortgage loans.

The company can secure financing for a wide variety of multifamily properties, including affordable, manufactured, military, age-restricted, and student housing communities.

Berkadia Commercial Mortgage

A joint venture of Berkshire Hathaway and Jefferies Financial Group, Berkadia is the largest non-bank commercial mortgage provider in the United States with more than 22,000 completed transactions since inception.

The company originated over $26 billion in loans in 2018, with 79% going to multifamily projects.

Berkadia Multifamily Financing

Berkadia offers a full spectrum of financial products for multifamily investors including Freddie Mac, Fannie Mae, life company, bank, conduit, and HUD loans.

Its loan administration services include loan boarding, tax and insurance administration, escrow analysis, adjustable rate administration, letters of credit, payoff administration, and more.

CBRE Multifamily Capital

CBRE is not only the #1 sales broker of multifamily properties in the United States but also a top loan originator.

It closed $29.5 billion in multifamily sales and facilitated $29.6 billion of multifamily loans in 2018 alone.

The company provides financing for affordable housing, manufactured home communities, and senior and student housing projects.

CBRE originates Fannie Mae, FHA, Freddie Mac, and Freddie Mac Small Balance loans for new construction, acquisition, rehabilitation, and refinancing projects.

The company has originated over $50 billion in overall Freddie Mac transactions. Additionally, CBRE works with institutional lenders and correspondent life companies.

Newmark Knight Frank

Newmark Knight Frank’s Multifamily Debt & Structured Finance division provides loan origination, underwriting, and closing services.

Their list of debt products includes Freddie Mac, Fannie Mae, FHA, life company, bank, bridge, equity sourcing, and conduit loans.

Newmark Knight Frank Multifamily Financing

The company provides financing solutions for conventional and non-conventional multifamily properties as well as affordable, age-restricted, student and manufactured housing, hospitality, industrial, office, retail, and self-storage assets.

The Multifamily Capital Markets Servicing team has generated more than $33 billion in multifamily transactions in 2018 and was recognized as a top Fannie Mae and Freddie Mac lender.

Greystone Servicing Corporation

Greystone has more than 30 years of experience with providing commercial lending products.

The company offers lending under the FHA, Fannie Mae, and Freddie Mac programs as well as interim, CMBS, and EB-5 financing.

It specializes in funding the acquisition, construction, rehabilitation, and repositioning of affordable multifamily housing including nursing homes, senior housing, and healthcare properties.

Greystone services a portfolio of $26 billion in real estate loans and has developed over $2 billion in luxury commercial real estate.

It originated $9.5 billion in loans in 2017 and has been ranked in the top 12 Fannie Mae DUS® lenders for the past 10 years.

Capital One

Capital One Multifamily Financing

One of the top 10 commercial banks in the U.S., Capital One offers balance sheet and Fannie Mae, Freddie Mac, and FHA loans.

The bank has underwriters and service staff in branches across the country and has worked with loan customers in 47 states.

A top 5 commercial real estate lender in 2019, Capital One can close deals ranging from $1 Million to $1 Billion.

The bank is also one of the top 10 Fannie Mae and Freddie Mac lenders in the country.

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