Understand What is Expected of You as Borrower to Get the Best Financing Terms Available
The days of walking into your local bank to get a multifamily or commercial property loan are over. Not because your bank can’t finance you, but because there are simply too many options. Today, for example, agencies like Fannie Mae are offering non-recourse, 10 year fixed-rate loans at nearly 4% to qualified borrowers. CMBS financing is another great option for those seeking apartment loans at reasonable rates, and the list goes on. Whether you are a new borrower or are looking to refinance an existing loan, it's important that you partner with a lender like Multifamily.Loans to get you the best leverage and financing terms available.
What we are ultimately looking for in a borrower is someone who has great experience, a net worth greater than the requested loan amount, and liquidity greater than 10% of the loan amount post-closing (not including cash-out on refinances). Keep in mind that this requirement can be reduced for lower leverage loans.
When inquiring about new loans, we are often asked if we can do 100% financing – unfortunately there is no such thing. We can however offer a maximum of 80% LTC (as a borrower you will need to put down 20% cash) for apartment financing. Our minimum loan amount is $1MM but we can make exceptions down to $500k or less subject to location, sponsorship, Debt Service Coverage Ratio (DSCR), and other deal-level specifics.
Below is the standard documentation that we will need to get you the most accurate quote whether you will be purchasing or refinancing a multifamily property (view our multifamily forms and templates for additional information).
- Last 3 Years P&L
- Trailing 12 Month, Month-by-Month P&L
- Current Rent Roll
- Stabilized Budget/Pro Forma
- Summary of CapEx (capital expenditure) to Date
- Property Photos, Address, Description, Unit-Mix, Age, etc.
- Name of Entity (org chart if the structure is complicated)
- Personal Financial Statement for Each Guarantor
- Resume/Bio for Each Guarantor
- Property Management Company Info (if not self-managed)
If you are refinancing, we may also need some additional information including when you bought the property, how much you bought it for, how much you put down, your current loan terms, and the current occupancy. To get a better idea of the loan process, we have provided samples below (keep in mind that the below terms are generic and can improve or deteriorate subject to underwriting).
Sample terms for a 10 year fixed Fannie Mae loan that we can generally close in 45-60 days:
- Loan Amount: Maximum proceeds subject to the lesser of (a) an 80% LTV and (b) a DSCR no less than 1.25
- 10 years fixed
- 30 year amortization
- 4.3% - 4.9% interest rate (subject to underwriting and based on rates as of March 5, 2016)
- 9.5 years yield maintenance (prepayment penalty)
- Assumable for 1% fee
- About $15k application fee for third party reports (appraisal, environmental, lender legal, etc.) with unused funds applied towards closing costs
- Refundable Good faith deposit: 2% at time of commitment and rate lock - refunded about 30 days after closing
Sample of potential HUD 223(f) terms that generally take 120 - 150 days to close:
- Loan Amount: Maximum proceeds subject to the lesser of (a) an 83% LTV and (b) a DSCR no less than 1.25
- 35 years fixed (subject to a minimum remaining economic life of 45 years)
- 35 year amortization
- 4.4% - 4.9% interest rate (subject to underwriting and based on rates as of March 5, 2016)
- 2 year lockout followed by an 8 year declining prepayment penalty starting at 8%
- About $25k application fee for third party reports (appraisal, environmental, lender legal, etc.) with unused funds applied towards closing costs.
- HUD fee: 0.3% FHA exam fee (refunded from mortgage proceeds at loan closing) - Inspection fee: greater of 1% of repairs or $30 per unit (payable out of mortgage proceeds)
- Refundable Good faith deposit: 0.50% at time of commitment and rate lock - refunded about 30 days after closing
- HUD 223(f) finance and placement fee 3.5% of loan amount paid at closing
Although both options cost more to originate than typical bank deals, in the end they offer better long-term financing, interest rate risk protection, and of course leverage. Ready to get started? Click here to get pre-approved for your multifamily loan today!