What’s the Difference Between Fannie Mae® DUS and Fannie Mae® Small?
Our quick reference guide breaks down the key differences between Fannie Mae’s Small Loans and DUS programs.
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There are a number of financing options available for borrowers looking to acquire, develop, or refinance a smaller apartment property. Some of the most attractive loan programs are agency loans from Fannie Mae.
While Fannie offers a wide range of more than 20 different loan programs, some are more suitable for smaller apartment communities than others. This article highlights the key differences — and similarities — between Fannie Mae’s Multifamily Small and DUS loans.
Don’t want to read this whole page? No problem — check out our quick, high-level comparison below.
Or, better yet, fill in the form below and we’ll connect you with your best option, whether it’s a Fannie Mae loan or any of the other wide range of multifamily financing instruments we work with.
Fannie Mae DUS vs. Small At a Glance
Fannie Mae DUS Loan | Fannie Mae Multifamily Small Loan | |
|---|---|---|
Minimum Amount | $3 million | $750,000 |
Maximum Amount | No maximum | $6 million |
Maximum LTV | 80% | 80% |
Maximum Term | 30 years | 30 years |
Recourse | Non-recourse | Non-recourse |
DSCR | Minimum 1.25x | Minimum 1.25x |
Minimum Credit Score | Usually 680 | 680 |
Amortization | Up to 30 years | Up to 30 years |
Comparing Fannie Mae Multifamily Small Loans and Fannie Mae DUS Loans
You can see above that, upon first glance, the major differences between the two loan programs come down to loan size. And it’s true: The largest difference is that Fannie Mae DUS loans start at $3 million — and don’t have a stated maximum. Fannie Mae Small Loans, on the other hand, have a far more restrictive range, from $750,000 to $6 million. If your desired loan only fits with one of these products’ requirements, that may be all you need to know.
Read on below for more key details about each loan program and how they stack up to each other.
LTV Requirements for Fannie Mae Small and Fannie Mae DUS
Both Fannie Mae Small and DUS loans have a stated maximum loan-to-value ratio of 80%. The maximum may be lower depending on the scenario, however. For example, if you are looking to do a cash-out refinance, the maximum LTV is capped at 75% for both products.
Term Length for Fannie Small and Fannie DUS Loans
While both programs offer a maximum loan term of 30 years, most financing packages through these programs have considerably shorter terms. A Fannie Mae DUS loan, for example, could have a five-, seven-, or 10-year term, ranging up to even 25 years. Fixed-rate terms are available for both, as are variable interest rates. Both programs also offer interest-only periods of up to 10 years, depending on the strength of the borrower.
Fannie Mae’s DSCR Requirements
Both loan programs require a debt service coverage ratio of 1.25x. This can be particularly advantageous for the Fannie Mae Small Loan — its primary competitor, the Freddie Mac Small Balance Loan, bases DSCR requirements on the local market. This often means that Fannie Small loans are sought after in smaller cities or outside major markets.
So, Which Loan Do I Choose?
Maximum loan amounts aside — remember, Fannie Mae DUS loans can be much larger — the requirements and maximums of the loan products are essentially the same. That said, what’s important is to ensure you get the very best possible loan terms.
Depending on the lenders you go to and how you sell your multifamily experience and the particulars of your property, you may get very different terms. If you’d like to find out how you can maximize your loan term and get financing at a high loan-to-value ratio, fill in the form below. We’ll get in touch with a free quote.
Related Questions
What are the key differences between Fannie Mae® DUS and Fannie Mae® Small loans?
The key differences between Fannie Mae® DUS and Fannie Mae® Small loans are:
Fannie Mae DUS Loan Fannie Mae Multifamily Small Loan Minimum Amount $3 million $750,000 Maximum Amount No maximum $6 million Maximum LTV 80% 80% Maximum Term 30 years 30 years Recourse Non-recourse Non-recourse DSCR Minimum 1.25x Minimum 1.25x Minimum Credit Score Usually 680 680 Amortization Up to 30 years Up to 30 years The major difference between the two loan programs is that Fannie Mae DUS loans start at $3 million — and don’t have a stated maximum. Fannie Mae Small Loans, on the other hand, have a far more restrictive range, from $750,000 to $6 million. For more information, please visit this page.
What are the advantages of Fannie Mae® DUS loans?
Fannie Mae DUS loans offer many advantages, including:
- Very competitive interest rates
- Up to 80% Loan-to-Value (LTV)
- Most loans are non-recourse
- Supplemental loans are permitted after 12 months
- 30-180 day rate locks available after commitment (some lenders may allow rate locks of up to 1 year)
- Mezzanine financing is available
- Interest-only payment options are also available
- Loans are assumable with lender approval
For more information, please visit Fannie Mae DUS Loans for Multifamily and Apartment Properties and Fannie Mae DUS Loans.
What are the advantages of Fannie Mae® Small loans?
Fannie Mae® Small loans offer a variety of advantages, including:
- Very competitive interest rates
- Up to 80% LTV allowance
- Streamlined processing/documentation
- Capital improvements may be included in the loan amount
- Most loans are non-recourse
- Supplemental loans are allowed after 12 months
- 30- 180 day rate locks available after commitment (extended rate locks also available)
- No processing fees (except with written approval)
- Non-recourse loans are assumable with lender approval and a 1% fee
- 30-year fully-amortizing loan terms
- Can be used for manufactured housing communities and housing cooperatives
- Generally lower rates in smaller markets when compared to the SBL program
What types of properties are eligible for Fannie Mae® DUS loans?
Properties with 5+ units are eligible for Fannie Mae DUS loans, including:
- Town homes
- Co-ops
- Mixed-use commercial/residential properties
- Condos
- Properties with tenant-based Section 8 contracts
However, some property types are ineligible for Fannie Mae DUS loans, including:
- Properties with a homeowner's association (HOA)
- Fractured ownership condos
- Housing Assistance Program properties (these are eligible for Fannie Mae Multifamily Affordable Housing Loans)
- Non-contiguous town homes or duplexes (these may be eligible with a waiver, but that can be difficult to obtain)
- New construction developments or properties that require substantial rehabilitation
- Properties involving a healthcare component
What types of properties are eligible for Fannie Mae® Small loans?
The Fannie Mae Multifamily Small Loan Program has a few understated caveats and requirements that borrowers should consider. Most importantly, there is zero-tolerance when it comes to borrowers being able to meet the minimum requirements for net worth and liquidity. Being able to meet those stated minimums can make or break the entire deal.
In general, properties that are eligible for the Fannie Mae Multifamily Small Loan Program include multifamily and apartment properties with five or more units. This includes:
- Properties with commercial space that does not comprise more than 25% of the property’s gross income
- Independent living properties for seniors without resident services
- LIHTC (Low Income Housing Tax Credits), with land restrictions in the extended use period or the final 24 months of the initial restriction period (to qualify, eligible LIHTC properties must have 75 units or less and get special Freddie Mac approval)
- Other regulatory restrictions that limit income/rent (funds must be disbursed)
- Tax abatement properties
- Tenant-based housing voucher properties
- Buildings can have local rent subsidies for 10% or less units, as long as tenant eligibility certification is not required
- Cooperatives (must be located in New York City or Long Island)
In contrast, properties that are ineligible for the Fannie Mae Small Loan program include:
- LIHTC properties with more than 24 months left on their Land Use Restrictive Agreement
- Tax-exempt bonds Interest Reduction Payments (IRPs)
- Properties with a greater than 50% concentration of student or military housing
- Properties with Section 8 contractors or other project-based HAP contracts
- Master lease HTC (Historic Tax Credit) properties
What are the requirements for obtaining a Fannie Mae® DUS loan?
In order to obtain a Fannie Mae® DUS loan, you must meet the following requirements:
- Size: Typically $3 million or higher with no set maximum, but smaller loans may be available on a case-by-case basis.
- Terms: 5, 7, 10, 12, 15, 18, 20, 22, 25, and 30 year fixed-rate loan terms available, variable-rate (with option to convert to fixed-rate) and interest-only loan options are also available.
- Amortization: Up to 30 years, most loans are balloon loans, hybrid options may be available for a fee.
- Maximum LTV: 80%, 75-80% for cash-out refinances.
- Minimum DSCR: 1.25x.
- Recourse: Most loans are non-recourse with standard “bad boy” carve-outs.
- Prepayment Options: Yield maintenance or 1% prepayment penalty, whichever is larger.
- Credit Requirements: A credit score of 680+ typically required (may be somewhat flexible, depending on the situation).
- Eligible Borrowers: Borrowers must typically be a U.S. bankruptcy remote, single asset Single Purpose Entity (SPE), though this may vary by lender. Partial, indirect foreign ownership is allowed with proper structuring.
- Eligible Properties: Properties with 5+ units are eligible for Fannie Mae DUS loans, including townhomes, co-ops, mixed-use commercial/residential properties, condos, and properties with tenant-based Section 8 contracts. However, some property types are ineligible for Fannie Mae DUS loans, including properties with a homeowner's association (HOA), fractured ownership condos, Housing Assistance Program properties (these are eligible for Fannie Mae Multifamily Affordable Housing Loans), non-contiguous townhomes or duplexes (these may be eligible with a waiver, but that can be difficult to obtain), new construction developments or properties that require substantial rehabilitation, and properties involving a healthcare component.
What are the requirements for obtaining a Fannie Mae® Small loan?
The Fannie Mae® Small Loan program has a few understated caveats and requirements that borrowers should consider. Most importantly, there is zero-tolerance when it comes to borrowers being able to meet the minimum requirements for net worth and liquidity. Being able to meet those stated minimums can make or break the entire deal.
The program has a minimum expenditure requirement for specific expense line items like maintenance, payroll, management, and replacement reserves. Another detail worth noting is that the quality and condition of the subject property are of high importance. A property condition inspection is required for the deal, and any discovered deficiencies must be addressed and fixed before the transaction can close.
There are some lesser-known criteria for subject properties under the small loan program as well. Properties located in seismic zones 3 & 4 with subterranean or “tuck away” parking structures require a PML report. Properties with unreinforced masonry construction, as well as properties built before 1980 that have not had seismic reinforcements or retrofits completed are generally ineligible for financing. Non-Contiguous properties are eligible with a Fannie Mae waiver.
A Fannie Mae waiver is also required for phased properties as well. Properties that belong to an HOA or are a part of a PUD are typically ineligible. Borrowers should be aware that absentee ownership of any property financed through the program requires professional management.
In addition to the facts above, here are a few more things to take into consideration when shopping for a Fannie Mae Multifamily Small Loan:
- Even though the loans are non-recourse, key principals must sign an “exceptions to non-recourse” document, and face some liability
- Borrowing entities and key principals must undergo rigorous lien, litigation, and bankruptcy searches.
- There is a higher insurance expense in this type of transaction due to the higher coverage requirements in the secondary market.
- The Fannie Mae waiver that is required for non-contiguous and phased properties is difficult to obtain.
For more information, please visit Fannie Mae's website.