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Fannie Mae Multifamily Affordable Housing Loans
Fannie Mae Affordable Housing Loans can be used for both purchases and refinances, are mainly non-recourse, start at $750,000 to $1 million, have fixed-rate terms between 10 and 30 years, and permit LTVs between 80% and 90%.
With housing costs on the rise across the United States, it's never been more important for American families to have housing options that they can actually afford. If you're an investor interested in providing affordable housing solutions, a Fannie Mae multifamily affordable housing loan could be a great choice.
However, these loans aren't just available for property acquisitions; they're also available for refinancing, and can be given to properties already taking advantage of Low Income Housing Tax Credits (LIHTCs), properties with a Section 8 contract, or properties with a Housing Assistance Payment (HAP) contract.
Just like most other Fannie Mae multifamily loan options, Fannie Mae multifamily affordable housing loans offer competitive interest rates, are mainly non-recourse, and are fully assumable (with a 1% fee and lender approval.)
Sample Fannie Mae Terms For Affordable Multifamily Housing Loans in 2023
Minimum Loan Size | $750,000+ (no set maximum) |
Terms | 10- to 30-year fixed-rate loan terms |
Loan Use | Acquisitions and refinances |
Amortization | 30 years |
Maximum LTV | 80% to 90% |
Minimum DSCR | 1.15x |
Recourse | Most loans are non-recourse with standard "bad boy" carve-outs |
Prepayment Options | Yield maintenance or 1% prepayment penalty, whichever is larger |
Affordability Requirements | In most cases, at least 20% of the building's units must be rented to families earning 50% or less than the Area Median Income (AMI), or at least 40% of a building's units must be rented to families earning 60% or less than the AMI. |
The Pros and Cons of Fannie Mae Affordable Housing Loans
Advantages
Very competitive interest rates
Up to 90% LTV for some projects
Most loans are non-recourse
Supplemental loans are permitted after 12 months
30- to 180-day rate locks available after commitment, early and extended rate lock options are also available
Loans are fully assumable (with lender approval and 1% fee)
Funded or unfunded forward commitments may also be available
Requires replacement reserves
Typically requires 85% physical occupancy, 70-80% economic occupancy for 90 days before closing
Requires third-party reports including Appraisal, Physical Needs Assessment, and Phase I Environmental Assessment
Requires a $12,500 application deposit and a $3,000 processing fee
2% rate lock fee required (refunded after loan closing)
Commitment fees may also be required
Disadvantages
Case Study: Alex Invests in Atlanta Affordable Housing
Meet Alex, a real estate investor looking to invest in affordable housing solutions in Atlanta, Georgia. Alex identified a 20-year-old, 23-unit affordable housing property, with 60% of the units rented to families earning less than 60% of the Area Median Income (AMI).
Alex faced a challenge in finding a financing solution that catered to affordable housing properties. Conventional financing options didn't meet the specific affordability requirements needed for this type of property.
That's when Alex discovered the Fannie Mae Multifamily Affordable Housing Loan, a financing solution specifically designed for affordable housing projects. With competitive interest rates and a non-recourse feature, this loan product proved to be an ideal choice for Alex's investment.
The property's purchase price was $3.2 million, and Alex managed to secure a Fannie Mae Affordable Multifamily Housing Loan at 85% LTV, which amounted to a loan of $2.7 million. With a 30-year term and a fixed interest rate, Alex benefited from stability and predictability in his payments.
Thanks to the Fannie Mae Affordable Multifamily Housing Loan, Alex successfully invested in the affordable housing property, providing much-needed housing options for families in Atlanta. This financing solution allowed him to make a positive impact on the local community by offering affordable housing options in a market with increasing housing costs.
This is a fictional case study provided for illustrative purposes.