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Fannie Mae Multifamily Small Loans
Offered in amounts up to $9 million, Fannie Mae Small Loans require fewer documents when compared to standard DUS loans. Find out today's terms, updated daily.
While standard Fannie Mae multifamily loans are incredibly popular among multifamily investors, their $3 million minimum and lengthly documentation requirements means that they might not be the right loan for everyone.
Fortunately, Fannie Mae also offers Fannie Mae Small Loans, which have a minimum loan amount of $1 million and a significantly streamlined application process. Just like its larger sibling, Fannie Mae DUS Loans, Fannie Mae Small Loans offer competitive interest rates, are mainly non-recourse, and non-recourse loans are fully assumable (with lender approval and a 1% fee.)
Keep reading below to learn more, or click here to download our easy-to-read Fannie Mae Small Loan term sheet.
Sample Fannie Mae Terms For Small Multifamily Loans in 2023
Size: $1 million to $9 million
Terms: Five- to 30-year fixed-rate loan terms available, adjustable-rate and hybrid ARM options also available. Partial and full-term interest-only may also be available.
Amortization: Up to 30 years
Maximum LTV: 80%, 75% for refinances
Minimum DSCR: 1.25x
Recourse: Most loans are non-recourse with standard “bad boy” carve-outs
Prepayment Options: Yield maintenance or a declining prepayment premium (step-down)
Eligible Properties: Conventional multifamily properties, Multifamily Affordable Housing (MAH) properties; seniors housing developments, and student housing developments with 5+ units, and manufactured housing communities (MHCs) with 50+ pad sites.
Eligible Borrowers: Typically must have a net worth equal to the loan amount and liquid assets equal to 6 months mortgage payments.
Commercial Limits: Commercial space must be no more than 35% of the project's net rentable area and must contribute no more than 20% of its effective gross income.
Timing: Loans typically close between 45 and 60 days after application
Credit Requirement: Typically requires a credit score of 680+ (though this may vary by lender)
Advantages
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- to 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
Requires replacement reserves ($250 per unit minimum)
Typically requires 90% physical occupancy for 12-months before closing. This period may be reduced to 90 days under some circumstances.
Requires third-party reports including an Appraisal, reduced Physical Needs Assessment and an Environmental Screen
Requires a $10,000 application deposit
Typically requires between $4,500 and $13,000 in lender fees (including due diligence fees and third-party reports, though this may vary by lender)
Rate lock deposit of 1% to 2% typically required (refunded at closing)
Disadvantages
Case Study: Buying Apartments in Tampa
John, a seasoned real estate investor in Tampa, Florida, was looking for his next big opportunity. He discovered a 23-unit apartment building on the market for $3.2 million, averaging about $140,000 per unit.
Considering the potential return on investment, John opted for a Fannie Mae Small Loan to finance his acquisition. These loans are tailored for smaller multifamily properties, offering competitive interest rates, mainly non-recourse provisions, and an option to be fully assumable subject to lender approval and a nominal fee.
John successfully secured a Fannie Mae Small Loan amounting to $2.3 million, translating to a 72% loan-to-value ratio. His loan terms were set at a 25-year fixed-rate period with a 30-year amortization schedule, offering predictable monthly payments that would help in effectively managing his investment.
With his financing secured, John was able to confidently move forward with his acquisition, equipped with a financial structure that suited his investment strategy.
This is a fictional case study provided for illustrative purposes.