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Freddie Mac Fixed-Rate Conventional Loans
Freddie Mac Fixed-Rate Conventional Loans offer LTVs up to 80%, are non-recourse, and offer flexible terms and amortizations of up to 30 years, making them great for apartment buildings and other multifamily properties.
Freddie Mac Financing for Conventional Multifamily Properties
If you're an investor or developer looking to finance a multifamily property with a Freddie Mac loan, the Freddie Mac Fixed-Rate Conventional Loan could be a great solution for your financing needs.
Freddie Mac Fixed-Rate Conventional Loans have a wide variety of potential uses, as they allow for the acquisition or refinancing of conventional properties, student housing developments, seniors housing projects, cooperative apartments, and targeted affordable housing developments.
Plus, these loans offer LTV allowances of up to 80%, are non-recourse, assumable (with approval and fees) and offer flexible terms and amortizations of up to 30 years, making them suitable for a variety of different multifamily financing situations. Freddie Mac Fixed-Rate Conventional Loan borrowers will usually receive a commitment within 45 to 60 days after initial application, which also makes them quite a bit speedier than alternatives like HUD multifamily loans.
Keep reading below to learn more, or click here to download our easy-to-understand Freddie Mac Fixed-Rate Loan term sheet.
Sample Freddie Mac Terms for Fixed-Rate Conventional Loans in 2023
Size: $5 million to $100 million (though smaller and larger loan amounts will be considered)
Use: Acquisition or refinance
Terms: 5-10 years (Up to 30 years if loan not purchased for securitization)
Amortization: Up to 30 years, with interest-only payment options
5-7 Year Loans:
Partial Term Interest-Only: 75%/1.30x
Full Term Interest-Only: 65%/1.40x
7 Year Loans:
Partial Term Interest-Only: 80%/1.25x
Full Term Interest-Only: 70%/1.30x
7+ Year Loans:
Partial Term Interest-Only: 80%/1.25x
Full Term Interest-Only: 70%/1.35x
Prepayment Options: Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No pre-payment premiums required in the last 90 days of the loan.
Eligible borrowers include limited partnerships, limited liability companies, corporations, or tenancies in common (TICs) with 10 or fewer members
In some circumstances (and with specific requirements), general partnerships, REITs, limited liability partnerships, and some trusts may also be eligible
Typically, borrowers must be single purpose entities (SPEs), however, on loans less than $5 million, borrowers may be able to be Single Asset Entities instead
For tenancies in common (TICs), each member needs to be a SPE
- Conventional multifamily properties, manufactured housing communities, seniors housing developments, cooperative housing, student housing developments, and targeted affordable housing, including LIHTC Year 4-10 and 11-15 and Section 8 properties
Refinancing Test: No test needed for amortizing loans with a DSCR of at least 1.40x and an LTV of less than or equal to 65%. Interest-only loans must pass a refinancing test before they are approved.
Assumability: Loans are assumable with lender approval, but require a 1% assumption fee paid to Freddie Mac. May also require an underwriting fee paid to the lender (typically $5,000.)
Timing: Borrower will typically receive a commitment 45 to 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process
Very competitive interest rates
Up to 80% LTV for some properties
Loans are non-recourse
Supplemental loans allowed
Mezzanine financing available
Early rate-lock options allowed, between 60-120 days before purchase, index locks are also available to eligible borrowers
Eligible mixed-use properties permitted
Requires replacement reserves
Requires third-party reports including Phase I Environmental Assessment, Appraisal, Physical Needs Assessment, Seismic Report may be required for properties in Seismic Zones 3 and 4
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger) for conventional first mortgages, $5,000 or 0.15% of loan amount (whichever is larger) for seniors housing, $3,000 or 0.1% of loan amount (whichever is larger) for targeted affordable housing loans
Typically requires a loan origination fee
Typically requires between $8,000 and $12,000 in legal fees
Lender application fees also required (avg. of $15,000, including third-party reports, but may vary based on specific lender)
2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)
Case Study: Financing a Sioux Falls Purchase
Meet John, a seasoned investor. In the summer of 2023, he set his eyes on a large multifamily property in Sioux Falls, South Dakota. This 45-unit property was listed for $7 million in an up-and-coming neighborhood that was seeing an influx of young professionals.
John saw the potential for this investment and decided to apply for a Freddie Mac Fixed-Rate Conventional Loan to finance the acquisition. The strong rental market in Sioux Falls and the property's robust occupancy rates strengthened his loan application.
He successfully secured a Freddie Mac loan of $5.2 million, which came in below the program's maximum loan-to-value (LTV) ratio of 80%. The loan term was set at 30 years, with an equal amortization period that would facilitate manageable monthly payments.
As the Freddie Mac loan was non-recourse, it limited John's personal financial liability, providing him with additional security. Though John was an individual investor, his real estate experience and solid credit history met the lender's underwriting criteria.
To fulfill the loan requirements, John hired professionals to complete the required third-party reports, which included a property appraisal and a Phase I Environmental Assessment. These reports added to his upfront costs but were crucial for meeting the lending guidelines.
Overall, the Freddie Mac loan was an effective financing solution for John's investment. He was able to acquire the multifamily property with a sizable, long-term loan that offered a competitive interest rate and limited personal financial risk. This case demonstrates the utility and flexibility of Freddie Mac loans for experienced real estate investors.
This is a fictional case study provided for illustrative purposes.