The Industry's Most Competitive Small Apartment Loan Program

Freddie Mac has forever been the industry's most competitive source of financing for large multifamily loans, particularly loans north of $10MM, however Fannie always dominated the market under $10MM. Last year Freddie Mac finally decided to get competitive in the small balance market and they have been accepted with open arms. One of the most substantial obstacles to originating small balance loans is the cost to the borrower. Third party reports and lender legal don't vary much with the loan size, leaving fixed origination costs for a $1MM loan very similar to those of a $10MM loan. Freddie Mac has effectively addressed all these issues with a streamlined small balance loan program with substantially compressed fixed costs and rates as competitive as those for large loans. The following are general guidelines and terms for the Freddie Mac SBL apartment loan program as of September, 2016:

Loan Amounts From $750k to $7,000,000.

Property Types: 

  • Multifamily: 5+ unit market-rate multifamily properties.
  • Non-Contiguous Properties: Allowed if within same zip code and manageable as a single asset. 
  • Occupancy: 90% for past 90 days (exceptions down to 85% and down to 30 days for new construction).
  • Mixed Use: Available subject to no more than 40% non-residential income and no more than 40% of net rentable area.
  • Ineligible: Senior housing, student housing, greater than 25% concentration of military and affordable housing.

Market Tiers Defined:

  • Top Markets: Certain Counties (but not all) in the following MSA’s: New York, Los Angeles, Chicago, Washington D.C., San Francisco, Miami, Boston, Seattle, San Diego, Minneapolis, Denver, Portland, San Jose and Stamford, CT.
  • Standard Markets: Typically greater than 60k rental population which includes most MSA’s of Significant size.
  • Small Markets: Typically between 30k and 60k rental population.
  • Very Small Markets: Typically under 30k rental population.

Leverage / DSCR:

  • Top Markets: Max LTV 80% for purchases, 80% for refinances, 1.20x DSCR minimum. 
  • Standard Markets: Max LTV 80% for purchases, 80% for refinances, 1.25x DSCR minimum.
  • Small Markets: Max LTV 75% for purchases, 70% for refinances, 1.30x DSCR minimum.
  • Very Small Markets: Max LTV 75% for purchases, 70% for refinances, 1.40x DSCR minimum.


  • Top Markets: From 3.90% 5 years fixed, 4.35% 7 years fixed, 4.60% 10 years fixed.
  • Standard Markets: From 4.48% 5 years fixed, 4.70% 7 years fixed, 4.98% 10 years fixed.
  • Small / Very Small Markets: Add 20bps to Standard market pricing

Prepayment Penalty: Step down or yield maintenance. Soft-step downs are also available. 

Interest Only: Max interest only period 1 year for 5 year terms, 2 years for 7 year terms, 3 years for 10 year terms. No I/O available for 5 year loans in small or very small markets, 1 year available for 7 year loans and 2 years available for 10 year loans.

Assumable: Subject to 1% fee plus borrower due-diligence.

Rate Reductions: Available for lower leverage and higher DSCRs. 

Application Fees:

  • $7,000 (covers 3rd Parties – Appraisal, Eng, Env, O&M’s)
  • 10 basis points – Freddie Mac processing fee

Recourse: Non recourse with standard carve-outs (carve-out waiver available with minimum 1.40x DSCR and maximum 65% LTV)

Borrower Requirements:

  • 9 months principal and interest liquidity (before refi or after purchase). Retirement accounts not included.
  • Net worth greater than the loan amount.
  • Minimum 650 credit score.
  • No bankruptcies, foreclosures, deed-in-lieu, or defaults for 7 years.
  • At least one year multifamily or commercial real estate experience. 
  • Borrower must be a US entity (single asset not required, but preferred).

Documents Required for New Loan Submissions:

  • Personal financial statement and SREO for each guarantor (anyone with more than 20% interest).
  • Last 3 years operating statements.
  • Trailing 12 month, month-by-month operating statements.
  • Current rent roll.
  • Subject photos.
  • Property summary/description.