Tap to get financing
Multifamily Loans
Property Types
MultifamilyHealth Care & Senior LivingStudent HousingAffordable HousingMobile Home ParkOffice, Retail & More
Loan Options
Fannie MaeFreddie MacConstruction LoansLoans Under $1MFreddie Mac SBLFHA/HUD Multifamily LoansForeign National LoansCMBSBank LoansLife CompaniesBridge LoansHard MoneySoft MoneyMezzanine FinancingCrowdfundingSBA 504 LoansMezzanine Construction LoansUSDA 538 LoansFix and Flip LoansFractured Condo LoansDSCR LoansRefinance
Resources
BlogLoan DocsForms and TemplatesRatesLingoVideo LibraryMultifamily For SaleCommercial MortgagesFrequently Asked QuestionsBeginner's Guide
Calculators
Multifamily Mortgage CalculatorCap Rate CalculatorNOI CalculatorDSCR CalculatorLTV CalculatorDebt Yield CalculatorCash on Cash Return CalculatorYield Maintenance CalculatorIRR Calculator
About
About UsLeadershipTeamContactAffiliate Program (Coming Soon)We're Hiring
Get financing
Newly Published
Mar 20 at Multifamily Loans
Multifamily Minute Reader Reflections: How Will Bank Failures Impact Multifamily?
Mar 14 at Multifamily Loans
Multifamily Minute Reader Reflections: How Big Are We Buying?
Feb 27 at Multifamily Loans
Multifamily Minute Reader Reflections: When Do You Start the Refi Process?
Explore the Janover Network
Mar 17 at Commercial Real Estate Loans
Top 10 Commercial Real Estate Lenders of 2023
Mar 15 at Commercial Real Estate Loans
Top 4 Refinancing Loans for Industrial Real Estate in 2023
Feb 20 at Commercial Real Estate Loans
How to Set Rent Rates for Your Commercial Property in 2023
Was This Article Helpful?
Last updated on Jan 3, 2023
5 min read

Freddie Mac Small Balance Loans

The Freddie Mac SBL program offers competitive terms for multifamily and apartment loans from $1 million to $7.5 million.

Better Financing Starts with More Options Start Your Application and Unlock the Power of Choice. Click Here to Get Quotes →$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
In this article:
  1. The Industry's Most Competitive Small Apartment Loan Program
  2. Sample Terms for the Freddie Mac Small Balance Loan in 2023
  3. Eligible Properties
  4. Market Tiers Defined
  5. Leverage / DSCR
  6. Advantages
  7. Disadvantages  
  8. Get Financing

The Industry's Most Competitive Small Apartment Loan Program

Freddie Mac has consistently offered some of the industry's most competitive financing options for large multifamily loans — particularly loans north of $10 million. Eventually, however, Freddie Mac opted to get competitive in the small balance market, introducing the Freddie Mac Small Balance Loan into their line of financing options, and the product has been accepted with open arms as a viable alternative to the Fannie Mae Small Loan Program.

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 $1 million loan very similar to those of a $10 million loan. Freddie Mac has effectively addressed all these issues with the streamlined small balance loan program — known for substantially compressed fixed costs and rates as competitive as those for large loans.

Keep reading below to learn more, or click here to download our easy-to-understand Freddie Mac Small Balance Loan term sheet.

Sample Terms for the Freddie Mac Small Balance Loan in 2023

Loan Amount:  $1 million minimum, $7.5 million maximum 

Loan Uses:  Acquisitions or refinances 

Loan Terms:  

  • 20-year hybrid ARM with initial 5, 7, or 10-year fixed-rate period, OR

  • 5, 7, or 10-year fixed-rate loan

  • ARMs typically based on 6-month LIBOR with up to 1% rate adjustments every 6 months. Lifetime cap set 5% over starting rate.

Amortization: Up to 30 years, partial interest-only options available, full-term interest-only options may also be available in certain circumstances. 

Interest Rates: Vary, but lower for properties in Top and Standard Markets and higher for properties in Small and Very Small Markets

Eligible Properties

  • Multifamily: 5+ unit market-rate multifamily properties. For loans larger than $6 million, properties with more than 100 units must be approved by Freddie Mac.

  • 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). 85% occupancy may also apply to properties with 30+ units, or acquisitions with no history of serious crime, or that have been recently taken over by sophisticated management.

  • Mixed Use: Available subject to no more than 40% non-residential income and no more than 40% of net rentable area.

  • Affordable:

    • Low-Income Housing Tax Credit (LIHTC) properties with Land Use Restriction Agreements (LURAs) that are in either the final 24 months of the initial compliance period or the extended use period (investor must have exited for property to be eligible).

    • Properties with tenant-based housing vouchers, and properties with local rent subsidies for 10% or fewer units where the subsidy is not contingent on the owner’s initial or ongoing certification of tenant eligibility are also eligible.

  • Ineligible:

    • Seniors housing with residential services

    • Student housing (greater than 50% concentration)

    • Military housing (greater than 50% concentration)

    • Properties with Housing Assistance Program (HAP) Section 8 contracts and other project-based housing assistance payment contracts

    • LIHTC properties with LURAs in compliance years 1-12

    • Tax-exempt bonds Interest Reduction Payments (IRPs)

    • Historic Tax Credit (HTC) properties with a master lease structure

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.

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

Interest Only: 

Typical maximum interest only periods include: 

  • 1 year for 5 year terms

  • 2 years for 7 year terms

  • 3 years for 10 year terms

  • 1 year available for 7 year loans

  • 2 years available for 10 year loans

  • No I/O available for 5 year loans in small or very small markets

  • Full-term interest only available under some conditions with Freddie Mac approval.

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 “bad boy” 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 equal to 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.

  • Borrowers up to $6 million: Individuals (U.S. citizens only), limited liability companies, limited partnerships, Single Asset Entities, Special Purpose Entities, tenancies in common (with up to five unrelated members), and Trusts (irrevocable trusts and revocable trusts with an individual guarantor.)

  • Borrowers more than $6 million: Single Asset Entities.

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.

Portfolio Executions: 

Freddie Mac SBL Portfolio Executions provide benefits to borrowers who take out more than one SBL loan in top and standard markets. 

  • Benefits: Fewer forms, may achieve better pricing and larger loan size. May also achieve reduced transaction costs.

  • Requirements: Sellers must collect and hold a Good Faith Deposit on behalf of Freddie Mac, of 0.1% of the loan amount or $50,000, whichever is greater. This is refundable to the borrower upon closing.

Advantages

  • Up to 80% LTV allowance

  • Streamlined application process

  • Loans are non-recourse

  • Interest-only options

  • 30-year amortizations

  • Variety of hybrid ARM and fixed-rate options available

  • Loans are assumable with approval and 1% fee

  • 60-120 day rate locks typically available

Disadvantages 

  • Requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Engineering Report

  • Typically requires replacement reserves of between $200 and $300 per unit

  • Requires $7,000 application fee

  • Requires Freddie Mac processing fee of 0.1% of the loan amount

  • Subordinate debt not permitted

In this article:
  1. The Industry's Most Competitive Small Apartment Loan Program
  2. Sample Terms for the Freddie Mac Small Balance Loan in 2023
  3. Eligible Properties
  4. Market Tiers Defined
  5. Leverage / DSCR
  6. Advantages
  7. Disadvantages  
  8. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

Multifamily Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

hello@multifamily.loans

Multifamily Loans

Beginner's Guide
Multifamily Refinance
Multifamily Mortgage Calculator
Current Rates
Commercial Mortgage Calculator

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

Copyright © 2022 Janover Inc. All rights reserved.