Best Commercial Multifamily Loan Program Based on Rates & Terms

David Cohn
Sep 23, 2020
Multifamily Loans

Financing a multi-family property is all about finding the right loan with the best rates and terms—and, more importantly, a loan program that is suitable to your timeline, your needs, and your budget.

What is Commercial Multifamily Loans

Commercial multifamily loans are designed specifically for financing building complexes or a single building with at least five separate units or dwellings, making them popular for investors looking at investing in apartments.

Because commercial real estate assets like multifamily properties are larger and riskier.

The process for loan underwriting is a bit more stringent than the financing for a conventional residential property.

Lenders will have to consider specific property metrics—including the loan-to-value ratio, debt service coverage, and the net operating income, as well as the borrower’s industry experience, income, and credit score.

As you do your research, you will likely come across bank balance sheet loans and government-backed loans as among the best loans for multi-family properties.

Government-backed loans are being funded under the programs of FHA, Fannie Mae, and Freddie Mac, and they usually have affordable interest rates and low down payment options.

Portfolio or balance sheet loans come from banks and stay on their balance sheets without government backing.

Here, we’ll discuss the best financing for a multi-family property according to their rates and terms.


These loans start at around $2,000,000 and may be applied to apartment buildings, senior housing, nursing homes, assisted living facilities, and independent senior living properties.

They go up to 85 percent loan-to-value (LTV), 87 percent for affordable housing, and rates can be fixed up to 35 years and come with a 35-year amortization.

The best HUD loans for multifamily properties are as follows:

  • 223f multifamily loan – Consider this loan if you’re buying or refinancing existing apartment buildings that have been around for at least three years. It can go up to 85 percent without cash out for refinancing, and 80 percent with cash out. However, the property must be in very good condition, making it a good chance for tackling any maintenance you might have put off for the longest time. The maximum amortization and term are 35 years, and there is up to 85 percent LTV.
  • FHA 223 (a) (7) Streamline Refinance – This is designed for multi-family loans and health care loans that are existing HUD loans. It allows you to refinance an existing HUD commercial loan with better terms and rates. It closes quickly in 60 days, and it won’t require an appraisal. The loan’s maximum size is your original mortgage or the balance of the existing HUD loan along with the loan expenses and repairs.

The interest rate will be fixed for the entire term, and you can qualify for a 35-year fixed term again. However, the loan’s term shouldn’t go further than the original term or a maximum of 12 years beyond the present HUD loan term. The interest rate applies to the whole term.

Fannie Mae programs

  • Fannie Mae Green Program – This financing for a multi-family property lets you make small changes such as upgrading water-saving showerheads and energy-efficient light bulbs. The interest rate can be lowered to one-third of one percent, which could mean interest savings of $600 each month on loan worth $2M.
  • The minimum loan size is $1M, and there is no maximum. The rate period is fixed at five to 30 years. There are no tax returns and income verification required. You will need a minimum of 680 on your credit score to qualify.
  • Fannie Mae Student Housing – This loan program lets you rent the property by the bed or unit. It offers long-term fixed rates (five to 10 years), and tax returns aren’t required on key principals. Loans start at $1M, and the student occupancy should range from 20 to 80 percent or more. The property must also be located within 2 miles from a major sized university, which must have a minimum of 10,000 students, and 50 percent of these students must be full-time.

The loan is amortized for 25 years, the loan can be assumed, subordinate financing isn’t permitted, a prepayment penalty is yield maintenance, and there’s a requirement to have a management company for student housing.

Freddie Mac Commercial Multifamily Loans

Freddie Mac offers some of the best loans for multi-family properties due to their low-interest rates.

  • The Apartment/Multi-family Loan - Ideal for properties in a large city. Full-term interest is good for loans at a maximum of 65% LTV. Is rate can be 0.30 percent lower if the property has a lot of affordable rents.

A minimum credit score of 660 is required to qualify for a minimum loan of $1M. Amortization is good for 30 years, with nine to 12 months post-closing liquidity required. Fixed rates apply for five, seven, or ten years, and interest is only for one to 10 years.

  • Freddie Mac Student Housing – The minimum is $5M, and the property must be no less than two miles from colleges or universities, and close to a major route for buses. The school must have an enrollment of no less than 8,000 students, and every property must have its kitchen, with at least one bathroom for every two bedrooms.

The maximum loan size for this loan is $100,000,000, and the loan to value’s maximum is 80 percent.

You need to have a minimum credit score of 660 to qualify. The rate can be fixed for a maximum of 10 years, and 20 percent of commercial space is allowed.

Keep in mind that this is a non-recourse loan, and subordinate financing isn't allowed.

SBA Loans

This financing for multi-family property lets you borrow up to 90 percent of the property’s cost plus improvements, and you don’t need to have a lot of cash on hand or be wealthy.

However, this lending is designed for owner-occupied business property, including self-storage and hotels, as well as any single-tenant owner-occupied property.

It lets you achieve leverage of 85 percent to 90 percent when you buy a business with real estate that currently won’t qualify for a large loan given sufficient mitigation.

CMBS Loan Program

Should you have a smaller network without much income on tax returns, CMBS loans may be the best loans for multi-family properties. However, it requires your property to be in a good location.

These loans range from $3,000,000 to $50,000,000 for senior housing, assisted living, or memory care.

There’s a 75 percent loan value, and the rate is 10-year treasury plus 2 to 2.50 percent for a 10-year fixed rate.

Terms are either five or ten years, and the loan is amortized for 30 years.

REIT loan program

REIT stands for ‘Real Estate Investment Trust,’ a company with ownership of (and often, running) income-generating real estate.

REITs can be any property from offices to multi-family apartments, hotels, and hospitals. Most of them are equity, where they invest in commercial property to generate income.

Mortgage REIT provides real estate financing through mortgage-backed securities and originating mortgage loans. The goal is to generate interest income.

The fixed-rate term is good for five to 15 years, and the loan ranges from $3,000,000 to $30,000,000. You’ll need a minimum credit score of 700 to qualify.

The maximum loan-to-value is 75 percent, with a 30-year amortization and 1.30 DSCR.

National Bank Loan Program

This starts at $10,000,000 with a maximum of 70 percent loan-to-value.

It can be used for really big loans of up to $150M, with a 10-year term and very low LIBOR adjustable rate or according to the treasury swap rate of five to 10 years fixed. Amortization is from 25 to 30 years.

Regional Bank Loan Program

Regional bank loans are financing for a multi-family property with very low loan costs and the best rates, which can sometimes be fixed during application.

Lenders may lend up to 75 percent of the loan to value with terms ranging from three to 10 years. The loan is amortized for 30 years.