FHA/HUD/Fannie/Freddie Multifamily financing

6 Replies

Hello! I'm currently an investor and single-family homes and interested in learning more about the multifamily market. Specifically I'm wondering how everybody finances and funds their deals through FHA and HUD. If anybody could link me two more resources that could help me understand and learn how they work, I greatly appreciate it. I'm specifically looking for the lending guidelines for Fannie and Freddie loans on multi families. Do you need to put a certain percentage down? Do you get loan-to-value or a loan to cost? what is the minimum income requirement? I know that they are nonrecourse loans, but I can't seem to find any clear definition of what guidelines are necessary to qualify. Also, with FHA for Multi family, does it have to be your first purchase to qualify for 3 1/2% down? Or your first commercial purchase? If anybody is available to answer any questions I'd love to connect via PM or telephone.

You can definitely learn a lot here on BP but if I were you I would go get the information your looking for straight from a lender. They will not only be able to answer all of your questions but they can start looking at your personal situation, what your wanting to do, even pre-qualify you for a loan and jump start you in the right direction. Don't neglect BP either as you might discover some unique financing strategies that could correlate well with what you are trying to achieve. 

GOOD LUCK!!!

Medium srr logo w backgroundColin Smith, Solid Rock Realty | [email protected] | 719‑232‑6709 | http://www.SolidRockRE.com | CO Agent # ER.100052152

Veena,

Here are the answers to your questions about Fannie and Freddie multifamily loans:

1 )Do you need to put a certain percentage down?

They have tiered pricing depending on the down payment. The minimum down payment is 20%. They will loan up to 80% LTV as long as the debt service coverage is 1.25x

2) Do you get loan-to-value or a loan to cost?

They will do Loan to Cost, but typically only up to $5,000/unit in rehab dollars into the loan. Above that you will have to go to a local/regional bank to get more rehab dollars.

3) What is the minimum income requirement?

They will be looking for the property to service the debt not you personally. However, they will look for your net worth to be equal to the loan amount and for you to have at least 10% of the loan amount in post close liquidity.

4 )I know that they are nonrecourse loans, but I can't seem to find any clear definition of what guidelines are necessary to qualify.

The loans are non-recourse, but you typically need at least 2 years of multifamily experience to get these loans or have a partner sign with you that has Fannie or Freddie experience.

@Veena J. - this really depends on what size properties you are looking at?  Once you cross out of the 1-4 family then you're going to have a very tough time finding a lender for the agency products under $1m.  

if you're looking to get into a larger sized apartment complex then ask away, I'm happy to help you with any specific questions that you may have.

Derek Carroll, NorthMarq Capital | [email protected] | 315‑558‑8332 | http://www.realestatefinanceguy.com

Derek, thank you for your response. We are looking outside of the 1 to 4 units. I'm looking for something a little bit larger probably between 1 to 10,000,000 depending on the numbers. Our target is to be between 2 to 5,000,000. Do you mind if I call you to discuss this further? Thank you.

Veena,

I use to be the director for Fannie Mae Multi Family, Give me a call anytime and i can probably answer any question you have.

HUD loans make sense on $3MM+ due to the cost. A HUD loan allows a multifamily unit to cash flow very well!

HUD's loan to value is 83.3%. The advantage of a HUD, has the highest LTV in the market, the rate is in the mid to high 3's, , the rate and term is fixed for 35 years, it is non recourse, assumable, no defined financial capacity requirements, no geographic restriction, and no minimum population requirements.

The disadvantages are longer process times (4+ months is typical), higher fees, mortgage insurance premiums, annual audited operating statements required, replacement reserve escrows required, HUD property inspections required, and owner distributions limited to two times a year.

Hope this information helps.