Longer Term Commercial Loans

14 Replies

We are looking into a 60 unit project. Our commercial lender typically offers a max amortization of 25 yrs. Would you recommend we make connections with a longer term lender that can offer a 30 yr amort? Overall purchase is around $5.5million. Our largest property so far is 12 unit, it's on a 25yr amort ans the numbers are great....this one....the numbers suck and I can't make sense of it.

Talk with a commercial mortgage broker.  Fannie and Freddie have excellent multifamily programs, including 30 year amortization.

25 to 30 amortization will not make "suck" turn to "good".

I'd love to help analyze this deal with you. I've never crunched the numbers on such a big investment. Maybe you are missing something. A second set of eyes may help. Are all the units up to market value? I tried getting my bank to run 30 amort also. Didn't happen.

Fannie and Freddie will offer 30 year am and the fixed term will be 5-15 years. Leverage will vary depending on market but all loans are non-recourse.

With a HUD multifamily loan (223f) you could acquire and it would be a 35 year fixed rate, 35 year am, non-recourse loan. HUD just requires a bit longer in underwriting, has higher soft costs and will require more property scrutiny.

Pros and cons to both.

@Christy Wright Like the others said, there are some great Fannie and Freddie products with 30 yr amt. I have a great relationship with a direct freddie/fannie lender, I would be happy to put you i touch with (PM me).

Definitely shop around with a few mortgage brokers also.

@Christy Wright I always recommend shopping around multiple lenders for every deal.  Even if you engage a broker, you should still shop around an additional couple lenders yourself (if you have the time/energy).

Freddie SBL loans cap at 50 units, so you won't be able to take advantage of that program (unless they can somehow make an exception), but there are still great Agency (Fannie/Freddie) programs that would work. The rub with Agency is that it can be difficult to qualify for. If your deal is in a market they aren't crazy about at the moment, that may kill your chances at 80%LTV / 30am right off the bat. Check out the Fannie/Freddie websites for general terms, or speak with a broker/lender for more specific terms.

I've underwritten 30 year am with non-Agency lending sources in the last 30 days (Banks, credit unions, etc.); if the asset is in good shape and performing, and the borrower/guarantor is strong, shouldn't be any problem finding 30am.  Try a couple larger regional banks that lends in your area.

Does personal income still play a role in qualifying for Fannie/Freddie commercial loans on 5+ unit MFR's the same way it does when qualifying for 1-4 unit residential loans? Or are they underwriting based more so on the asset itself like the typical non-agency commercial/portfolio lenders do? I'm not familiar with the Fannie/Freddie commercial programs.

@Brian Garrett Focus is on the asset, but they'll still check on the borrower's PFS.

Usually looking for net worth greater than the size of the loan, and liquidity to cover 9 months debt service. (combined between the guarantors)

Not sure if I can post links in the forums: http://www.crefcoa.com/freddie-mac-small-apartment-loan-program.html

Originally posted by @Andrew Beauchemin :

@Brian Garrett Focus is on the asset, but they'll still check on the borrower's PFS.

Usually looking for net worth greater than the size of the loan, and liquidity to cover 9 months debt service. (combined between the guarantors)

Not sure if I can post links in the forums: http://www.crefcoa.com/freddie-mac-small-apartment-loan-program.html

Thank you Andrew. Is net worth greater than the size of the loan a requirement for qualifying?

I would recommend building a relationship with agency lenders because they can offer better terms. That said, there are many different degrees that you can negotiate on with your current lender. If the numbers are not working out at all with the current terms, I would be questioning whether this deal is truly something you want to go after.