Fannie Mae Fixed-Rate Multifamily Loans

Fannie Mae Fixed-Rate Multifamily Financing Options

Fannie Mae Fixed-Rate financing is one of the most effective ways to acquire or refinance a multifamily property. With incredibly flexible loan terms and amortizations up to 30 years, competitive interest rates, and a wide variety of eligible properties, its no wonder that Fannie Mae's Fixed-Rate Loans are so popular. These loans have an LTV allowance of up to 80% for conventional properties, and eligible property types include stabilized conventional properties, seniors housing properties, manufactured housing communities, student housing developments, and Multifamily Affordable Housing (MAH) developments. Plus, just like many other Fannie Mae multifamily loans, Fannie Mae Fixed-Rate Loans are mostly non-recourse and are fully assumable with lender approval. 

Keep reading below to learn more, or click here to download our easy-to-read Fannie Mae Fixed-Rate Loan term sheet.

Sample Fannie Mae Terms For Fixed-Rate Multifamily Loans in 2024

Size: Varies

Terms: 5-30 years 

Amortization: Up to 30 years

Maximum LTV: 80% for conventional properties (other properties vary by asset class)

Minimum DSCR: 1.25x for conventional properties (other properties vary by asset class)

Recourse: Most loans above $750,000 are non-recourse with standard “bad boy” carve-outs

Prepayment Options: Yield maintenance or prepayment premium options available

Eligible Properties: 

• Stabilized conventional properties, seniors housing properties, manufactured housing communities, student housing developments, and Multifamily Affordable Housing (MAH) developments

• Properties must have 5+ units (50+ pad sites for manufactured housing communities)

• Borrower must be credit-worthy and a U.S.-owned single-asset entity (indirect foreign ownership interest allowed with proper structuring)

Advantages

• Very competitive interest rates

• Up to 80% LTV

• Most loans are non-recourse

• 30- 180 day rate locks available (streamlined rate locks also available)

• Loans are assumable with lender approval

Disadvantages

• Requires replacement reserves

• Requires third-party reports including a property appraisal and a Phase I Environmental Assessment

Case Study: Buying a Portfolio in Philadelphia

In 2023, a Philadelphia-based real estate investment group sought to acquire a portfolio of stabilized multifamily properties scattered across the city. The portfolio, comprised of several low-rise apartment buildings totaling 300 units, was valued at approximately $45 million. The investor group was keen to secure long-term, fixed-rate financing to leverage their acquisition and turned to Fannie Mae's Fixed-Rate Financing program to help meet their financial needs.

Given the flexibility and favorable terms of Fannie Mae's Fixed-Rate Financing, they were able to secure a loan amount of $36 million, representing 80% loan-to-value (LTV) on the portfolio. The loan term agreed upon was 30 years with the same amortization period, minimizing the borrower's monthly payments and providing ample time for the investment to generate a substantial return.

The fixed-rate loan offered very competitive interest rates, which was a significant advantage for the investors as it ensured stability of their debt service payments over the long term. The loan was also non-recourse, limiting the group's financial liability.

The process required third-party reports, including a property appraisal and a Phase I Environmental Assessment. These were necessary steps to satisfy due diligence requirements, although they added some complexity and cost to the loan acquisition process. Also, replacement reserves were required as a part of the loan conditions.

The loan came with a standard "bad boy" carve-out and prepayment options such as yield maintenance were available. The ability to lock the interest rate for 30-180 days and the option to transfer the loan to a new owner (with lender approval) added another layer of flexibility and security to the financing.

In summary, through Fannie Mae's Fixed-Rate Financing, the investor group could achieve their aim of acquiring the portfolio of stabilized multifamily properties in Philadelphia. They secured a favorable long-term, fixed-rate loan that provided financial predictability and stability, ultimately supporting the sustainability and potential profitability of their investment.

This is a fictional case study provided for illustrative purposes.