Fannie Mae Senior Housing Loans

With more than 10,000 Americans turning 65 every single day, it has never been a better time to invest in the senior housing industry. If you're an experienced investor or developer interested in purchasing a senior housing project, a Fannie Mae Seniors Housing Loan might be the perfect fit.

Fannie Mae Seniors Housing Loans have terms and amortizations up to 30 years, fixed and adjustable-rate interest options, and can be used to acquire or refinance independent living, assisted living, and Alzheimer's/dementia care facilities.

Fannie Mae Seniors Housing Loans have a minimum loan amount of $5 million, allow LTVs of up to 80%, and are assumable (with a 1% fee and approval from both Fannie Mae and the lender.) 

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

Sample Fannie Mae Terms For Seniors Housing Loans in 2024

Size:  $5 million minimum (exceptions can be made on an individual basis)  

Terms:  5 to 30 years

Use:  Acquisitions or refinances

Amortization:  Up to 30 years

Interest Rates:  Fixed- and adjustable-rate loans available 

Recourse: Most loans are non-recourse with standard “bad boy” carve-outs 

Prepayment Options: Yield maintenance, defeasance, or graduated prepayment premiums

Commercial Space Limits: Commercial space must comprise no more than 10% of the net rentable area and produce no more than 10% of the project's effective gross income

Maximum LTV

• 75% (80% for fixed-rate, tax exempt bonds)

• 70% for Alzheimer's/dementia care properties

• 70% for properties with a skilled nursing component

• Decrease max. LTV by 5% for cash-out refinances

Minimum DSCR 

• 1.30x for independent living only

• 1.40x for 100% assisted living properties

• 1.45x for 100% Alzheimer's/dementia care properties

• 1.50x for properties with a skilled nursing component

• Weighted average calculation for properties with less than 50% Alzheimer's/dementia care units

Eligible Properties

• Properties must have between five and 50 units

• Properties must be stabilized and can include manufactured housing communities

• For acquisitions or refinances, loans must be first lien

• Eligible borrowers must be single asset entities

• No properties with entrance fees are allowed

• Owner/operators must have at least five years of successful experience in senior living communities and must have owned/managed five or more senior housing properties

Advantages of Fannie Mae Seniors Housing Loans

• Competitive interest rates

• Most loans are non-recourse

• Flexible prepayment options

• Supplemental financing is allowed

• 30- 90 day rate locks available (early and extended rate locks are also available-- early rate locks allow borrowers to lock the rate between 45 and 365 days before closing)

Disadvantages of Fannie Mae Seniors Housing Financing

• Requires third-party reports including an Appraisal, Property Condition Assessment, Zoning, Termite, Flood, and Seismic reports (for properties in specific areas), a Phase I Environmental Assessment, and a Seniors Housing Liability Assessment Report

• Replacement reserves are required ($300/unit per year)

• Typically requires 90% economic occupancy for 12 months (for Independent Living facilities) or 15 months (for Alzheimer's/Dementia Care or Skilled Nursing properties), though this may vary

• Typically requires $15,000 application deposit and $3,000 non-refundable processing fee

• Typically requires a 1% origination fee

• A 2% rate lock fee is required (refundable at closing)

• Commitment fees may also be charged

Case Study: Senior Housing in Portland

Experienced investor Teresa identified an excellent opportunity in the senior housing market. A well-maintained assisted living facility in Portland, Oregon, comprising 40 units was available for $7.5 million. The property had been operating successfully for several years and was an ideal addition to Teresa's growing portfolio of seniors housing.

Teresa planned to put down 20% of the purchase price ($1.5 million), leaving a balance of $6 million to finance. After carefully considering her options, she decided to apply for a Fannie Mae Seniors Housing Loan. Her loan request was well within the limits set by Fannie Mae for seniors housing properties, and her solid track record in the industry enhanced her application.

Accompanied by necessary third-party reports, Teresa submitted her application. Fannie Mae approved the request, offering a loan of $6 million with a fixed interest rate for a term of 30 years. The terms of the loan included a non-recourse clause, which limited Teresa's personal liability.

Thanks to the competitive interest rate and flexibility of the Fannie Mae Seniors Housing Loan, Teresa was able to acquire the assisted living facility, effectively expanding her senior housing portfolio. Additionally, the long-term amortization aligned well with her investment strategy, ensuring predictable cash flow over the years.

This is a fictional case study provided for illustrative purposes.