Agency Loans
Fannie Mae® and Freddie Mac® financing for multifamily properties
Government-Sponsored Enterprise Loans
If you're interested in purchasing or refinancing a multifamily property, getting the right type of financing is key. Fortunately, the government-sponsored enterprises (GSEs) Fannie Mae® and Freddie Mac®, also known as the 'agencies' provide some of the best loan terms on the market. In fact, in 2018, the agencies issued more than $143 billion in multifamily loans, with Fannie Mae issuing more than $65 billion of loans and Freddie Mac issuing around $78 billion in multifamily financing.
However, it's important to realize that Fannie® and Freddie® don't actually provide these loans themselves. Instead, they work in concert with approved private lenders. Once an approved lender makes a loan to a borrower, Fannie® or Freddie® will purchase it. At that point, they will generally pool it with a variety of other loans in a process known as securitization, and will then sell the resulting bonds to investors on the secondary market.
What Makes Agency Loans So Great?
That's a good question — and we'll try our best to answer it. First, agency financing is (with few exceptions) non-recourse, which is a huge benefit for borrowers. Second, leverage for most agency loans goes to 80%, with up to 75% for cash-out refinances, which is slightly more generous than most banks or CMBS lenders.
Qualifying for Agency Loans
Qualifying for an agency loan isn't necessarily a walk in the park, but it's not nearly as difficult as getting approved for some kinds of financing, such as HUD/FHA multifamily loans. In most cases, borrowers need to have good credit (typically a 660-680 minimum FICO score), and a net worth of at least 100% of the loan amount, not including retirement accounts. They should also have liquidity of at least 10% of the total loan amount.
When it comes to the property itself, most agency loan products permit up to 80% LTV, with DSCRs as low as 1.25x. Some loans, like the Freddie Mac Small Balance Loan (SBL) provide substantially better terms to properties in larger MSAs, while for other loan products, this isn't as much of a factor.
What are the benefits of agency loans for multifamily properties?
The benefits of agency loans for multifamily properties include non-recourse financing, leverage up to 80%, long amortizations, and low rates. Additionally, there are a plethora of loan types offered, with specialized loans for affordable/LIHTC properties, senior living facilities, cooperative apartments, student housing, and more.
Explore Agency Loan Options
Connect with our team to learn how agency loans can benefit your multifamily property financing.
Contact Our Team