We often get questions about how to finance multifamily properties. Without a question, Agency Loans are one of the best sources of financing for multifamily properties. So what is an agency loan? An agency loan typically means a loan securitized or insured by one the government agencies: Fannie Mae, Freddie Mac or the Federal Housing Authority (FHA).
Fannie Mae is the largest, private-sector provider of multifamily financing. Fannie Mae operates in most sectors of affordable and market-rate rental housing. Since Fannie Mae cannot originate loans directly to borrowers, it uses a nationwide network of correspondents called Delegated Underwriting and Servicing (DUS) lenders that have been approved to underwrite and make mortgage loans. The DUS lenders don’t hold the loans, but instead sell them to Fannie Mae, which must purchase them under the DUS agreement.
Fannie Mae provides financing for acquisitions, refinance and rehabilitation of multifamily properties- all this through its DUS lender network. The lender can be very flexible in regard to loan terms, offering fixed-rate loans, variable-rate alternatives, interest only adjustable rate mortgages (ARMs), convertible ARMs, structured ARMs, and discount mortgage-back securities (MBS).The following are examples of some of the rate options:
Freddie Mac also purchases multifamily mortgages from approved lenders in exchange for cash of multifamily, mortgage-related securities. Both adhere to the 90/90 rule, meaning the agencies want a property stabilized to the extent of having 90 percent occupancy for 90 days prior to funding; typical maximum loan-to-value is 80%; debt service coverage; and terms are five years to 30 years with 30-year amortizations.
The three biggest difference between the two government sponsored enterprises (GSEs) are regionalization, delegating responsibility, and risk based pricing.
FHA-insured loans are made by third-party, private sector lenders that have been approved for participation. Under this program, HUD insures repayment to the lender of the amounts payable under the mortgage loan.
Contact the multifamily financing experts at Source Realty Capital to access the agency lender network.