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Advantages of Agency Loans for Multifamily Apartment Investors and Current Owners


Agency loans offer several benefits that local banks and other private lenders are often unable to provide.  These benefits include:

  • Up to 80% loan-to-value for both purchases and refinances. 
  • 75% loan-to-value for cash-out transactions. 

Examples of agencies that offer these exceptional terms include Fannie May, and Freddie Mac. Below, we have gathered additional information on the advantages of choosing agency loans for your multifamily apartment complex and the options available with these specific agency lenders.

Fannie Mae and Freddie Mac Agency Loans

Agencies such as Fannie Mae and Freddie Mac welcome borrowers with some of the most advantageous loan terms in the multifamily apartment market. Both Fannie Mae and Freddie Mac work with approved lending partners that provide borrowers with several different lending options based on the criteria that they set forth.  Upon completion of the transaction between the lender and the borrower, Fannie Mae and Freddie Mac purchase the loan and place it in a security pool, and sell bonds to investors on the secondary market.

Additional Benefits of Fannie Mae and Freddie Mac Loans

Here are just a few of the main reasons why many of our clients choose agency loans from Fannie Mae and Freddie Mac, in addition to the exceptional loan-to-value terms noted above.

Excellent Interest Rates

The interest rates on agency loans are typically a half to three quarters a percent lower than bank loans or private lenders. 

Non-Recourse Loans

Fannie Mae and Freddie Mac loans used to buy or refinance apartment buildings are non-recourse.  The debt is secured only by the loan collateral (i.e., your multifamily apartment project). In the event of default, the borrower is not personally liable for further compensation if the debt is not repaid.  However, if fraud or deception is identified in the financial reporting or used to obtain the loan, the lender can pursue the borrowers’ personal assets to make the debt whole. 

Choose from Various Loan Term Options

Several different loan terms are available with Fannie Mae and Freddie Mac.  Choose from interest-only options, fixed-rate options, and adjustable-rate options.  The loan term amortization can be up to 30 years. Once the fixed-rate period ends a balloon payment is due, at which point many borrowers sell, refinance with another agency loan, or select long-term Federal Housing Administration (FHA) financing.

Do I Qualify for an Agency Loan?

Agency lenders determine eligibility on a case-by-case basis, and will make their decision taking into account the individual property and the strength of the market where the property is located. Whether or not your project qualifies will depend on various factors, including the following and more:

  • Whether occupancy is increasing or decreasing in your property location.
  • Whether values are increasing or decreasing.
  • Property condition.
  • Net income.

After your initial mortgage has been held for a year, Fannie Mae will allow subordinate debt, and provide a second mortgage. Subordinate financing can allow the loan to increase up to a maximum of 80% loan-to-value.

Apply for Your Agency Loan

Borrowers should be able to provide their broker or lender with the following documents to obtain a preliminary loan analysis and quote:

  • The projects trailing 12-month operating statements.
  • Current rent roll.
  • Most recent mortgage statement.
  • Management company resume.
  • The Sponsor’s (owner’s) resume.
  • Personal financial statements.
  • Schedule of Real Estate Owned (SREO), reflecting your multifamily apartment or agency experience.

Contact LSG Lending Advisors to speak with an expert about agency loans for your multifamily apartment purchase or refinance transaction. Request your free quote and consultation today.

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