General Loan Options

 

 

Apartment / Multifamily Loan Interest Rates

HUD/FHA Apartment Loan Rates

 

 

 

 

 

 

With the lowest long-term apartment loan rates fixed for 35 years, with a 35 year amortization this is by far our best Apartment Loan Program in the United States. FHA multifamily has non-recourse, and assumable financing for both purchasing and refinancing of apartment buildings. The maximum loan is 85% LTV for a purchase, 85% for a rate and term refinance, and 80% for a cash out refinance.  The smallest size loan is $2,000,000. There is no maximum on loan size.

 

If your building is green construction, your rate can be lowered by 0.35%.  If you are planning on keeping this loan forever and passing the property on to your kids someday, this could be the best non-recourse loan for you and the last loan that you will ever need to place on the property.

 

FHA Multifamily Purchase or Refinance Loan Guidelines:

 

1.    Up to 85% LTV

2.   Low 35 year fixed rate

3.   Amortization has a maximum of 35 years

4.   Term 35 years

5.   Loans are non-recourse

6.   For a fee of .50%, loans can be assumed

7.   For properties to qualify, there must be at least 3 years lapsed since the date of certificate of occupancy.

8.   Senior Living Properties that have the age restriction of 62 years old or older are permitted.

9.   There is an occupancy requirement of at least 90% for a 90-day period.

10.  $15,000 for each unit is the maximum allowed for repairs.

11.   Mortgage Insurance Required

 

 

 

 

 

Fannie Mae Apartment Loan Rates

 

 

 

 

 

 

 

 

 

 

 

 

Even during the coronavirus recession, you can take cash out  when refinancing with a Fannie Mae Multifamily Loan for any reason up to 75%.  With some of the lowest fixed apartment loan rates in the United States, interest rates are tied to the 5,7,10, and 30 year treasury yields plus a margin. If you are going to keep the property for a long time, think about fixing the rate for 30 years.  After 15 years, you can prepay without a penalty.

 

Fannie Mae also known as the Federal National Mortgage Association is publicly traded.  Rates go up the longer you fix the rate. This program is non-recourse and requires a net worth equal to the loan size and 12 months of post-closing liquidity. Tax returns are not required, so these loans are easier to qualify for than commercial bank loans.

 

Fannie Mae creates mortgage pools that are securitized on Wall Street. Lenders originate apartment loans using their own funds, and then sell the loans to Fannie Mae. This gives them their money back to lend again. In the United States, Fannie Mae multifamily mortgages give the borrower access to some of the lowest fixed rates available in America.

 

Fannie Mae Multifamily Loan Guidelines:

 

1.    $750,000 is the minimum amount loaned with no maximum

2.   80% is maximum LTV, or 75% if you want cash out

3.   5, 7, 10, 12, 15, 20 and up to 30 year fixed rate terms available.

4.   30 year amortization period

5.   Interest Only Available

6.   Assumable with a 1.00% fee

7.   Non-recourse loans available

8.   Fannie Mae can do student housing

9.   Fannie Mae can also do independent senior living

10.  Net worth minimum is the size of the loan

11.   Minimum credit score needed is 680

12.  No Tax Returns Required

13.  Minimum DSCR  is 1.25

14.  Post Closing Liquidity required is 9 – 12 months mortgage payments

15.  Occupancy requirement is 90% for 90 days

16.  Fannie Mae allows up to 35% commercial space. This would be for mixed use property.

17.  Prepayment penalty is yield maintenance or declining

18.  The loan is assumable

19.  There are affordable housing programs allowed

 

 

 

 

 

 

Freddie Mac Apartment Loan Rates

 

 

 

 

 

 

 

 

Freddie Mac apartment loan rates are tied to the 5, 7 and 10 year treasury yields. Freddie Mac multifamily loans also have some of the lowest rates available in America if your property is located in a large city. Rates are based on LTV and the size of the MSA. Once the loan is made, it is sold to Freddie Mac where securitization takes place on Wall Street using mortgage pools. If you are looking for a cash out refinance, you can take cash out for any reason up to 75% LTV. Available with a Freddie Mac apartment loan is market rate, student housing, affordable housing, and senior housing.

 

The fixed apartment loan rate periods for Freddie Mac are 5 years, 7 years, or 10 years. Interest only options are available 1 year to 10 years. Loans are amortized for 30 years. After the initial fixed rate term, there is an option to extend the loan with a floating rate for up to a 20 year loan term.  Qualification are not as strict for Freddie Mac loans as it is for conventional bank loans. This is because with Freddie Mac, loans are mostly made to the property. Freddie Mac loans do not require tax returns. Most Freddie Mac loans are non-recourse. The minimum credit score requirement is 660.

 

Freddie Mac Multifamily Loan Guidelines:

 

1.    $1,000,000 is minimum loan size

2.   30 year amortization period

3.   Full term interest only payments available

4.   80% is maximum LTV rate and term, 80% maximum with cash out

5.   Rates are fixed 5 years, 7 years, or 10 years.

6.   The loan can convert to an ARM (adjustable rate mortgage) for an additional 10 years for a total 20 year term

7.   The loan is assumable

8.   There is an occupancy requirement of 90% for 90 days

9.   680 s the minimum credit score accepted

10.  Net worth minimum is the loan size

11.   Liquidity required post-closing is 9 to 12 months

12.  You don’t need to submit tax returns for the majority of Freddie Mac loans.

13.  Loans are non-recourse

14.  Your loan can be step-down prepayment

15.  1.2 to 1.25 DSCR

16.  Declining or Yield Maintenance Prepayment Penalty

 

 

 

 

 

CMBS Apartment Loan Rates

 

 

 

 

 

 

What are commercial mortgage backed security (CMBS) loans? These loans are bundled with loans with the same maturity in mortgage pools and sold as mortgage backed securities on wall street. The rates are tied into 5 and 10 year treasury yields. These loans do not require tax returns and have lower net worth requirements than Fannie and Freddie, but require strong historical incomes. CMBS apartment loan rates are higher than Fannie Mae and Freddie Mac, but are still decent.   For more on CMBS loans go here.

 

CMBS Loan Guidelines:

 

1.    $2,000,000 is the minimum amount loaned with no maximum

2.   75% is maximum LTV with or without cash out

3.   5, and 10 year fixed rate terms available.

4.   30 year amortization period

5.   Interest Only Available

6.   Assumable with a 1.00% fee

7.   Non-recourse loans available

8.   Net worth minimum is negotiable

9.   Minimum credit score needed is 660

10.  No Tax Returns Required

11.   Minimum DSCR is 1.25 to 1.35

12.  Post Closing Liquidity required is negotiable

13.  Occupancy requirement is 90% for 90 days

14.  The type of prepayment penalty is yield maintenance or defeasance

15.  The loan is assumable

 

 

 

 

 

Life Company Apartment Loan Rates

 

 

 

 

 

 

 

 

 

 

 

These loans are offered by insurance companies and have some of the very lowest long term apartment loan rates. If you want to fix the rate for 20 to 25 years, this can be done.  On the downside, leverage only goes up to 70% with 65% LTV preferred. Life company financing requires financially strong experienced borrowers and A class or B class properties in larger MSAs.

 

Life Company Loan Guidelines:

 

1.    Loan size: $10,000,000–150,000,000 plus

2.   LTV: 70%

3.   25–30 year amortization

4.   Nonrecourse

5.   5–25 year fixed rates

6.   5–25 year term

7.   Tax returns required

8.   No global or debt to income ratio

9.   Loan fee: 1%

10.  Primary and secondary markets

11.   720 minimum credit score

12.  Minimum net worth equal to 1.5 times loan amount

13.  Post-closing cash: 20% of loan amount

14.  1.25 minimum DSCR

15.  Yield maintenance prepayment penalty

16.  90% occupancy required

17.  Assumable with a 1% fee

18.  Interest-only available

19.  Rate lock at loan approval

20. Refundable rate-lock deposit required

 

 

 

 

 

 

Private Debt Fund Bridge Apartment Loan Rates

 

 

 

 

 

 

Private Debt Funds are regulated by the Securities and Exchange Commission (SEC).  Funds come from accredited or sophisticated investors. These loans are easier to qualify for than conventional bank financing with lower net worth and liquidity requirements.  Tax returns are required, but there is no debt to income ratio done. The lender just wants to make sure all your enterprises are operating in the black.  These non-recourse loans are great for repositioning opportunities where the property does not currently cash flow a conventional loan, but after value adding like operational improvements, cosmetic upgrades or rehabbing, the property will be a winner. For more on non-recourse bridge loans go here.

 

Private Debt Fund Loan Guidelines:

 

1.    Loan size: $3,000,000–75,000,000

2.   LTV: 75% with cash out

3.   Up to 80% cost of construction

4.   Interest-only

5.   Nonrecourse

6.   1–4 year term

7.   Tax returns: required

8.   Loan fee: 2–3%

9.   640 minimum credit score

10.  Minimum net worth: negotiable

11.   Post-closing cash: negotiable

12.  1.00–1.20 minimum DSCR

13.  6–12 months prepayment penalty

14.  Assumable: no

15.  Primary and secondary markets

 

 

 

 

 

 

Regional Bank Apartment Loan Rates

 

 

 

 

 

 

 

 

Apartment loan rates are lower than community banks and can be fixed for 3 – 10 years.  Community banks prefer to fix apartment loan rates for a maximum of 5 years. Many regional banks lend in most communities within the state they are located and often in neighboring states as well. One of the best features of these loan programs is that they offer 30 year fully amortizing loans.  Financing starts out with a fixed rate period followed by an 6 month adjustable rate tied to SOFR if you want to keep the loan for a full 30 years.   So if you are concerned about your loan ballooning, this might be the loan for you.  Loans require a net worth equal to the size of the loan, good income on tax returns, 12 months of payments in post-closing liquidity.

 

Regional Bank Loan Guidelines:

 

1.    $1,000,000 minimum loan size

2.   25 - 30 year amortization period

3.   75%  is maximum LTV

4.   Rates are fixed 3 – 10 years.

5.   The loan can convert to an ARM (adjustable rate mortgage) for an additional 10 years.

6.   The loan is assumable

7.   680 is the minimum credit score accepted

8.   Net worth minimum is the loan size

9.   Liquidity required post-closing is 12 months

10.  Tax Returns are required

11.   Loan is Recourse

12.  Step down prepayment penalty

13.  1.2 to 1.25 DSCR

14.  Occupancy Requirements flexible

15.  Mixed use allowed

 

 

 

 

 

 

Poor-Credit  & Foreign Investor Secondary Market Apartment Loan Rates

 

 

 

 

 

 

If your credit is less than perfect, or you have had a bankruptcy, foreclosure, some late payments or tax liens, these loan programs have much better rates and terms than hard moneylenders do. Interest rates are based on credit score. Tax returns are require. You do need to show that you have enough income to make ends meet. If you do have low credit scores, consider taking out one of these loans for 3 – 5 years. That should give you plenty of time to improve your credit scores and then you can apply for a much better apartment loan rate program. For more on bad/poor credit loans go here.

 

Program Guidelines and Requirements:

 

1.    Loan size: $500,000–6,000,000

2.   LTV: 70% with cash out

3.   25- or 30-year amortization

4.   Nonrecourse

5.   2–5 year term

6.   Tax returns: not required

7.   Loan fee: 1–2%

8.   Rates based on credit score

9.   540 minimum credit score

10.  Minimum net worth: negotiable

11.   Post-closing cash: negotiable

12.  1.25 minimum DSCR

13.  Declining prepayment penalty

14.  Assumable: no

 

 

 

 

 

 

Mezzanine Debt Apartment Loan Rates (Secondary Financing)

 

 

 

 

 

 

At up to 16.00% interest, mezzanine debt might seem outrageously expensive. But in reality it is not when you consider the huge risk the mezz lender is taking having a small second after a large first mortgage. Usually mezzanine debt represents 10% to 15% of the capital stack, and is secured after the first mortgage. The mezz loan rate when combined with a very low first mortgage rate will usually have a very affordable blended rate. For example if the first mortgage is at 3.95% at 75% LTV and the Mezzanine debt rate is at 15.00% at 10% LTV the blended rate will be about 4.35%. Now that seems affordable; especially if you are able to leverage up to 85%.

 

Mezzanine debt is not really a loan. The lender takes a security interest in the ownership entity like an LLC that owns the property and is not in second position on title. This is because most low rate first mortgages do not allow seconds. The mezz piece has to be coterminous with the first mortgage. For more on Mezzanine Debt go here.

 

Mezzanine Debt Guidelines

 

1.    $1,000,000 minimum loan size

2.   Purchases or Refinances

3.   Term and amortization is coterminous with the first mortgage

4.   Rates are fixed 5 – 10 years.

5.   This debt is usually not assumable

6.   680 is the minimum credit score accepted

7.   Net worth minimum is the loan size

8.   Tax Returns are usually not required

9.   1.10 to 1.20 DSCR (Combining both loans)

10.  Occupancy Requirements flexible

11.   Mixed use allowed

 

 

 

 

 

 

Hard Money Bridge Apartment Loan Rates

 

 

 

 

 

 

Although they have very high apartment loan rates, some hard money lenders can close in a week.  They are making the loan to the property, so you do not have to have perfect credit or a large net worth. These lenders get their money from a warehouse line of credit or from private investors.  They primarily do bridge loans, but can also lend to those who have bad credit.  They like to get their money back within 18 months, so you will need a good exit strategy such as selling the property to get a loan from them.  For more on hard money loans go here.

 

Hard Money Loan Guidelines

 

1.    Loan size: $750,000–25,000,000

2.   LTV: 65–75%

3.   Up to 75% of cost of construction

4.   Interest-only

5.   Recourse and nonrecourse

6.   1–2 year term

7.   Tax returns: not required

8.   Global ratio: no

9.   No minimum credit score

10.  Net worth requirement: minimal

11.   Post-closing cash: minimal

12.  6–12 months prepayment penalty

13.  Post-closing cash: negotiable

14.  Debt service ratio: 1.00 or less

15.  Assumable: no

 

 

 

 

 

 

Construction Apartment Loan Rates

 

 

 

 

 

 

 

 

 

During the Coronavirus recession, most lenders are not doing multifamily construction. It is difficult for them to know what the future will bring. Lenders are worried that rents will be going down along with real estate values. Also there is uncertainty about absorption. How long it will take the completed property to fill with tenants to market occupancy. FHA has a great construction roll over to permanent loan program which is open for business during recessions. Read more below

 

FHA Multifamily Construction Roll Over to Permanent Loan: Construction Perm Loan is Fixed for 40 Years with a 40 Year Amortization

 

FHA new construction loans have incredibly great rates and terms. With an 85% of Cost 2 year construction loan and then a 40 year low-rate fixed perm loan with a 40 year amortization, you can see why this is the best construction to perm loan in America.   Apartment Loan store has specialized in FHA new construction apartment loans in all 50 states since1999. FHA Multifamily Construction Loans are guaranteed by the US Department of Housing and Urban Development.

 

What is the reason that FHA apartment new construction rates are so low? It is that FHA provides the mortgage insurance for these new construction loans. This allows the loans to then be sold on Wall Street in the form of Gennie Mae bonds. The American government guarantees these bonds. This makes them attractive to investors who are looking for low risk investments in the national as well as the international arena. One of the best features is that the loan is non-recourse and assumable. It can also be used for heavy rehabilitation.

 

FHA Multifamily new construction loan terms:

 

1.    $5,000,000 is the minimum loan size

2.   85% of Cost

3.   No Appraised Value except for the land

4.   40 year fixed rate perm loan

5.   40 year amortization

6.   49 year term

7.   Mortgage Insurance is required

8.   Declining prepayment penalty the first 10 years

 

Please call for additional Multifamily Loan Programs. Our Funds come from Fannie Mae, Freddie Mac, FHA, Wall Street Hedge Funds, CMBS, Insurance Companies, Private Finance Companies, Real Estate Investment Trusts, Pension Funds, National Banks, Regional Banks, and Community Banks.

 

 

 

 

 

 

California Commercial and Apartment Loan Update

 

Over recent years, this cost has gradually risen due to factors like the state of the economy, increased demand for housing, and rising interest rates. On the other hand, construction costs for a particular property depend on several factors, including location, size, and value of the land.   For example, the average cost of renting one square foot of office space in California is $481.95, which is much higher than the industry average, according to Statista. In California, the prices are driven by labor and material costs, which have surged about 25% in the past decade, according to the Terner Center for Housing Innovation. Given the high construction costs in California, real estate loans are vital. Here is a look at how commercial real estate loans work in California.

 

 

CALIFORNIA REAL ESTATE LOANS

 

Unlike the standard residential mortgage that aids in purchasing or building a residential property, a commercial real estate loan finances commercial property projects including:

 

-   Purchase of a commercial property

-   Construction of a commercial building

-   Renovation of a commercial building

-   Refinancing commercial property at lower interest rates

 

It is worth noting that you can access up to $15 million worth of commercial loans in California, according to the California Credit Union (CCU).

 

 

FACTORS DETERMINING THE APPROVAL OF COMMERCIAL REAL ESTATE LOANS

 

Although the process of applying for a commercial loan in California is straightforward, the lender may either approve or reject your application based on several factors, including:

 

-   Business Finances – According to the National Federation of Independent Business (NFIB), over 80% of small businesses in the U.S. fail due to     cash flow issues. These problems can result from property damage, lawsuits, or a lack of demand for products. For this reason, most lenders consider small businesses as high-risk customers, so expect them to scrutinize your business finances before approving your commercial loan. More specifically, the lender will calculate your debt service coverage ratio, which is the ratio of the annual net operating income (NOI) of your business to the annual total debt service. This ratio basically indicates whether your business is running at a profit or a loss and whether you will be able to repay the loan. Additionally, the lender will also check your business credit score to determine your loan eligibility.

 

-   Personal Finances – Because small business owners are typically the sole managers of the company, lenders also look at their personal finances. For instance, if you have a good credit score with a reliable source of income, the lender may consider you low-risk and offer you a commercial loan. Contrarily, the bank may reject your application if your finances indicate an inability to repay the loan.

 

-   Size of Property Occupancy – To qualify for a commercial real estate loan, your lender will require your property to have at least 51% occupancy by your business. Otherwise, you should consider an investment loan, which is usually suitable for rental properties, considering the occupancy can go lower than 51%.

 

 

WHERE WE GET COMMERCIAL LOANS IN CALIFORNIA

 

Once you know how commercial loans work in California, you should now embark on finding the right loan at suitable interest rates. Any of the following institutions will offer commercial loans:

 

-   Banks – Borrowers can get a commercial loan from a reputable bank at affordable interest rates, although most banks only offer up to $1 million worth of loans to small businesses. The downside of borrowing from banks is that the application process is slow due to the strict and detailed underwriting measures, as well as increased banking regulations, as reported by the National Association of Realtors (NAR).

 

-   SBA loans – Although the Small Business Administration (SBA) doesn’t finance small businesses directly, they partner with lenders and set regulations on business loans to help make them easily accessible by small business owners. It also reduces the risk for lenders in case the borrower defaults on the loan, with the SBA repaying the lender up to 85% of the loan balance. There are different types of SBA loans, so carefully choose what is suitable for your business.

 

-   Commercial Lenders – These are financing companies that approve commercial real estate loans faster, due to their less rigid underwriting measures. While you may access a loan within a few weeks from application, the interest rates are relatively higher.

 

Other commercial real estate loan lenders include conduit lenders, P2P marketplaces, and hard-money lenders.

 

 

Based on the size of the loan and the repayment period, the lender will also offer you other terms of repayment, including a grace period during which your loan will not accrue interest, as reported by CBNC News.

 

Use these insights to get the right California real estate loan for your commercial property construction, renovation, or refinancing.

 

Do you have any additional questions about how commercial real estate loans work in California?

Let us Know!