Apartment loans can either be a short-term or permanent loan that would fund the purchase and/or renovation of apartment properties with term rates between 5-12%.*
There are several types of apartment loans, which include:
Government backed apartment loans are offered by Fannie met, Freddie Mac, and the FHA. The government agencies offer loan sizes between $750,000 and more than $6,000,000. The general requirements for these three loans are that of a down payment of at least 20%.
There are individual requirements for the loan type as follows:
Fannie Mae requires a credit score of at least 680, a DSCR of 1.25, Occupancy rate of 85%, and liquidity of 9+ months.
Freddie Mac requires a credit score of at least 650, a DSCR of 1.25, occupancy rate of 90% and liquidity of 9+ months.
FHA requires a credit score of least 650, DSCR of 1.15, occupancy of 95% and liquidity of 9+ months.
These loans are originated by traditional banks and sit on their balance sheets. A Bank Balance Sheet loan is not backed by the federal government, instead, banks manage there own process of issuing loans based on internal discretion. Bank Balance sheet loans are ideal for investors that do not reside in the same community that the apartment building is located. These loans have a minimum of $500,000, LTV up to 80% and a minimum down payment of 20%. Rates are typically 5-6%, closing costs between 2-5%, and prepayment penalty of 1% with terms between 15-30 years. A minimum credit score of 640 is required, DSCR of 1.25 and occupancy of at least 90%.
These loans are less common because investors usually purchase apartment buildings as long-term investments. These loans are ideal for fix and flip investors who desire a money loan to quickly purchase and renovate while competing with an all cash buyers quick timeline. The minimum loan amount typically is $1,000,000, LTV up to 80%, LTC up to 75%, a down payment of 25 to 30%. The rates are typically 6-10%, exit fees of 1%, and prepayment penalty of 1%. The terms tend to be between 6-36 months.
*Please note the lending market changes. All rates and terms on this page are for illustrative purposes only and are subject to change at any time. For exact rates and terms, please call the office or fill out our quote form.
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