Multifamily Mortgage Loans

There are different financing types available for both owner-occupied and investment property multifamily homes. Some of the more popular options are conventional loans (Fannie Mae and Freddie Mac), agency financing, debt funds and online marketplaces.


The loan qualifications for these multifamily loans typically include current and projected rental income of the property and the borrower’s credit score. Many lenders also have minimum down payment requirements and required reserves.


Pre-qualification is step one in the mortgage loan process and is considered a dipping toe into the loan waters. Pre-qualification gives a lender a broad view of the borrower’s financial situation and offers a rough estimate of the maximum amount of mortgage he or she is eligible to receive.

To qualify for a multifamily mortgage loan, the borrower must meet certain criteria. Generally, lenders will expect the borrower to have good credit and sufficient liquid assets to cover the debt. Additionally, borrowers will need to meet minimum debt-to-income ratio requirements. Many types of multifamily financing also require borrowers to maintain a set reserve amount for property repairs.

The Fannie Mae Multifamily Mortgage Business provides financing for workforce housing, a segment of the nation’s rental and for-sale market that serves families earning below area median incomes. The business works with select lenders that demonstrate financial strength and extensive experience in the multifamily industry. These lenders sell loans to Fannie Mae through mortgage-backed securities (MBS) that investors purchase on the capital markets.

In the past, lenders who financed multifamily projects included banks, life insurance companies and conduits that provided commercial mortgage-backed securities (CMBS). However, most of these institutions exited the market in the aftermath of the 2008 financial crisis. This left Fannie Mae, Freddie Mac and the Federal Housing Administration as the main providers of liquidity in the multifamily market.


A pre-approval is the next step up from getting a prequalification and requires much more involvement from you as the homebuyer. During the pre-approval process, you complete an official mortgage application and provide your lender with extensive information about your financial background and credit history. This entire package is then reviewed by a third-party underwriter to give you an idea of the loan amount and interest rate you can expect to receive. This process typically takes 1-2 hours.

While every lender is different, most look for two years of stable employment and a credit score of 700 or above. Changing jobs or industries can affect your credit score and risk profile, which could lead to an approval denial. Therefore, it is important to consult your mortgage lender about career changes before making any major decisions.

Multifamily loans are more complex than single-family loans and require more rigorous underwriting to ensure borrowers can operate the apartment properties that serve as their collateral. This includes an assessment of the underlying tenants, the property management team and other factors. In addition, Fannie Mae Multifamily only purchases Multifamily mortgage loans from lenders that can demonstrate financial strength, extensive multifamily experience and strong portfolio performance and are willing to share in the risk of losses associated with a multifamily mortgage loan.

In addition, most loan types require borrowers to have reserves to cover unforeseen expenses and to maintain the property’s condition over time. This can increase a borrower’s cash outflow and reduce his or her flexibility to make capital investments in the future.


The appraisal is a key part of the multifamily mortgage loan process. It establishes the property’s market value to ensure that you are not over-paying for the home. It also protects the lender from providing a loan on a property that is not worth the value referenced in the sales contract.

Unlike a BPO, an appraisal is a more formal evaluation of a property for lending and other financial purposes. It includes a comprehensive analysis of the market and a detailed review of the property. In most cases, an appraiser will visit the property several times to make sure that all the information is accurate.

An appraisal for a multifamily mortgage is usually more complicated than that of a single family home. The lender will need to verify that the property is in good condition and has a high quality tenant base. In addition, the lender will need to confirm that you can afford the mortgage with the rental income from the property.

An HUD multifamily appraisal is a comprehensive examination of a project, including local property trends, the size, composition and rent of each unit, expenses, potential earnings, and amenities. This helps to ensure that the borrower is capable of successfully operating and maintaining a multifamily project. HUD also requires that all third party analysts complete a standard analysis of the project, as well as a variety of standard certifications.


Multifamily loans are used to finance real estate properties with more than one unit. They may be conventional, government-backed or private. The type of financing you select will depend on your business goals and qualification requirements. Conventional multifamily mortgages are best for financing owner-occupied residential homes with two to four units and apartment complexes with five or more units. Government-backed multifamily mortgages typically offer lower rates and more flexible eligibility criteria.

Multifamily lending is a different business than single-family lending and requires additional financial expertise and experience from the lender. The loan structure is also more complex than single-family mortgages. The lifecycle of a multifamily loan is longer and the lending standards are stricter. For example, current Small Loan credit standards require a detailed review of a borrower’s track record, property management experience, financial capacity and other real estate holdings. These standards are often not required for other financing types.

The closing process for a multifamily loan can be lengthy and requires a great deal of paperwork. A few of the main pieces of documentation include a credit authorization, financial statements, lease information and as applicable, entity documents. A copy of the loan agreement must also be provided. Servicing a multifamily loan is more expensive than servicing single-family mortgages and requires the regular collection, review and processing of a variety of individualized data elements.