If you own an apartment complex worth $1 million or more and have a need to refinance in the next few years, it’s worth comparing HUD and Fannie Mae multifamily loan programs before you commit to either one. Mixed-use buildings may also qualify, provided the commercial component makes up about a third or less of total square footage.
How Is This Different From Bank Loans?
Banks are often lending from their own resources, and smaller local banks tend to cover local, smaller properties. Bank loans tend to offer shorter terms and amortization, with full or partial recourse.
With larger multifamily projects, Fannie Mae and HUD loans are programs often facilitated by a specialty lender. HUD and Fannie Mae guarantee the loans; they don’t make them directly.
The Differences Between HUD and Fannie Mae Multifamily Loans
- Minimum loan: Fannie Mae $1,000,000 | HUD $3,000,000
- Maximum loan: Fannie Mae None | HUD None
- LTV: Fannie Mae 75–80% | HUD 80–87%
- Term: Fannie Mae 5–30 years | HUD 35 years
- Amortization: Fannie Mae 30 years | HUD 35 years
- DSCR: Fannie Mae 1.25–1.55 | HUD 1.176
- Loan fee: Fannie Mae 1.00% | HUD 2.25%
- Interest-only payments: Fannie Mae 1–10 years | HUD not available
- Recourse: Fannie Mae non-recourse | HUD non-recourse
- Time to close: Fannie Mae 60 days | HUD 180 days
- Assumable: Fannie Mae yes, 1% fee | HUD yes, 0.50% fee
- Prepayment penalty: Fannie Mae yield maintenance or declining | HUD declining
- Required occupancy: Fannie Mae 90% for 90 days | HUD 90% for 90 days
- Mortgage insurance: Fannie Mae not required | HUD required
- Minimum net worth: Fannie Mae equal to loan amount | HUD not specified
As with any financing decision, the right program depends on your specific deal, your timeline, and how much flexibility you need around prepayment and recourse. If you’re weighing your refinancing options or want to talk through financing strategies for an upcoming acquisition, we’re happy to walk through the numbers with you.
