Borrowers Can Get 90% LTV Multifamily Loans from HUD, Fannie Mae, and Hard Money Lenders
When it comes to multifamily financing, most loans are capped at 75-80% LTV. However, some HUD multifamily loans, Fannie Mae multifamily loans, and hard money loans offer up to 90% LTV for qualified borrowers. Hard money loans are by far the easiest 90% LTV loans to qualify for, as even borrowers with bad credit or legal issues may qualify, though they carry the least desirable terms.
In contrast, Fannie Mae multifamily and HUD multifamily loans are generally reserved for only the most qualified borrowers, typically those with extremely good credit, significant multifamily ownership experience, and a net worth (exclusing their primary residence) of at least 100% of the loan amount.
HUD 221(d)(4) Loans
The HUD 221(d)(4) loan program for multifamily construction and substantial rehabilitation offers up to 90% LTV for properties utilizing the HUD Section 8 program. The program offers LTVs up to 87% for properties with a sufficient amount of affordable units, and up to 85% LTV for market-rate properties.
These HUD multifamily loans offer fixed-rate, fully-amortizing, non-recourse loan terms up to 40 years. This includes up to 3 years of interest-only multifamily construction financing, making the entire potential loan term up to 43 years. Minimum DSCR requirements are also quite low, with 1.11x for Section 8 properties, 1.15x for affordable properties, and 1.18x for market-rate properties.
HUD 221(d)(4) loans generally start at a minimum of $4 million, with some exceptions, but the average loan is $15 million+, with the maximum loan amount being $100 million or more. The major downside of the program is the fact that many loans take 6-12 months to close, as a wide variety of documentation is required, though loan processing times have sped up recently due to the implementation of HUD’s MAP (multifamily accelerated processing) program. These loans are also fully assumable with a 1% fee and lender approval.
HUD 223(f) Loans
The HUD 223(f) loan program is designed for the purchase or refinancing of stabilized multifamily properties. Like HUD 221(d)(4) loans, HUD 223(f) loans offer up to 90% LTV for properties utilizing the HUD Section 8 Housing Assistance Program (HAP). And, just like the HUD 221(d)(4) program, 223(f) loans offer LTVs up to 87% for properties with a sufficient amount of affordable units, and up to 85% LTV for market-rate properties. HUD 223(f) loans offer fixed-rate, fully-amortizing, non-recourse loan terms up to 35 years.
HUD 223(f) loans start at $1 million, with some exceptions, with a maximum loan amount of $100 million+. Like HUD 223(f) loans, these loans may take a long time to close, with an average closing time of seven months. 223(f) loans are fully assumable with a 1% fee and lender approval.
Fannie Mae Affordable Housing Loans
Fannie Mae Affordable Housing Loans are available for the acquisition and refinancing of affordable housing properties, including properties utilizing the HUD Section 8 program, properties with a Housing Assistance Payment (HAP) contract, or properties using the Low Income Housing Tax Credit (LIHTC) program. These loans offer LTVs up to 90% for qualified borrowers.
Fannie Mae Affordable Housing Loans offer terms between 10 and 30-years, with 30-year amortizations. Minimum DSCRs are set at 1.15x. Most loans are non-recourse. Loans start at between $750,000- $1 million.
Other Fannie Mae Multifamily Loans
In addition to its more widely used Affordable Housing Loan option, Fannie Mae also offers several other niche loan options offering up to 90% for qualified borrowers. These include Fannie Mae Rural Development Guaranteed Rural Rental Housing Program Loans, which are intended for housing development in rural areas. They also include Fannie Mae Reduced Occupancy Affordable Rehab (ROAR) Loans, which are designed for affordable properties with low occupancy that are in need of immediate rehab.
Other Fannie Mae options offering up to 90% LTV include Fannie Mae Moderate Rehabilitation Supplemental Loans for Affordable Properties, Fannie Mae MBS as Tax-Exempt Bond Collateral (M.TEB), and Fannie Mae Standard FHA Risk Sharing Execution Loans.
Hard Money Loans and Private Lenders
Some hard money lenders and private lenders, but not many, will finance properties up to 90% LTV, or even 100% LTV in some scenarios. These loans may have higher interest rates, often close to 20%, and may include higher origination fees (5%+). Some adventurous lenders may offer lower interest rates, closer to 5%, and longer terms.
Unlike traditional hard money loans, these higher leverage loans may involve more intensive background checks, higher credit scores, borrower net worth or income requirements, and higher minimum DSCR (debt service coverage ratio) requirements. They may also require additional third-party reports like appraisals or environmental assessments. Some 90% LTV loans may be available for construction financing, and may even allow for additional loan proceeds to fund the construction process.
Hard money or private lenders may offer similar loan structures for non-multifamily commercial assets, such as industrial, office, and retail properties.