Today’s rates for a wide range of commercial property and loan types.
Check Today's Rates →
FNMA: Fannie Mae Mortgage Association in Commercial Real Estate
FNMA, or Fannie Mae Mortgage Association, is a U.S. government sponsored enterprise that focuses on expanding housing opportunities across the United States. To do so, it purchases residential mortgages from lenders and securitizes, or pools them, into mortgage-backed securities. While Fannie Mae does not offer direct commercial real estate loans, investors can rent a certain amount of commercial space if they use an FNMA loan to purchase a multifamily property.
What is FNMA in Commercial Real Estate?
FNMA, or Fannie Mae Mortgage Association, is a U.S. government sponsored enterprise that focuses on expanding housing opportunities across the United States. To do so, it purchases residential mortgages from lenders and securitizes, or pools them, into mortgage-backed securities. While Fannie Mae does not offer direct commercial real estate loans, investors can rent a certain amount of commercial space if they use an FNMA loan to purchase a multifamily property.
For example, apartments purchased with a Fannie Mae DUS loan are permitted to have up to 35% of their property's space occupied by commercial tenants. Or, they can derive 20% of the property's income from commercial sources (whichever is less).
Popular Fannie Mae Multifamily Loans
Some of the most popular kinds of Fannie Mae multifamily loans include:
Fannie Mae DUS Loans: The most popular multifamily loan program offered by Fannie Mae, the DUS program allows for loans of $3 million or above.
Fannie Mae Multifamily Small Loans: These multifamily loans are sized between $750,000 and $5 million, and offer streamlined underwriting and documentation requirements.
Fannie Mae Affordable Housing Loans: With a minimum loan size of $1 million, this program is designed especially for properties using the Section 8 Housing Assistance Program (HAP), projects with expiring LIHTC tax credits, or projects using other, specific, affordable housing arrangements.
Fannie Mae Senior Housing Loans: With a minimum loan size of $5 million, these loans are available to independent living, assisted living, and Alzheimer’s/Dementia care projects for senior citizens.
Leverage: Maximum 80% LTV
DSCR: 1.15-1.30 minimum DSCR
Recourse: Non-recourse, standard carve-outs apply
Loan Term: 5-30 years
What is Fannie Mae Mortgage Association?
Fannie Mae Mortgage Association, or FNMA, is a U.S. government sponsored enterprise that focuses on expanding housing opportunities across the United States. To do so, it purchases residential mortgages from lenders and securitizes, or pools them, into mortgage-backed securities. While Fannie Mae does not offer direct commercial real estate loans, investors can rent a certain amount of commercial space if they use an FNMA loan to purchase a multifamily property. For example, apartments purchased with a Fannie Mae DUS loan are permitted to have up to 35% of their property's space occupied by commercial tenants. Or, they can derive 20% of the property's income from commercial sources (whichever is less).
In addition to Fannie Mae, its brother corporation, Freddie Mac, also purchases and insures multifamily mortgages, including some that allow for a degree of commercial property use. For example, properties purchased with a Freddie Mac Small Balance Loan (SBL), can derive up to 40% of their income from commercial rents.
What types of commercial real estate loans does Fannie Mae offer?
Fannie Mae offers a variety of loans for commercial real estate, including fixed-rate loans with 5- to 30-year terms, variable-rate loans, and interest-only options. Loan-to-value (LTV) ratios of up to 80% may be permitted. Fannie Mae also allows a certain portion of a property to be leased to commercial tenants, often between 15% and 25%, depending on the specific loan program.
For more information, please see the following sources:
What are the eligibility requirements for a Fannie Mae commercial real estate loan?
To be eligible for a Fannie Mae commercial real estate loan, you must meet the following requirements:
- You must have a minimum loan amount of $1 million.
- You must be purchasing a multifamily property.
- You must be able to rent a certain amount of commercial space.
- You must be able to derive 20% of the property's income from commercial sources (whichever is less).
For more information, please visit www.commercialrealestate.loans/commercial-real-estate-glossary/fnma-fannie-mae and www.commercialrealestate.loans/how-to-get-a-commercial-real-estate-loan.
What are the advantages of a Fannie Mae commercial real estate loan?
Fannie Mae offers a variety of commercial real estate loan products, including Multifamily Small Loans. The advantages of these loans include:
- Very competitive interest rates
- Up to 80% LTV allowance
- Streamlined processing/documentation
- Capital improvements may be included in the loan amount
- Most loans are non-recourse
- Supplemental loans are allowed after 12 months
- 30- 180 day rate locks available after commitment (extended rate locks also available)
- No processing fees (except with written approval)
- Non-recourse loans are assumable with lender approval and a 1% fee
Additionally, Fannie Mae DUS loans permit up to 35% of a property's space to be occupied by commercial tenants, or 20% of the property's income to be derived from commercial sources (whichever is less).
What are the disadvantages of a Fannie Mae commercial real estate loan?
Fannie Mae commercial real estate loans have the following disadvantages:
- Selective of the properties they will finance.
- Require financially strong borrowers.
- Less autonomy in the operation of the property and limited flexibility to deviate from the terms of the loan documents.
- Difficulty in releasing collateral.
- Expensive to exit.
- Lock outs often prevent prepayment or up to two years.
- Reserves required.
- Secondary financing (i.e. mezzanine debt or preferred equity) not always allowed.
Source: www.multifamily.loans/freddie-mac-multifamily-loans and www.multifamily.loans/multifamily-cmbs-loans
Fannie Mae Multifamily Loan Terms
While terms vary significantly with different loan products, most Fannie Mae Multifamily loans have the following terms:
Freddie Mac® Also Insures Multifamily Loans
In addition to Fannie Mae, its brother corporation, Freddie Mac, also purchases and insures multifamily mortgages, including some that allow for a degree of commercial property use. For example, properties purchased with a Freddie Mac Small Balance Loan (SBL), can derive up to 40% of their income from commercial rents.