Do you need a pre-approval letter for multifamily 5+

[Carol Bloom]

Hello BP Community!

I am receiving conflicting opinions if I need a pre-approval letter from a Freddie Mac lender for a multi-family 5+ units. I will be financing the property using the Freddie Mac Small Balance Loan program.  Some of the commercial brokers are asking for a pre-approval letter, some commercial lenders tell me a pre-approval letter is only needed for residential loans, can someone please clarify the process. 

Greatly appreciate the help!

Carol

[Conor Freeman]

@Andrew Beauchemin is correct. Any Freddie or Fannie multifamily program, including the Freddie SBL, will NOT issue blanket pre-approval letters to borrowers, like one would see in residential. The programs are more focused on the real estate rather than the financials of the sponsor, therefore you'd receive a term sheet from the lender. The term sheets are thoroughly vetted by the lender and if there are any concerns, reviewed by Freddie, so receiving a term sheet would be the commercial equivalent to a pre-approval.  

Andrew, just an FYI: Freddie tells lenders to put their pencils down if they receive the same deal from multiple lenders (IE submitted by NorthMarq and Greystone and CBRE). The lender that comes back with a signed exclusive is allowed to proceed, so it negatively effects the deal to shop multiple Freddie lenders in this case. The Freddie SBL is essentially the same at every shop with a license. The difference would be the timeliness and efficiency in closing, and servicing the loan after it closes.