Multifamily Loan Options

[Matthew Wright]

I'm looking for some direction in determining loan type.

I've only used local banks for my smaller multis. This year I plan to purchase a multi for $1 million or more (which i believe is the minimum for fannie mae/freddie mac?). Im wondering if when getting into $1 million+ price range, I should be going the fannie mae/freddie mac direction, or stick with the local banks?

Im considering FN/FM because I've heard they have better terms, like 15% down and 30 year amortization, but if thats not the case I think Ill stick with my local banker... looking for someone to talk to but I'm having a hard time finding someone on the local level here in Maine, that handles these loans.

[Evan Polaski]

@Matthew Wright: You are looking at the Fannie/Freddie small loan product. Typically, these are up to 80% LTV non-recourse loans. They are also typically lower interest than local lenders. But the trade-offs are: potentially more stringent underwriting standards, net worth equivalent to loan balance, and since COVID have had more stringent reserve requirements.

More than the LTV, most deals are limited by DSCR. You will also be working through a broker to secure these loans, who may have a fairly hefty fee associated with their work.

Overall, they can be a great lending source, but it is not always a clear cut decision whether to use the agencies or local lenders.