Apartment Loan Rates Are at the Highest Levels in Years

Apartment loan rates are at the highest levels in years. While rising rates may challenge some investors, the fundamentals of apartment ownership remain solid.


Unlike single-family loans, multifamily mortgages require significant equity and cash reserves. Fortunately, there are many financing options for investors. Banks, agencies and conduit lenders are the most popular options. Other choices include life companies and hard money lending.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is a government-sponsored enterprise (GSE) that operates as a publicly traded corporation that creates mortgage pools for securitization on Wall Street. These mortgage pools are then sold to lenders who use them to fund multifamily loans.

These loans are designed for apartment buildings with 5 or more units. They require a minimum 20 percent of the rentable space to be leased for commercial purposes. Fannie Mae also requires that the borrower maintain a debt service coverage ratio of 1.0x or higher.

Founded in 1938 as part of Franklin D. Roosevelt’s New Deal legislation, Fannie Mae and its twin sister Freddie Mac changed the mortgage and housing market in the United States. They created a secondary mortgage market and increased the number of lenders offering home loans, replacing the old locally based savings and loan associations (or “thrifts”). In 2008, due to the subprime mortgage crisis, the government placed both Fannie Mae and Freddie Mac into conservatorship.

Although the companies are now under government control, they retain their Congressional charters that give them an implied guarantee and special treatment that makes them different from private corporations. As such, they still purchase many mortgage loans from banks and other mortgage lenders and continue to provide liquidity, stability and affordability to the nation’s housing finance system.

Freddie Mac

Freddie Mac is a government sponsored enterprise (GSE) that is headquartered in McLean, Virginia. It is one of two GSEs that dominate the mortgage market in the United States. Along with Fannie Mae, it buys mortgage loans from thousands of banks, credit unions, savings and loan associations, and other lenders, bundles them into mortgage-backed securities, and sells them to investors around the world.

Unlike Fannie Mae, which only buys multifamily loans from large financial institutions, Freddie Mac also purchases mortgages from small local lenders and community development finance organizations. This helps them compete with Fannie Mae in the multifamily space. In addition to traditional multifamily loan programs, Freddie Mac also offers its Small Balance Loan program (SBL) that has a lower minimum loan size and more flexible requirements such as no tax returns required.

The SBL program also allows for a higher leverage ratio and provides the ability to finance Section 8 properties and those receiving Low-Income Housing Tax Credits. Additionally, the SBL program is non-recourse and offers flexible prepayment penalties including yield maintenance and soft stepdown. Freddie Mac also offers the Value Add program that gives apartment developers access to financing to do some light rehab work. As a result, this program has been able to help address the shortage of affordable housing in America. During 2021, Freddie Mac exceeded all of its FHFA-set affordable housing goals through loan purchase activity.


HUD oversees the Federal Housing Administration (FHA), which sets guidelines and guarantees low down payment loans for primary residences. It also provides multifamily financing for apartment buildings. HUD’s mission is to make affordable housing available to everyone.

In addition to multifamily mortgages, the FHA also offers loan programs for manufactured homes, residential care facilities, and home improvements. The FHA has been in operation since 1934, and its goal is to stabilize the credit markets during times of economic stress.

If you’re an investor in a multifamily property, it’s important to understand the FHA’s guidelines and requirements. These include a requirement for replacement reserves, which is an additional amount paid into a repair/capital replacement escrow account each month. This is designed to cover the costs of major replacements and repairs that would otherwise be paid from operating expenses.

FHA loans are highly competitive in the multifamily market, and they are backed by the government, which means that they are less risky than conventional mortgages. As a result, they’re usually more affordable. They also offer a number of other benefits that can help your bottom line. For example, FHA multifamily loans are assumable, so if you sell your property, you can transfer the mortgage to the new buyer. FHA multifamily loans also have lower down payment and closing costs than conventional loans, making them easier to qualify for.


The debt yield of an apartment loan can vary based on several factors. Some of these include the property’s location, its current cash flow, and the borrower’s creditworthiness. It can also be influenced by market conditions and the loan’s minimum debt yield requirement. These factors are important when comparing loan options and choosing the best one for your property.

Joey has been a member of Janover Ventures’ capital markets team for just over a year, where he handles many client-facing activities from providing potential borrowers with the guidance and knowledge they require to obtain the financing they need through financial analysis and capital markets deal construction. He has a broad base of experience in the real estate industry, including investment banking, equity placement and consulting services.

Blake Janover founded Janover Ventures because he realized that many commercial real estate and multifamily property investors were not aware of all the financing options available to them. His company provides a concierge service that connects its clients with lenders for multifamily apartment loans, commercial real estate loans, and small business loans.

The service consists of filling out a simple questionnaire online, which asks questions about the type of loan you need and your financial situation. Then, an algorithm searches thousands of lenders to find the best match for your needs. It has been used by more than 1 million people, and the company expects to continue to grow during the COVID-19 pandemic.