The Basics of Apartment Mortgage Financing

When it comes to buying an apartment building, there are numerous mortgage options. This article will cover the basics of the most popular types of apartment financing.


Conventional loans follow guidelines set by either Fannie Mae, Freddie Mac, or the FHA. They have higher down payments and more strict credit requirements. Government-backed loans are nonrecourse but take longer to fund.

RCN Capital

Whether you’re a real estate investor or broker, RCN Capital can help you find financing for your next deal. This nationwide private lender offers financing for short-term fix and flip projects, long-term rental properties, and ground-up construction. Their loan programs are designed to meet the needs of new and experienced real estate investors. They also offer simple referral options. Brokers are protected and compensated for their work.

When Jeffrey Tesch started RCN Capital in 2010, he knew that his company would face a daunting task. Nevertheless, he believed that the real estate market was at a point where investors needed more workable options. RCN Capital stepped in to fill that need, and it continues to serve the industry as a whole 13 years later.

RCN Capital offers several unique financing options for residential and commercial property investment, including the Rehab Cash Now program, which provides financing up to 80% of purchase price + up to 100% of renovation costs, not to exceed 65% of ARV. This is a great option for investors who need a bridge to their next investment.

In addition to offering a wide range of loan products, RCN Capital also has a team dedicated to creating educational materials for both private lenders and investors. This dedication to forward thinking has helped the company to develop a reputation for excellence. Their commitment to the industry also carries over into their hiring practices.

Government-Backed Loans

A mortgage loan is a financial agreement that allows a borrower to purchase or refinance a residential property. It is secured by the property and the borrower repays the lending institution with interest over time. The federal government provides numerous types of loans for home buyers, including government-backed loans. These loans are backed by the government, which makes it easier for lenders to offer lower interest rates and more flexible credit requirements.

What draws buyers to government-backed loans is that they are less risky for the lender than conventional loans. This is because the loans are insured by a government agency such as the Federal Housing Administration, Department of Veterans Affairs, or USDA. These agencies help reduce the risk of default by paying a portion of a lender’s losses should the borrower fail to make payments. Conventional loans don’t offer this option and have stricter eligibility criteria.

A government-backed loan can be a great way to get a mortgage for a primary residence, multi-family properties, and manufactured homes. It is also available to first-time homeowners, borrowers with a limited credit history, and those who need a smaller down payment. Contour Mortgage offers several government-backed loan options that are ideal for many different buyer types. Talk to one of our mortgage specialists or loan officers about the benefits of these loans, eligibility requirements and costs.

Bank Balance Sheet Loans

The loan application process for an apartment mortgage is similar to the one for a single-family home. The lender reviews the credit report and other financial information, the property is appraised, and a commitment letter is issued that states the bank will lend up to a certain amount on a particular date at a given interest rate.

There are many lenders willing to finance multifamily properties, including balance sheet lenders and private investors. Some borrowers prefer balance sheet loans because they can deal with the original lender instead of having to go through a broker or other financial institution.

Apartment mortgages require higher down payments than residential loans and a much higher debt coverage ratio, or DCR, which is calculated by dividing the annual net operating income of the property by the yearly cost of servicing the debt. In addition, lenders may require that the borrower have a cash reserve to cover unexpected expenses or maintenance issues.

Other things to consider when shopping for an apartment mortgage are down payment requirements, origination fees and closing costs, and prepayment penalties. It’s important to take the time to compare various options and find the best fit for your needs. This will ensure that you get the best possible deal on your apartment purchase.


HUD loans and FHA loans are terms that home buyers hear often, but not everyone understands the relationship between these two entities. HUD is the agency that oversees housing and urban development, while the FHA is the federal government agency that manages mortgage loans for homeowners. FHA offers different types of mortgage insurance to lenders, which can help them offer financing to meet the needs of certain homebuyers. For example, the 203(k) program helps homebuyers finance property rehabilitation and repair costs within their mortgage loan.

FHA-insured multifamily loans are a great option for investors, because they come with a number of benefits that other commercial real estate loans can’t match. First and foremost, they’re available to borrowers with credit scores below 600, a level that would normally prevent them from qualifying for conventional loans. Additionally, these loans typically have lower down payment requirements than traditional loans.

These features, combined with the flexibility of the loan program’s allowed leverage and amortization schedules, make them ideal for investors who want to build or buy multifamily properties. Another feature that sets them apart from other commercial real estate loans is that they can be assumable if the borrower wants to transfer their rights to a new owner. Finally, the mortgage insurance that these loans require is based on market forces. The FHA adjusts MIP rates to account for changes in the housing market, unemployment, inflation and other economic factors.