Chicago Apartment Loans
|Chicago Apartment Loan Rates Over $6,000,000||Rates (start as low as)||LTV|
|Multifamily 5 Year Fixed Loan Rates||2.59%||Up to 80%||Get Free Quote|
|Multifamily 7 Year Fixed Loan Rates||2.70%||Up to 80%||Get Free Quote|
|Multifamily 10 Year Fixed Loan Rates||2.91%||Up to 80%||Get Free Quote|
|Chicago Apartment Loan Rates Under $6,000,000||Rates (start as low as)||LTV|
|Multifamily 5 Year Fixed Loan Rates||3.23%||Up to 80%||Get Free Quote|
|Multifamily 7 Year Fixed Loan Rates||3.24%||Up to 80%||Get Free Quote|
|Multifamily 10 Year Fixed Loan Rates||3.26%||Up to 80%||Get Free Quote|
Select Commercial has excellent Chicago Apartment loan products and options available for owners and purchasers of multifamily properties throughout the city of Chicago. Whether you are looking to finance a small apartment building, a complex with hundreds of units, or a co-operative, we can help you find the optimal financing solution to meet your Apartment mortgage loan needs. While we lend across the entire continental US, we are able to give our best rates and loan programs to certain areas that we feel are strong markets. Chicago is one of the cities that we consider to be a premium market and we actively look to originate good quality loans here for our clients. We have a diverse array of many available loan products to help qualified Chicago IL borrowers looking to purchase or refinance an apartment property. We offer apartment loans with terms and amortizations up to 30 years, recourse and non-recourse, and many options for prepayment. We typically approve Apartment building loans within 1 day and usually close within 45 days of application. Our clients love our simplified application process, 24-hour pre-approvals with no-cost and no-obligation, great rates and terms, fast closings and personalized service. If you are looking to purchase or refinance an apartment building, don't hesitate to contact us.
Chicago Apartment Loan Benefits
Chicago Apartment Loan rates start as low as 2.59% (as of October 20th, 2021)
• No upfront application or processing fees
• Simplified application process
• Up to 80% LTV on multifamily financing
• Terms and amortizations up to 30 years
• Multifamily loans for purchase and refinance, including cash-out
• 24 hour written pre-approvals with no cost and no obligation
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Chicago Apartment Loan Types We Serve
If you are looking to purchase or refinance a Chicago apartment building, don't hesitate to contact us. We arrange financing in the city of Chicago for the following:
- Large urban high-rise multifamily buildings
- Suburban garden multifamilycomplexes
- Small multifamily buildings containing 5+ units
- Underlying cooperative multifamily building loans
- Portfolios of small multifamily properties and/or single-family rental properties
- Other multi-family and mixed-use properties
Chicago 2021 Apartment Market and Trends
Rental demand in Chicago’s urban core significantly decreased in 2020, as businesses shut down or had employees work from home during COVID-19. Many people looked for less expensive and larger homes outside of the urban center that could accommodate remote work. In specific, rental demand in the Streeterville-River North and the Loop areas went down the most. These two markets each received more than 2,000 new multifamily units in 2020. Given the lower demand, vacancy soared around 400 basis points to metro highs in each market. In 2021, experts anticipate an improvement in rental demand due to both a slower delivery pace and widespread vaccinations that allow workers to return to offices.
During COVID-19, the suburban markets of Chicago actually did quite well. Unemployment caused many renters to look for cheaper housing, and many people working for home sought larger apartments in the suburbs. Vacancies decreased by over 100 basis points in the Will County and Merrillville-Portage-Valparaiso submarkets. In fact, South Cook County had the city’s lowest vacancy rate of 2.8 percent, a reduction of 70 basis points year over year. Experts have said that with a downtown revival in Chicago, additional investors will be drawn to multifamily assets in the city in 2021.
In 2021, there is expectation that employment should grow about 2.6 percent in the city. However, the total employment level will remain more than 200,000 jobs below the pre-Covid-19 pandemic level. Therefore, Chicago’s unemployment rate in 2021, which sat at 8.2 percent at the end of 2020, is likely to stay above the national rate. In 2021, deliveries are expected to decrease to the lowest level in more than five years. Total inventory is expected to expand by only 0.8 percent in 2021. This is down from a 1.1 percent gain last year. The majority of the rentals due in 2021 are located in the suburbs. Following a slow absorption pace in 2020, Demand for rentals is set to outpace inventory additions in 2021. This should lead to a contracting of the vacancy rate down to 5.3 percent in 2021. This is a significant improvement from last year when the vacancy rate jumped 100 basis points. A growing demand for apartments in Chicago in 2021 is set to push rents higher. By the end of 2021, the average effective rent in Chicago is expected to sit at $1,498 per month. While the rate is up year over year, it remains below the recent peak of $1,580 achieved during 2019.
2021 Multifamily Outlook
The COVID-19 pandemic affected the ability of young graduates to find jobs and move into apartments of their own. The demand for apartment rentals is usually fueled by young graduates entering the workforce and moving into rental apartments. Many young adults lived with their parents or friends during the pandemic and into early 2021. As 2021 progressed, many companies reopened their offices and began hiring again which generated record levels of new apartment rentals. This trend should continue through late 2021 as more new workers are able find jobs and move into their own apartments. Many of these new multifamily units are in metro areas of the sunbelt states as workers have been moving out of colder urban areas in favor of more suburban warmer climates.
The tight market in 2021 for new home purchases has caused many would be homebuyers to continue renting. Prices for existing homes have risen due to lack of inventory and the cost of construction has skyrocketed due to increased costs for raw materials. The high cost of purchasing a new or existing home is keeping the demand for rental units very strong in 2021.
During the pandemic, when workers were either out of work or working from home, many people moved out of densely populated urban areas in favor of suburban locations. In 2021, as more employees are returning to their offices, we are seeing demand pick up once again for rental apartments in urban locations. In addition, as more and more retail and dining locations reopen in downtown areas, we expect to see a return of employees to these areas.
During the pandemic, the CDC and local governments instituted a moratorium of evictions. This caused many landlords to suffer economic losses and depressed the value of apartment properties. In 2021, as these moratoriums start to expire, we expect to see strong demand from investors for these properties.
Nationwide, the first half of 2021 saw more than 175,000 new apartments completed and a total of 363,000 for the previous 12 months. A high percentage of these new units were in Texas and other sunbelt states, as more and more people are relocating to warmer climates. Occupancy rates and asking rents have been lower in larger urban markets in the Northeast and other colder climates, while occupancy rates and asking rents have been increasing in these warmer sunbelt climates. These 2021 trends have definitely been driven by the COVID-19 pandemic and we are watching these trends closely to see if these trends persist after the pandemic is over.
What Happened with Apartment Loans in 2020
Development Remains Active Downtown; Property Tax Reassessment Weighing on Outlook
Tech sector fuels apartment rental demand in thriving urban core. Chicago will continue to witness multifamily rent growth in 2020, lifting the average effective rent above $1,600 per month. Suburban rent growth will remain stable this year as vacancy sits below 4 percent; however, apartment rental gains in the urban core will drive the marketwide increase. Employment growth is focused in downtown Chicago, particularly among tech firms, providing a boost to apartment demand here as vacancy has pushed down 180 basis points since 2017. Companies including Relativity, Truss and Vistex continue to add jobs, encouraging developers to meet the additional multifamily housing demand from new employees. The urban core is set to receive 65 percent of this year’s completions, with construction activity in the West Loop and Near North Side. Several inner-ring communities will also receive a portion of the new supply of apartment units, such as Logan Square and Uptown, which have become viable options for renters who have been priced out of downtown Chicago. Suburban completions will be largely confined to a variety of northern cities, where apartment demand continues to steadily increase. Investors would be wise to look to take out apartment loans in order to make their next purchase in the Chicago market.
Chicago apartment outlook clouded by property tax concerns. Buyers have increased focus on areas surrounding the forthcoming Lincoln Yards development. Smaller Class C assets in Wicker Park and Ukrainian Village produce cap rates in the low-6 percent range, but these multifamily properties generally require considerable upgrades to compete with newer, nearby inventory. Suburban assets along major transit arteries also garner attention, particularly in Aurora and Naperville, enticing a variety of local and out-of-state investors as they capitalize on sub-4 percent apartment vacancy. Though deal flow was relatively steady during the past year, concerns surrounding new property tax assessments in Cook County will remain a downside risk for many apartment investors. The assessor still has at least a year before the entire county has been reassessed, but increases witnessed in suburban submarkets offer insight into what could be in store for county apartment owners. While there are some concerns about the market, investors are still very interested in pursuing multifamily loans in order to finance their next acquisition in Chicago.
2020 Chicago Apartment Market Forecast
Chicago’s National Multifamily Index Rank is at 37, down 9 places. Diminishing overall employment gains and rising property taxes contribute to Chicago’s reduced standing in this year’s National Multifamily Index.
Employment in Chicago is up 0.6%. Hiring activity will continue to slow this year as 30,500 workers are added to payrolls. Last year, 33,000 jobs were created.
Construction of new apartment units in Chicago is expected to exceed 7.400 units. Completions will decrease after 9,100 units were delivered last year, with the urban core logging the majority of new supply.
The vacancy rate in Chicago is down 10 bps. The absorption of nearly 7,800 units will push market vacancy down to 4.8 percent this year. This builds on 60- and 40-basis- point drops during the previous two years.
Rent in Chicago is up 5.1%. Coming in just under the previous three-year average, rents will continue to advance, lifting the average effective rent up to $1,663 per month.
Investment in the Chicago apartment and multifamily market remains promising for those looking for multifamily loans. Large-scale mixed-use projects coming to fruition in the near future will continue to spur new investment opportunities in adjacent areas, further strengthening bidding environments. Investors would be wise to look into procuring an apartment loan for their next purchase in the Chicago metro.
Data provided by Marcus & Millichap.
Apartment Loan Trends in 2020
At the start of 2020 the market outlook did not indicate any significant factors that would cause major trouble in the multifamily market. Market indicators suggested that demand for housing, especially for apartment rentals, would remain healthy, thus continuing to generate new construction of multifamily buildings. Both the high number of permits and starts over the past couple of years led experts to believe that developer confidence is very high in the multifamily market. Market experts predicted an annual completion of 340,000 apartment units over 2020, way above the 300,000-annual average for the past five years. Over the last couple of years, the multifamily market has seen absorptions outperform expectations due to both changes in lifestyle and demographic preferences and new supply has consistently taken longer to be built. These two factors have helped the market to perform stronger than expected in the past and should continue throughout this year. Market data indicated that rent growth would remain strong in 2020, growing 3.6% (which is above the historical average). In terms of mortgage origination, low interest rates and strong multifamily performance were expected to help loan volumes grow. Experts predicted that the origination volume in 2020 will increase by 5.7% to $390 billion. Market data indicated that cap rates have more room to decline, which would lead to increasing property values and should drive up origination volume. However, with the current outbreak of Covid-19, the overall economy has been in flux. The stock market has crashed and commercial mortgage interest rates have been severely impacted. Huge metros such as New York have all but shut down much economic activity and entertainment. In this unsteady climate, many investors are scared to purchase commercial real estate and to take out commercial mortgages and apartment loans. Additionally, the oil industry has taken a big hit. Not only are people traveling less due to the pandemic, foreign countries like China and Russia are involved in a huge price war which is driving the price of oil way down. Experts are hopeful that as the weather warms up and public health policy learns how to handle this pandemic, the economy should revert back to its pre-virus strength.
Chicago Apartment Loan Options
Chicago Freddie Mac Apartment loans
Chicago Freddie Mac Multifamily Loans provide mortgage capital in the secondary market for apartment building loans. Together, Fannie Mae and Freddie Mac control a very large portion of the multifamily loan market. Freddie Mac has a very aggressive program for small balance apartment loans (from $1,000,000 to $7,500,000). Some features of this program include:
- Market size driven. Freddie Mac classifies loans by the size of the overall market: Top, Standard, Small, and Very Small. Rates are best in top market locations (major metropolitan areas).
- Capped costs. Freddie Mac lenders often cap the closing costs at a fixed dollar amount, thereby lowering the overall cost to borrow money.
- Flexible pre-pay penalties. Freddie Mac offers many options for pre-payment penalties, from yield maintenance to step-down to “soft” step-down.
- Interest-Only (I/O) loans. Freddie Mac will allow payments consisting of only interest and no amortization of principal.
- Fixed rate terms. Freddie Mac offers fixed rates of 5, 7, and 10 years, followed by an adjustable period. These loans are called Hybrid/Adjustables. Loans have a 20 year term and a 30 year amortization schedule.
Freddie Mac is a government sponsored agency that offers incredible financing solutions to investors looking for apartment loans. They provide both fixed rate and floating rate multifamily loans to acquire or refinance a wide variety of multifamily properties. These apartment building loans are used to finance properties such as market-rate apartments, student housing, senior housing, and affordable housing. While Freddie Mac has always been one of the industry's most aggressive financing source for larger apartment loans, Fannie Mae used to really dominate the smaller balance market. However, over the last 7 years, Freddie Mac has rolled out their Freddie Mac Small Balance Multifamily Loan program to compete with Fannie Mae in the small balance market. For eligible borrowers, Chicago Freddie Mac Multifamily loans offer some of the best terms and rates in the market. However, qualifying for Freddie Mac loans requires that the borrower and property both meet a high standard set by Freddie Mac. Borrowers must typically meet a threshold for net worth and liquidity and properties must be cash flowing with at least 90% occupancy for 90 days.
Freddie Mac’s Chicago Multifamily Loan Programs offer many unique and beneficial features for apartment purchases and refinances, with a minimum loan size of $1,000,000. The loan application process is simple and streamlined. As an example, tax returns for the borrower and the property are not required. Loans typically close in 45 days and the program has much lower costs than other government or agency programs. These apartment building loans are non-recourse, which means that the borrower is not required to guarantee payments personally. Prepayment penalties are flexible, ranging from yield maintenance to soft stepdown. Perhaps the best feature of these multifamily loans is that Freddie Mac offers a free rate hold for 45 days from application. If rates change during the processing period, the loan rate is automatically held from the date of application.
Freddie Mac has a publicly stated mission to help maintain stability in the American housing-mortgage markets. Additionally, their goal is to both keep the housing market well-financed and to promote affordable housing. Freddie Mac accomplishes this goal by helping investors to purchase, refinance, preserve, and renovate existing multifamily and apartment buildings. A large portion of the properties financed by Freddie Mac are more than 10 years old, need significant improvements and have a hard time procuring financing with other lenders. Freddie Mac’s main focus in the multifamily arena is affordable housing. Around 90 percent of their apartment loans are written for properties with affordable rents (based on local area median income). Over the years the number of renters has continued to grow leading to a short supply of available affordable apartment units. Many of Freddie Mac’s programs were designed with this challenge in mind. They focus on financing apartment buildings that are affordable to renters with lower annual incomes. They also write apartment building loans for subsidized housing that assists individuals with very low (below average) incomes. Through these programs, Freddie Mac’s multifamily loan programs are playing a crucial role in ensuring that Americans have access to affordable housing throughout the country.
One potential complication with Chicago Freddie Mac multifamily loans is that Freddie Mac does not directly originate their loans. Rather they rely on authorized lenders from within their Optigo network to underwrite and service their loans. While these apartment loans may be financed by outside lenders, they all must conform to Freddie Mac guidelines. While Freddie Mac offers loans in varying markets for many different situations, each Optigo lender may have their own limitations on eligible deals they are willing to finance. At Select Commercial Funding, we have access to a wide array of Freddie Mac funding solutions so we can help to connect you with the right Freddie Mac lenders for your specific needs.
Chicago Fannie Mae Apartment loans
The Chicago Fannie Mae multifamily loan platform is one the leading sources of capital for apartment building loans in the US. Fannie Mae is a leader in the secondary market – meaning they purchase qualifying apartment loans from leading lenders who originate these loans for their borrowers. Fannie Mae purchases loans secured by conventional apartments, affordable housing properties, underlying cooperative apartment loans, senior housing, student housing, manufactured housing communities and mobile home parks on a nationwide basis. The Fannie Mae platform has many benefits, including:
- Long term fixed rates and amortizations. Fannie Mae allows terms and amortizations of up to 30 years. Most banks offer only 5 or 10 year fixed rates and 25 year amortizations.
- Non-recourse options. Most banks will require the borrower to sign personally for the loan. Fannie Mae offers non-recourse apartment loans.
- Lending in smaller markets. Many national lenders do not like to lend in rural or tertiary markets. Fannie Mae is a good option for these loans.
- Assumability and Supplemental Financing. Fannie Mae allows their loans to be assumed by a qualified borrower. They also have a program which allows borrowers the ability to come back and borrow additional funds during the life of the loan (subordinate financing).
Fannie Mae is one of the nation’s leading secondary market sources of capital for apartment building financing. Fannie Mae provides mortgage capital for conventional, affordable housing, cooperatives, senior housing, student housing, manufactured housing communities and mobile home parks nationwide. Fannie Mae's apartment loan program offers many distinct advantages over traditional bank programs, including long-term fixed rates up to 30 years, high LTV ratios up to 80%, and nonrecourse financing (no personal guarantee to the principals). Fannie Mae Multifamily provides long term permanent mortgage loans for the purchase or refinance (cash-out OK) of apartment properties nationwide.
Fannie Mae Multifamily loans can be used to finance apartment buildings with at least 5 residential units. No more than 20 percent of net rentable area can be leased out to commercial tenants. Fannie Mae Multifamily is an industry leader in apartment building loans and there terms are incredibly difficult to beat. This program offers loan terms between 5 and 30 years with amortization schedules up to 30 years. They offer flexible prepayment penalties and interest-only options. In addition, loans are typically assumable and allow for secondary financing.
While Chicago Fannie Mae Multifamily loans are a terrific option for investors in the multifamily space, this program does have some very specific underwriting guidelines. Typically, these loans are only eligible for apartment buildings in primary or secondary MSAs (with some exceptions for tertiary markets). These properties must be stabilized with 90% occupancy for at least 90 days. Standard multifamily properties must have at least 5 units and manufactured housing communities must have at least 50 pad sites. Borrowers must have strong financials with net worth equal to the loan amount and liquidity of 9 to 12 months of debt service. Typically, borrowers must have a credit score of at least 680 with no recent delinquencies.
If you are looking for a multifamily loan, Fannie Mae Multifamily may be the perfect option for you. The professionals at Select Commercial Funding are excited to help you find the perfect Fannie Mae product for your multifamily loan. Give us a call today to take the next step in financing your apartment building with a Fannie Mae Multifamily loan.
Apartment Lending with Banks and Other Programs
While the agencies (Fannie Mae and Freddie Mac) offer some excellent programs, not every apartment loan applicant qualifies for these programs. We have many excellent choices for these loans with our correspondent banks, credit unions, insurance companies and private lenders. Some examples of these loans include:
- Multifamily loans that require flexible underwriting or those that don’t meet standardized criteria.
- Properties in less than desirable markets, or those that require repairs or updating.
- Properties that don’t cash flow according to industry guidelines or lack stabilized cash flow.
- Borrowers with past credit issues, including foreclosures, short sales, or judgements.
- Borrowers who are not US citizens.
Whether you are purchasing or refinancing, we have the right solutions available for your multifamily mortgage loans. We will entertain apartment loan requests of all sizes, beginning at $1,000,000. Get started with a Free Commercial Mortgage Loan Quote.
Chicago Apartment Building Loans
Addison • Glen Ellyn • Northbrook • Algonquin • Glenview • Oak Brook • Arlington Heights • Gurnee • Oak Lawn • Aurora, • Putnam • Oak Park • Barrington • Bolingbrook • Orland Park • Bartlett • Hanover Park • Rolling Meadows • Batavia • Highland Park • Round Lake Beach • Bolingbrook • Hinsdale • Schaumburg • Buffalo Grove • Joliet • St. Charles • Carol Stream • Lake Forest • Tinley Park • Des Plaines • Lombard • Waukegan • Downers Grove, • Morton Grove • Westmont • Elgin • Mundelein • Wheaton • Elmhurst • Naperville • Wheeling