Ohio Apartment Loans
Loans from $1 Million to $25 Million+
|Ohio Apartment Loan Programs Over $6,000,000||Rates (start as low as)||LTV|
|Multifamily 5 Year Fixed Loan Rates||5.22%||Up to 80%||Get Free Quote|
|Multifamily 7 Year Fixed Loan Rates||5.10%||Up to 80%||Get Free Quote|
|Multifamily 10 Year Fixed Loan Rates||4.91%||Up to 80%||Get Free Quote|
|Ohio Apartment Loan Programs Under $6,000,000||Rates (start as low as)||LTV|
|Multifamily 5 Year Fixed Loan Rates||5.32%||Up to 80%||Get Free Quote|
|Multifamily 7 Year Fixed Loan Rates||5.20%||Up to 80%||Get Free Quote|
|Multifamily 10 Year Fixed Loan Rates||5.01%||Up to 80%||Get Free Quote|
Ohio Apartment Loan FAQs
There are many different types of lenders offering a myriad of different loan products to finance the acquisition or refinance of apartment properties nationwide. These lenders include agency lenders (Fannie Mae and Freddie Mac), local and national banks, insurance companies, credit unions and private lenders.
Most lenders write apartment loans for five, seven or ten years (fixed) with a 30 year amortization. It is also possible to obtain loans that are fixed for up to 30 years, although this is not the norm. Rates are typically based on a margin over the corresponding US Treasury rate.
Lenders offer non-recourse to strong borrowers and solid properties. The borrower will be expected to have strong credit, good net worth and liquidity, and experience owning and managing similar properties. The property will be expected to demonstrate solid long term positive cash flow, be in good to excellent condition, and be located in a strong market with low vacancy rates.
Apartment loans are typically screened and pre-approved in 2-3 days. Since lenders require appraisals, environmental and property condition reports, and title, closings will usually take 45-60 days from application.
How do we help our Ohio apartment loan clients get the best rate and terms?
Select Commercial has excellent apartment building loan and multifamily loan products and options available for owners and purchasers of multi-family and apartment properties throughout the state of Ohio. 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. Ohio is one of the states that we consider to be a premium market for apartment building loans 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 OH 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. For more information on multifamily loans, check out how to get the best rate on a multifamily loan and how to get the best rates on an apartment refinance.
Ohio Apartment Loan Benefits
Ohio Apartment Loan rates start as low as 4.91% (as of March 30th, 2023)
• A commercial mortgage broker with over 30 years of lending experience
• No upfront application or processing fees
• Simplified application process
• Up to 80% LTV on apartment financing
• Terms and amortizations up to 30 years
• Loans for purchase and refinance, including cash-out
• 24 hour written pre-approvals with no cost and no obligation
Recent TRUSTPILOT Reviews
Select Commercial Funding Reviews from TRUSTPILOT
A three year journey
"Thanks Stephen for all of your hard work in getting our deal closed! I appreciate your professionalism and patience throughout a complicated process. You always were there for my partner and I whenever we had questions and needed answers quick. It was a pleasure to have worked with you and Select Commercial!"
Ohio Apartment Loan Types We Serve
If you are looking to purchase or refinance a Ohio apartment building, don't hesitate to contact us. We arrange financing in the state of Ohio for the following:
- Large urban high-rise apartment buildings
- Suburban garden apartment complexes
- Small apartment buildings containing 5+ units
- Underlying cooperative apartment building loans
- Portfolios of small apartment properties and/or single-family rental properties
- Other multi-family and mixed-use properties
What are the market conditions expected for Ohio Apartment Loans in 2023?
Experts anticipate above average performance for the multifamily sector in 2023. Occupancy rates are expected to remain above 95% and rental rates are expected to grow by 4%. These figures are not as robust as the past couple of years, however, which saw vacancy rates under 3% and rent growth in the double digits. During the second and third quarters of 2022, leasing activity for apartment buildings was slow. This coincided with a solid pace of new multifamily deliveries to the market. The combination of slower leasing activity and heightened supply caused the overall vacancy rate to increase by 150 basis points in the middle portion of 2022. Throughout 2023, vacancy rates will likely continue to rise at a slower pace and move toward the 20-year average of 5%.
The overall multifamily housing demand is expected to remain strong in 2023. With inflation continuing to impact consumer spending, more and more renters are determining whether to renew their leases. While new leasing activity stalled throughout the middle portion of 2022, the overall multifamily demand remained pretty strong. The rise in home prices and residential mortgage rates is also helping to increase multifamily demand. Monthly payments for homes purchased in the third quarter of 2022 were, on average, 57% more than monthly apartment rents. That difference is the widest gap on record. Even if home values and mortgage rates decrease in 2023, the relatively lower cost of renting will support multifamily demand.
Rapidly rising interest rates on multifamily loans caused multifamily investment activity to slow down in the second half of 2022. Many buyers not willing to pay higher rates for apartment loans stepped out of the market. As apartment loan rates stabilize in 2023, many buyers will return to the market and look to finance apartment building investments with multifamily loans. The multifamily sector has historically been one of the most attractive sectors to investors. Over the past decade, the multifamily sector has seen average annual total returns of 9.3%. Additionally, this sector offers multifamily loan options from both Fannie Mae and Freddie Mac. These apartment loan options are not available for other asset classes. As the market stabilizes in 2023, more and more investors will look to acquire apartment buildings and finance them with agency apartment loans.
One other factor that caused the multifamily sector to stall in 2022 is that buyers expected cap rates to increase commensurate with the rise in interest rates, but sellers still expected higher prices. This caused many deals to simply not cash flow. Cap rates are expected to increase in 2023. With this increase, many buyers will have the option to finance acquisitions with apartment loans at more attractive prices.
Ohio Apartment Loan 2022
As we enter 2022, apartment loan activity is very strong but facing a potential slowdown as the Federal Reserve begins increasing rates to slow the rate of inflation. Ohio apartment loans might be affected, along with the rest of the country, depending on what happens this year with the Federal Reserve. The following is a national summary of the apartment loan market at the beginning of 2022. We expect Ohio apartment loans to follow national economic trends.
National Apartment Loan Outlook
Apartments Show Record Strength as Household Growth Performs at Record Levels In 2022 we expect strong housing demand to surpass existing supply. 2021 was a very strong year for apartment owners. After the difficulties of 2020 due to the pandemic caused much disruption, rapid job creation and a strong economic reopening led to a surge in apartment rentals. A record number of units were rented in 2021, driving the national apartment vacancy rate down to the lowest year-end level in more than twenty years. Average multifamily rental rates increased by record setting margins, as well. Apartment profitability is expected to increase even further in 2022, although probably at a slower pace following the uncertainty observed in 2020 and 2021, as the economy often started up and slowed down quickly with each new strain of the Coronavirus pandemic. As the economy continues its stabilized recovery, apartment demand will continue to grow. Strong household formation will drive rental increases above the record 400,000 apartments expected to hit the market in 2022. Apartment availability among top-of-the-line Class A units began 2022 at one of the lowest rates in over twenty years. Rental demand for Class B and C units, will also strengthen in 2022 as increasing prices prompt some apartment renters to give up more expensive apartments. Raw material and labor shortages also raise risks of construction delays in the home buying market, keeping many would be buyers in apartment rentals. As such, all multifamily properties will perform well in 2022.
Urban areas continue to recover even as suburban demand gets stronger. The Coronavirus pandemic and associated lockdowns caused a movement, or transition, of households from densely populated urban areas and large urban cities to more suburban and rural settings and secondary market locations. Vacancy rates in the densely populated business districts of the country’s large markets rose 230 basis points in 2020, versus a 10 basis point vacancy rate increase in smaller suburban submarkets in smaller cities. Apartment availability has continued to decrease in these secondary market locations even though the worst of the pandemic has passed. Not including immigration, an estimated 44 million people will enter their 30s over the next 10 years, a stage of life associated with the beginning of families, which is the main driver of apartment demand. Increasing household size causes renters to look for larger accommodations, which are more affordable in suburban and rural locations. While this demographic change will continue in 2022 and beyond, urban areas are also recovering quickly as offices in downtown areas continue to reopen. The 2020 shock to downtown markets changed course by the third quarter of 2021, with further improvement anticipated in 2022. The reopening of retail establishments such as bars, restaurants and entertainment venues, the continuing return to offices, and a new group of college graduates all point to strong demand for the downtown apartments in urban locations.
Housing demand in 2022 is expanding into alternative dwellings. Households are being created faster than new construction can accommodate, forcing some apartment renters to look at other choices. Millennials seeking larger space at lower costs are considering single-family home rentals while those who are priced out of Class C units are looking more at manufactured home communities and mobile home parks.
The ability to work from home offices and pet-friendly accommodations are gaining importance in 2022. Even though the pandemic situation is improving, work habits adopted during the pandemic will not be so easily reversed. The increase in workers who still work from home has caused some renters to look for greater apartment square footage as well as common spaces within the building in which to co-work with others. A large increase in pet ownership caused by lockdowns also now causes strong demand for pet-friendly properties.
The strong apartment market nationally is causing many investors to consider investing in apartments and is causing strong demand for apartment loans. Apartment loan rates remain low as we enter 2022, but the Federal Reserve has indicated their desire to raise rates in 2022 to curtail inflation. We are watching closely to see what happens with Ohio apartment loan rates this year.
Cincinnati 2021 Apartment Market and Trends
Employment in 2021 is on the uptick in Cincinnati. The employment rate is expected to grow 2.5% with an increase of 27,300 jobs in 2021. Construction of new multifamily units is a bit down this year, with an expectation of 2,200 new units to be created in 2021. Vacancy is up this year in Cincinnati. The vacancy rate will climb 3.9% this year. That is an increase of 30 basis points. Rent in 2021 is up 2.9% with an expected effective rent of $1,059 per month. While multifamily construction has been down overall, construction has been ramping up of late. This has helped to drive demand in key areas such as the Northeast Cincinnati/Warren County and the Campbell/Kenton Counties submarkets. The affordability of these areas seem to be leading developers to construct new multifamily properties in these submarkets. We have seen a similar trend amongst renters of late in 2021. Apartment buildings in the Central and the North Central Cincinnati submarkets have experienced the largest declines in annual net absorption, while the Northeast Cincinnati/Warren County and the West Cincinnati submarkets had the largest increases.
- Data provided by Marcus and Millichap
Apartment Loan Outlook - 2021
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. Check out our low commercial real estate loan rates and use our commercial mortgage calculator to calculate monthly principal and interest.
Ohio Multifamily Loan Information and Economic Overview
Ohio is the seventh largest economy in the United States with a gross state product of over $650 billion. If Ohio were its own country its economy would rank as the 21st largest economy in the world. A few years ago, Ohio was ranked in the top ten states in the country for best business climate. Ohio is frequently considered to be the Industrial Capital of America, dating to its roots in the Rust Belt and Ohio's present-day scientific and intelligence dominance. Ohio has a very active commercial real estate market and is highly regarded by lenders offering commercial mortgage financing. Here are some quick facts:
- Ohio is home to almost 2.4 million commercial properties.
- With 1.3 million parcels, land is the largest property type in Ohio leaving much potential for commercial real estate development.
- The state of Ohio contains 200,000 multifamily properties.
- About 275,000 of Ohio's commercial properties are currently located in Qualified Opportunity Zones with high investment upside.
Overall the Ohio apartment market ranks among the most consistent in the nation in terms of performance making Ohio a terrific place to receive commercial mortgage financing. There has been a tempered supply growth in multifamily units resulting in strong rent gains in various markets. These trends are expected to continue as vacancy in all the Ohio’s big markets remains below 5 percent. There is a lot upside potential in the Class C sector, where a housing shortage continues across the Ohio market. Vacancy is lowest in this segment with below average rent hikes. The Cincinnati multifamily market is very hot right now. We have been witnessing Steady demand across all apartment classes. Over the past four years the demand for rental units in Cincinnati has been stable, bolstering absorption totals that outmatched supply additions. The city’s economic strength has supported the growing demand pool as people move into the region in search of new employment opportunities. The wide reach of the demand pool here bodes well for existing property performance and future development. Commercial real estate builders are doing most of their work near the core of the city, where new developments will provide residents a highly amenitized experience in proximity to work and leisure venues. Cleveland is also a very intriguing spot for commercial real estate and multifamily investment. Downtown Cleveland has remained the focal point of the city’s current real estate development. The city’s rental market has turned around recently, with heightened demand diminishing the vacancy rate by 170 basis points. Throughout this period development has remained strong with more than 2,000 multifamily units added to the local inventory.
Ohio’s average rent is typically lower than the national average. Apartments in Cleveland are the state’s most expensive, with an average rent of $1,081 per month. Cincinnati apartments rank second with an average monthly rent of about $975 followed by Columbus with average monthly rents of just under $924. Ohio’s cheapest cities to rent in are Toledo at a meager $714 per month and Dayton at just $765 per month. That being said Dayton rents are trending upwards (renters are paying $34 more per month than they did in April of last year) as the city is experiencing growing rents, with apartment prices increasing by 4.7% year over year. Behind Dayton, Cleveland apartments had the second highest rental rate increase in Ohio, with increases of 4% or $42 more expensive than the same month last year. Ohio’s slowest rising rents were in Akron with a small increase of 2.1%, and in Toledo, where rents rose by just 2.3% year over year. In terms of commercial mortgages, there are over 2 million mortgages for commercial real estate properties throughout the state of Ohio. The average value of these mortgages is just above $6 million, 14% above the United States average. This information shows that Ohio is a wonderful place to take out a commercial mortgage loan.
Ohio Apartment Loan Options
Ohio Freddie Mac Apartment loans
Ohio 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 Loan and Rate Information
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, in 2014, Freddie Mac launched their Freddie Mac Small Balance Multifamily Loan program to compete with Fannie Mae in the small balance market. For eligible borrowers, Cincinnati 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 Ohio 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 Ohio 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.
Ohio Fannie Mae Apartment loans
The Ohio 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 Loan and Rate Information
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 Cincinnati 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.
Ohio FHA HUD Multifamily Loans
HUD (Department of Housing and Urban Development) and FHA (Federal Housing Administration) insured multifamily loans are some of the best financing options for real estate investors and developers. While HUD does not directly make these loans, they do insure multifamily loans made by third party lenders to real estate investors. The third party lender will process the loan in accordance with the FHA HUD guidelines and HUD will underwrite the loan in order to provide the insurance. There are two primary types of HUD insured loans that multifamily investors can take advantage of.
The FHA HUD 223(f) multifamily loan program was instituted to help investors purchase and refinance multifamily properties. While many people think that HUD will only insure affordable and Section 8 housing the truth is that the HUD 223(f) loan program is a great option for investors looking to finance all kinds of multifamily properties across the United States. The FHA HUD 223(f) multifamily loan insurance program is one of the best financing options in the market for multifamily investors.
The FHA HUD 221(d)(4) Multifamily loan program was instituted to finance developments and substantial rehabilitations of multifamily properties. Through these multifamily loan programs, FHA and HUD are able to fulfill the essential mandate of its insurance programs: to make sure that there is an ongoing availability of capital for the acquisition, rehabilitation, development and refinancing of all apartment properties.
HUD insured multifamily loans offer investors some of the longest terms and amortizations on the market. The HUD 223(f) loan program offers fully amortizing terms of up to 35 years while the HUD 221(d)(4) loan program offers up to 43 year loan terms! This multifamily construction loan offers up to 3 years of interest only financing for the construction period followed by an additional fully amortizing term of up to 40 years. Monthly payments on multifamily HUD loans are much lower than with a typical lender because of the program’s longer amortization periods. Another huge benefit of these programs is that HUD is not able to discriminate based on geographical locations and markets. While many lenders may choose to not lend in a small and rural markets, HUD will insure loans in these markets. The biggest drawbacks of HUD insured multifamily loans are the timing it takes to close the loan and the red tape the borrower has to navigate. These loans can take anywhere from 5-10 months depending on the location of the property and HUD’s current pipeline. HUD insured loans require annual financial audits and they are generally more expensive than traditional multifamily loans.
Mortgage Insurance Premium - A common misconception in the multifamily industry is that FHA HUD directly makes multifamily loans to developers and real estate investors. The truth is that these loans are actually made by third party lenders and HUD only underwrites and insures the loans. This is where the mortgage insurance premium comes in. All HUD borrowers have to pay mortgage insurance premium at time of closing and on an annual basis. Typically, borrowers will pay 1% due to HUD at closing and 0.6% annually thereafter. However, affordable properties and green properties are eligible for MIP discounts (0.25%-0.35% for affordable and subsidized properties, 0.25% for Green/Energy Star certified properties). HUD pools up this money and uses it to insure the loans made by third party lenders. If a borrower defaults on a loan, HUD will use this money to pay the third-party lender. In essence, the mortgage insurance premium paid to HUD is what allows these loans to be offered at such attractive rates with incredibly long terms and amortizations.
2021 HUD Multifamily Loan Data - In 2021, HUD insured about 1,800 loans (worth over $29 billion) made to commercial real estate investors and developers. These loans were made on multifamily and healthcare properties all across the United States. HUD put a few new policies into place that made their loan insurance programs even more desirable for investors. HUD used to require developers of newly constructed apartment buildings to wait at least three years in order to be eligible to refinance their property into a HUD insured loan. In 2020, HUD did away with this rule- allowing developers to refinance right at stabilization. Many developers took advantage of this rule change in 2021, helping HUD achieve record loan volume year over year. In addition, HUD also began to allow investors looking to acquire multifamily properties through bridge loans and still qualify for up to 85% LTV through the 223(f) program. This was very beneficial for investors because the HUD process can easily take over half a year. Most sellers will not wait around that long to wait for their sale to close. This policy allowed investors to purchase multifamily properties with short term bridge loans and to flip into HUD loans after the initial acquisition. Many real estate investors took advantage of this policy change in 2021, another factor that helped HUD to produce record volumes year over year.
Due to historically low rates and the above policy changes, HUD was incredibly busy throughout 2021. Many loans took upwards of 10 months to close as HUD offices across the country were backlogged with billions of dollars’ worth of deals. Many investors were able to take advantage of the low-rate climate by locking into long term fixed rates below 3%. Due to all these factors, HUD was able to claim a very large share of the multifamily loan market in 2021.
Apartment Lending with Banks and Other Programs
While the agencies (Fannie Mae, Freddie Mac and HUD) 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.
Ohio Apartment Loans
Select Commercial provides Apartment Loans and commercial mortgages throughout the state of Ohio including but not limited to the areas below.
• Columbus • Cleveland • Cincinnati • Lakewood • Toledo • Akron • Dayton