San Jose Apartment Loans in 2025

In order to determine San Jose multifamily loan rates, the first thing a multifamily loan lender needs to know is the type of property involved. Pricing on apartment loans will be lower than pricing for office properties, as apartments are a preferred investment in today’s market. After the lender understands the asset class involved, he will look at the deal metrics, which include, Loan to Value ratio (LTV), Debt Service Coverage Ratio (DSCR), and Debt Yield. Loans with a lower LTV and higher DSCR are considered less risky and will have better pricing. Another important deciding factor will be the location of the property. Top quality urban and suburban markets will be preferred over rural locations. One other major deciding factor will be the borrower’s experience, credit, net worth and liquidity. Strong borrowers with experience can expect the best pricing. The bottom line is that lenders need to understand the entire picture before quoting rates. As of May 30, 2025, you can check where multifamily loan rates currently start.

San Jose multifamily loan rates fluctuate based on current market indices. Most multifamily loans are priced over one of the following: US Treasury rate, the Wall Street Journal prime rate, or the Secured Overnight Financing Rate (SOFR). At the beginning of 2025, all of these rates are still elevated as a result of the Federal Reserve’s rate increases to curb inflation. As market rates gradually soften, multifamily loan rates will trend downwards. Many borrowers today are not locking in long term fixed rates but are opting for short term deals with lower prepayment penalties so that they can refinance when rates are more favorable.

It used to be fairly common to obtain 80% financing when rates were in the 3% and 4% range as the property’s cash flow could support higher levels of debt. In early 2025, with many rates in the 6% and 7% range, cash flow is severely restricted due to higher debt service costs. We often see maximum loan to value ratios in the 65% -70% range today as a result of these higher rates. As market rates ease, we would expect to see higher loan to value ratios and lower down payment requirements.

Many borrowers who are looking to refinance loans taken out five to ten years ago are experiencing several obstacles. First, since rates in early 2025 are higher, many loans are coming up cash-short (the new loan amount is not enough to pay off the maturing loan). These borrowers are often required to inject more cash into their deals or take on equity partners who are willing to invest. Today’s higher rates are causing mortgage payments which are often rising faster than the rental income increases will bear. Until rates ease, many borrowers will have experience difficulty refinancing their existing loans.

There are many reasons to work with a qualified and experienced San Jose multifamily loan broker. A mortgage broker will have a large database of capital sources, including agency lenders, insurance companies, CMBS lenders, national, regional and local banks, credit unions, debt funds, and private lenders to choose from. The broker will analyze your specific deal and determine which capital source will offer the best terms and the highest likelihood of success. The broker will professionally package your deal and negotiate the best terms for you.

Select Commercial has over 40 years of experience negotiating commercial and apartment loans for its clients. They have an extensive nationwide network of capital sources that are able to consider most loan scenarios. Many borrowers go to one or two of their local banks but don’t have the nationwide reach to approach other lenders that are often offering better rates and terms. Select Commercial spends the time understanding every client’s needs and will aim to negotiate all important loan terms, including, rate, term, amortization, prepayment penalty, recourse obligations, fees, reporting requirements, etc.

Lenders look at many items when deciding whether to approve an apartment or not. Some of the most important factors include LTV ratio, DSCR ratio, location of the property, property condition, occupancy, and borrower qualifications (experience, credit, net worth, and cash liquidity). While most of these factors are common sense and assumed by borrowers, the DSCR ratio might need some explanation. DSCR stands for Debt Service Coverage Ratio and is a ratio of the total net operating income divided by the annual debt service. Most lenders will require a DSCR of at least 1.25. This means that for every dollar of mortgage payment the property must net $1.25 in NOI. The reason that this is important is that while the maximum LTV might be 80%, the property needs to meet the debt service requirements. Due to higher market rates in 2025, most properties will only cash flow at 65% or 70%. It is important to calculate both LTV and DSCR when looking for a new loan.

San Jose lenders look for quality properties with high historical occupancy in excellent neighborhoods. Certain asset classes are preferred today based on current market conditions. Apartment properties and investment grade retail/warehouse/industrial properties with long leases are always in high demand. The risk of default with these properties is very low. Riskier deals include properties with short term leases, properties with high vacancy rates, and properties in remote or rural locations. Certain asset classes are not in favor today, such as general office properties. Ever since the work from home policies enacted during the Covid pandemic (many of which still remain in place) office properties have lagged the market.

Most new loans today will have rates that are higher than the rates which borrowers obtained 5 – 10 years ago. As these loans come up for renewal, many borrowers will be forced to refinance at today’s higher rates. Those borrowers might find that the new loan does not cash flow as well as their previous loan and might need to pay down the loan. Some borrowers who opt to refinance now might be looking to free up cash for other investments. Borrowers will need to decide if that makes sense in today’s market. We are not seeing a lot of discretionary refinancing right now due to higher market rates. Once rates soften, we expect to see a significant increase in discretionary refinancing.

Applying for a San Jose HUD multifamily loan is no different than applying for a regular loan with your bank. The lender will want to see a current rent roll showing at least 90% occupancy, a 12-month operating history showing the necessary cash flow to support the new loan, sufficient multifamily experience, good net worth and cash liquidity, and a good credit rating. Loans that do not meet HUD, Fannie Mae or Freddie Mac standards might still qualify for a bank or credit union loan. The lender will tell you upfront which lending options are best for you.

Applying for a San Jose Freddie Mac multifamily loan is no different than applying for a regular loan with your bank. The lender will want to see a current rent roll showing at least 90% occupancy, a 12-month operating history showing the necessary cash flow to support the new loan, sufficient multifamily experience, good net worth and cash liquidity, and a good credit rating. Loans that do not meet HUD, Fannie Mae or Freddie Mac standards might still qualify for a bank or credit union loan. The lender will tell you upfront which lending options are best for you.

Applying for a San Jose Fannie Mae multifamily loan is no different than applying for a regular loan with your bank. The lender will want to see a current rent roll showing at least 90% occupancy, a 12-month operating history showing the necessary cash flow to support the new loan, sufficient multifamily experience, good net worth and cash liquidity, and a good credit rating. Loans that do not meet HUD, Fannie Mae or Freddie Mac standards might still qualify for a bank or credit union loan. The lender will tell you upfront which lending options are best for you.

Most multifamily loan loans today are fixed for 5, 7, or 10 years and come with a 25–30 year amortization schedule. Loans can be recourse (personal guarantee) or non-recourse (no personal guarantee). multifamily loan loans typically carry prepayment penalties, whereas residential home loans usually do not. Specific terms will be determined by your lender’s underwriting team after your application is reviewed.

San Jose multifamily loan lenders typically lend up to 75–80% on an apartment purchase (down payment of 20–25% necessary). On other types of commercial property, multifamily loan lenders will typically lend up to 70–75% (down payment of 25–30% necessary). An exception is for owner-occupied business real estate, where owner/users may qualify for up to 90% LTV financing.

San Jose multifamily loan loans are evaluated differently from residential loans. Residential lenders base their decisions on the borrower’s income and creditworthiness, while commercial lenders focus on the property’s cash flow, operating statements, rent roll, and other financial metrics. Riskier commercial properties often lead to higher rates, while strong-performing properties can result in rates lower than residential loans.

The best commercial properties to invest in 2025 are those with high historical occupancy in strong locations. Apartment properties and investment-grade retail, warehouse, and industrial properties with long leases are preferred due to their low risk. Riskier properties include those with short-term leases, high vacancy rates, or located in rural areas. General office properties remain less desirable due to work-from-home trends.

Refinancing a multifamily loan involves determining whether the new loan meets your goals, such as lowering rates, reducing payments, or freeing up cash. Higher rates in 2025 can make refinancing challenging, with some borrowers needing to inject cash into deals. Once rates soften, refinancing may become more favorable for many property owners.

To apply for a multifamily loan, you’ll need to provide financial documentation, including a rent roll, operating statements, and borrower financials (net worth, liquidity, credit score). The lender evaluates both the property’s and borrower’s profiles to determine loan eligibility and pricing. A qualified mortgage broker can help streamline the process and identify the best options for you.