Multifamily has the best financing options of any commercial real estate asset class. Fannie Mae, Freddie Mac, and HUD provide government-backed agency debt with non-recourse terms, long amortizations, and competitive rates that no other CRE asset class can access. This financing advantage is one of the biggest reasons multifamily is so popular.

This lesson covers the major multifamily financing options — agency debt, bank debt, HUD loans, bridge debt, and how to choose between them.

Why financing matters so much in multifamily

Most multifamily deals are 60-75% leveraged. The cost and terms of that debt drive most of the equity return. Two identical properties financed differently can produce 10% or 20% IRR depending on:

Interest rate
Loan-to-value (LTV)
Amortization period
Loan term length
Recourse vs non-recourse
Prepayment penalties
Reserves and escrows

Multifamily's edge over other CRE is access to agency debt — government-sponsored entity (GSE) loans from Fannie Mae and Freddie Mac that offer terms unavailable to other property types.

Agency debt overview

The two government-sponsored enterprises (GSEs) — Fannie Mae and Freddie Mac — provide multifamily loans through a network of approved lenders. These loans are then pooled and sold as mortgage-backed securities to investors. The GSE guarantee makes them attractive to bond buyers, which keeps rates low for borrowers.

Why agency debt is special

Non-recourse — borrower is not personally liable (with standard "bad boy" carve-outs)
Competitive rates — typically 50-100 bps below bank loans
Long amortization — 30 years vs 25 years for banks
Long terms — 5, 7, 10, 12, 15 year fixed-rate options
Available nationwide — even in tertiary markets
No personal guarantees for most loans
Predictable execution — agencies follow standard underwriting

Who can borrow

Multifamily properties of 5+ units. Both stabilized and lease-up properties (with the right product). Both Class A and Class C/D. Both individual investors and large institutions.

There's no minimum or maximum borrower size for most agency programs, though smaller deals use different programs than larger deals.

Fannie Mae programs

Fannie Mae's multifamily lending is delivered through DUS (Delegated Underwriting and Servicing) lenders — about 25 approved national lenders.

Standard Fannie Mae DUS

Loan size: $750K and up; sweet spot is $5M-$50M
LTV: Up to 80% (75% for many properties)
DSCR: 1.25x minimum
Amortization: 30 years
Term: 5, 7, 10, 12, 15 years (10-year is most common)
Rate: Fixed at closing, based on Treasury + spread
Recourse: Non-recourse with standard carve-outs
Prepayment: Yield maintenance or defeasance
Property requirements: 5+ units, occupied/stabilized

Fannie Mae Small Loan

Loan size: $750K to $9M
Streamlined underwriting — less documentation
Same favorable terms as standard DUS
Sweet spot: small to mid multifamily acquisitions and refinances

Fannie Mae Green programs

Properties that meet energy efficiency standards (or commit to upgrades) qualify for:

Reduced interest rate (12.5-25 bps lower)
Higher LTV in some cases
Treatment of utility savings in DSCR calculation

The Green Rewards program is particularly popular — it lets borrowers fund energy upgrades through additional loan proceeds.

Freddie Mac programs

Freddie Mac competes directly with Fannie Mae but has some distinct programs.

Freddie Mac Optigo (standard)

Loan size: $1M and up; sweet spot is $5M-$100M
LTV: Up to 80%
DSCR: 1.25x minimum
Amortization: 30 years
Term: 5-30 years (very flexible)
Rate: Fixed at closing
Recourse: Non-recourse
Property requirements: Stabilized 5+ units

Freddie Mac Small Balance Loan (SBL)

Loan size: $1M to $7.5M
LTV: Up to 80%
Streamlined underwriting with set DSCR/LTV grids
Recourse: Non-recourse
Sweet spot: Smaller multifamily that wouldn't qualify for full DUS

The SBL is one of the most popular financing options for small and mid multifamily because of its streamlined process and favorable terms at the small end of the market.

Freddie Mac float-to-fix

A unique structure: borrow floating rate during the renovation/value-add period, then convert to fixed rate when stabilized. Eliminates the need for a separate bridge loan.

Freddie Mac Targeted Affordable Housing (TAH)

For properties with regulatory affordability requirements (LIHTC, Section 8 subsidized, etc.). Offers below-market rates and favorable terms for affordable housing preservation.

HUD multifamily loans

HUD (the Department of Housing and Urban Development) provides FHA-insured multifamily loans through approved lenders. These are the longest-term, highest-LTV loans in the market.

HUD 223(f) — refinance/acquisition of existing properties

Loan size: $1M and up; commonly used $5M-$50M
LTV: Up to 85% for purchase, 80% for refinance
DSCR: 1.176x minimum (lower than Fannie/Freddie!)
Amortization: 35 years
Term: 35 years (full self-amortizing — no balloon)
Rate: Fixed at closing
Recourse: Non-recourse
Mortgage insurance: 0.6-0.65% annual MIP (mortgage insurance premium)
Process: Slow and bureaucratic — 6-9 months from application to closing

The good: 35-year amortization at fixed rates is the longest in CRE. Cash flow is maximized. No refinance risk for 35 years.

The bad: Slow process, lots of documentation, MIP adds cost, prepayment is restrictive.

HUD is best for buy-and-hold investors who want maximum cash flow and minimum refinance risk over decades. Less useful for value-add buyers who plan to refinance or sell in 3-5 years.

HUD 221(d)(4) — construction/substantial rehab

For ground-up construction or major rehabilitation (>$15K/unit)
40-year amortization plus construction period
LTV: Up to 85% for market-rate, 87% for affordable
Slow process — typically 12-18 months from application to closing
Highest leverage of any CRE construction financing

HUD 221(d)(4) is the gold standard for large multifamily development financing, but only viable for sponsors who can wait through the long approval process.

Bank loans for multifamily

Commercial banks compete with agencies for multifamily lending, especially at the smaller end of the market.

When banks beat agencies

Loan size below $1M — agencies don't go that small
Pre-stabilized properties — banks more flexible on lease-up
Local market knowledge — community banks know the area
Speed — banks can close in 30-45 days vs agency 60-75
Existing borrower relationships — banks reward repeat customers
Cross-collateral — banks may take additional collateral for lower rates

When banks lose to agencies

Recourse — banks usually require it; agencies don't
Amortization — banks max out at 25 years; agencies do 30
Term — banks rarely go over 10 years; agencies do 15+
Rate — banks usually 50-100 bps higher

Typical bank loan terms for multifamily

LTV: 65-75% (lower than agency)
DSCR: 1.20-1.30x
Amortization: 20-25 years
Term: 5-10 years balloon
Rate: Floating or fixed for the term
Recourse: Yes for most banks
Prepayment: Negotiable (often less restrictive than agency)

Banks are best for smaller deals, local relationships, or borrowers who don't qualify for agency.

Bridge debt for value-add

For value-add multifamily where the property isn't stabilized at acquisition, bridge debt provides interim financing during the value-add phase.

Typical bridge loan terms

LTV: Up to 80% (some go to 85%)
LTC (loan to cost): Up to 80-85% including renovations
Term: 2-4 years
Rate: SOFR + 350-650 bps (higher than permanent debt)
Amortization: Interest-only typically
Recourse: Often non-recourse for institutional bridge lenders
Origination fee: 1-2% of loan amount
Exit fee: 0.5-1% of loan amount

Bridge-to-perm

Many bridge lenders offer an integrated path:

Buy with bridge loan
Execute value-add (renovations, lease-up, rent push)
Stabilize NOI
Refinance into agency permanent loan
Pay off bridge with permanent proceeds

The risk: if the value-add doesn't work, you can't refinance, and the bridge loan matures with the property still unstabilized. This is when value-add deals fail.

Major multifamily bridge lenders

Arbor Realty Trust — bridge and agency lender
Walker & Dunlop — bridge and agency
Berkadia — Berkshire/Jefferies JV, bridge and agency
CBRE Capital Markets — bridge and agency
Greystone — bridge and HUD/agency
Lument (formerly ORIX/Hunt) — bridge and agency
Northmarq — bridge and agency
MF1 Capital — bridge specialist
Blackstone Mortgage Trust — institutional bridge

Most bridge lenders also originate agency debt, so you can use the same lender for bridge-to-perm.

CMBS for multifamily

CMBS (Commercial Mortgage-Backed Securities) loans are still occasionally used for multifamily but have lost market share to agencies. CMBS is more common for mixed-use, retail, and office now.

CMBS for multifamily makes sense when:

The deal is too large for a single agency lender
The borrower wants long fixed terms (10-year is standard)
The property doesn't quite fit agency boxes

For most multifamily, agency beats CMBS on every dimension.

Choosing the right financing

A simple decision tree for multifamily financing:

Is the property stabilized (90%+ occupied for 90 days)?

No → Bridge loan (Arbor, Walker & Dunlop, etc.)
Yes → Continue

Loan amount?

Under $1M → Local bank
$1M-$7.5M → Freddie SBL or Fannie Small Loan
$5M-$50M → Fannie DUS or Freddie Optigo
$5M-$50M, want max amortization → HUD 223(f)
$50M+ → Fannie/Freddie large loan or balance sheet lender

Hold period?

3-5 years (value-add exit) → Agency 5-7 year term or bridge-to-perm
5-10 years (intermediate hold) → Agency 7-10 year term
10+ years (long hold) → HUD 223(f) for max term

Property condition?

Class A new → Agency standard
Class B value-add → Bridge-to-perm or agency with capex reserves
Class C value-add → Bridge first, then agency
Class D heavy reposition → Bridge or hard money

Florida-specific considerations

Multifamily financing in Florida has some unique factors:

Insurance escrow — most lenders require monthly insurance escrows; Florida insurance volatility creates large escrows
Hurricane wind coverage — verify the policy covers what the lender requires (lenders increasingly demand named storm coverage)
Concurrency / impact fees — for development financing
Property tax reset — Year 1 underwriting must include the tax reset
Construction defect litigation history — lenders ask about it for properties under 10 years old
Coastal flood zones — flood insurance required for many properties; rates have risen sharply

Worked example: financing a $10M Central Florida value-add deal

You're buying a 100-unit Class C apartment complex in Lakeland, FL for $10M. Plan: $1M renovations, push rents 25%, hold 5 years, refinance to agency, exit at year 5.

Option A: Bridge-to-perm

Bridge loan year 1-3:

Loan: 75% LTC = $8.25M (75% × $11M total cost)
Rate: SOFR + 450 bps = 9.5% all-in
Amortization: Interest-only
Term: 3 years
Origination fee: 1.5% = $124K

Refinance to Fannie DUS year 3:

Stabilized NOI year 3: $900K
70% LTV at 6.0% cap stabilized value of $15M = $10.5M loan
Rate: 5.75% fixed
Amortization: 30 years
Term: 7 years

Pros: Maximizes value-add, no prepay penalty for refi Cons: Higher cost during bridge period, refi risk if rates rise

Option B: Direct agency

If the property is currently 90%+ occupied with reasonable in-place rents, you could go direct agency:

Fannie DUS at acquisition:

LTV: 75% = $7.5M loan
Rate: 5.75% fixed
Amortization: 30 years
Term: 7 years

Pros: Lower cost, more predictable Cons: Less leverage; prepay penalty if you exit before maturity; no funded renovations

For most value-add deals, bridge-to-perm is the right answer. For stabilized deals, direct agency is.

What to take away

Multifamily has the best financing options of any CRE asset class because of agency debt
Fannie Mae DUS and Small Loan programs provide non-recourse, 30-year amortization, fixed-rate loans
Freddie Mac Optigo and Small Balance Loans compete directly with Fannie Mae
HUD 223(f) offers the longest amortization (35 years) but slow process
Bank loans are best for sub-$1M deals or borrowers wanting local relationships
Bridge loans bridge value-add deals from acquisition to stabilized refinance
Bridge-to-perm is the standard structure for value-add multifamily
Florida-specific considerations include insurance escrows, hurricane coverage, and tax reset
Choose financing based on stabilization status, loan size, hold period, and property condition

Next lesson: value-add multifamily strategies — the playbook for buying, renovating, and repositioning Class B and C properties.

Agency Debt and Multifamily Financing