Multifamily Mortgage Loan

The multifamily mortgage loan provides financing for property with two or more units. This financing can be long-term, permanent loans or short-term bridge loans.


This type of financing is available through credit unions, banks, life companies, agency and CMBS lenders as well as debt funds and online marketplaces. It is also a great option for first time home buyers who qualify for Freddie Mac’s Home Possible program.

Interest Rates

Depending on the type of financing, borrowers can get multifamily mortgage rates that are either fixed or floating. There are also options for short-term multifamily loans, which are used to finance the acquisition or development of a property. These loans have shorter terms and require higher credit standards. Generally, they have higher interest rates and fees than permanent loans.

The interest rates for multifamily mortgages are based on the federal funds rate, which is the interest rate that banks charge each other to borrow money overnight. These rates are controlled by the Federal Reserve, which affects the cost of money for banks and other financial institutions. The resulting cost trickles down to mortgage interest rates.

Conventional mortgages for multifamily properties are available from commercial banks and lending institutions. The loan amounts can range from USD 510,400 to more than USD 1.0 billion. Investors can obtain conventional loans only if they have prior experience as landlords or can prove that their incomes exceed the required debt-to-income ratio.

Another option for multifamily financing is a portfolio loan, which can be secured by a credit union or private lender. The loan is often used to buy multifamily properties that are rented to low-income tenants, though it can be used for other purposes. It carries competitive rates and allows borrowers to invest in multiple properties at a single time.

Down Payment

Unlike single-family mortgages, multifamily loans typically require a larger down payment. This is due to the fact that a property has multiple units and can be a more complex asset to own. Generally, conventional mortgage lenders require between 15%-25% of the purchase price for owner-occupied duplexes, triplexes and four-plexes if the borrower will live in one of the properties. However, government-backed FHA loans and CMBS lenders may allow lower down payments for 2-4 unit properties and have more flexible credit and income requirements.

When assessing a borrower’s eligibility for a multifamily loan, a lender will look at their debt-to-income ratio. This is a comparison of the amount that a person spends each month on regular and recurring debts such as mortgages, car payments and student or personal loans against their gross monthly income. In addition, a lender will also consider their existing assets and other sources of income.

Experienced real estate investors with a proven track record of buying and managing investment properties may be eligible for non-recourse multifamily financing. This type of financing uses only the financed multifamily property as collateral, rather than other assets that may be pledged as security for other loan obligations. However, this type of financing usually comes with higher interest rates and fees. This is because the lenders take on more risk when providing a non-recourse loan to borrowers.


There are a number of requirements that both the property and borrower must meet to qualify for a multifamily mortgage. For the property, lenders will consider things like vacancy rates, occupancy levels, and income generation. For the borrower, lenders will examine their net worth and liquidity as well as their previous real estate experience. Lenders also typically require reserves that are held in cash or in liquid assets to ensure that the borrower can meet their loan payments in case of an unexpected shortfall.

Credit scores are an important factor in determining the borrower’s eligibility for a multifamily mortgage, with many loans requiring a minimum score of 620 or higher. However, this is not a hard and fast rule and there are plenty of options available for borrowers with lower credit scores.

Other considerations include the property’s location and its physical condition. The occupancy level is an important metric, with most agencies and some conventional lenders requiring a minimum of 85-90% occupancy on stabilized properties. The loan-to-value ratio is another key metric, with most lenders having maximums that they will not exceed.

Other types of financing for multifamily properties include bridge and mezzanine financing. Bridge loans are generally shorter term loans and can be useful in filling in gaps between the purchase or construction of a property and the availability of permanent financing. CMBS (commercial mortgage-backed securities) loans are another type of multifamily financing that can be used to acquire existing properties. These loans are bundled into larger securities and sold on the capital markets.


Multifamily loans allow you to finance properties that have two or more units. There are many different types of multifamily financing, and the right option for you will depend on your business goals and qualifications. You should shop rates with multiple lenders to find the best deal. You may also be required to provide a series of third party reports for a multifamily loan.

There are several types of multifamily mortgage lenders, including traditional banks, life insurance companies and agency, CMBS and HUD lenders. Most multifamily mortgage lenders offer permanent financing options that can be either floating or fixed interest rates. These types of loans are amortized over a period of 20 to 30 years. Some lenders also offer shorter amortization periods for borrowers who want to pay off their principal balances sooner.

Some multifamily mortgage lenders specialize in certain markets, such as urban and suburban neighborhoods. These lenders typically have more flexible lending criteria, such as lower debt service ratio requirements and lower credit standards for borrowers. In addition, they often have experience working with multifamily property managers and syndicators.

Other lenders offer short-term financing, such as bridge loans and hard money loans. These types of loans are best for investors who want to buy and rehab a multifamily property quickly. These loans are usually less expensive than conventional and government-backed multifamily mortgages, but they also have higher fees.