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Small Balance Loans:
Borrower Tips and Insights

The Small Balance Landscape in 2017

A One on One interview with Freddie Mac Multifamily EVP, David Brickman and Arbor Realty’s CEO, Ivan Kaufman.

This three-part video series captures an interview with two leaders of the Multifamily Small Apartment Loan space, David Brickman and Ivan Kaufman.


Cash in on Market Improvements: 5 Tips

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If you own a small multifamily property—now, more than ever—it’s good to be you. For the better part of a decade, the market has delivered low vacancies and higher rents.

Apartment values have risen over 143 percent since 2009. As employment and wages continue to rise, 2017 is expected to be yet another strong year.

Bottom line: It’s a great time to cash-in on market improvements by refinancing— especially if your loan was originated in more difficult economic times. Growth is good and rates are still near historic lows. But, without the right preparation, you could find yourself short-changed.

5 Tips to Put More Cash in Your Pocket

  1. Aim for Accuracy. Spotty records make underwriting tough. Have at least 3 years of accurate operating financial statements and rent rolls. Identify any capital improvements.
  2. Show Your Property Some Love. A well-maintained property shows owner commitment. Serious deferred maintenance could require you to escrow part of your proceeds to cover repairs, reducing cash at closing.
  3. Strive for Stability. Volatile expenses, income, or occupancy makes it hard for your lender to project income when underwriting. Strive for consistent operations. Have a spike in expenses or a dip in occupancy? Explain it.
  4. Don’t Count Out B- or C-class Properties. While some lenders might shy away from cash-outs on properties with lower-than-market rents, Freddie Mac Multifamily does not as long as the property meets the underwriting criteria.
  5. Take a Fresh Look. Already have a go-to source for financing? Options have changed. You owe it to your business to take a fresh look, especially if you have owned your property for at least three years and it has experienced rent growth, or you have made improvements to boost rent potential.

Rising Rates: 3 Things to Know Before Financing

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When it comes to financing a small multifamily property, rising rates have the potential to reduce your loan proceeds or even kill your deal altogether.

Here’s what you should look out for and ways to make your transaction a smooth one.

The Fair Weather Lender

With rates rising, many traditional lenders many traditional lenders are becoming more restrictive on multifamily real estate in order to chase more attractive investments. For property investors, this translates into higher costs, more restrictions and less flexibility.

Fortunately, nearly a dozen nationwide lenders Learn More About Small Balance Loan program from reading 3 Things to Know Before Financing now offer small multifamily loans financed by Freddie Mac Multifamily. Since the company’s mission is to ensure liquidity, stability and affordability in the market, they are always in the market and they are eager to finance small multifamily buildings in particular because these properties are a major source of affordable rental housing.

Inspecting Your Interest Rate

When the Federal Reserve adjusts rates, most lenders follow suit accordingly. But, again, the Freddie Mac Multifamily loan program is different. They look at a variety of factors across the mortgage market when setting rates. That makes them more competitive and less subject to volatility.

Hold That Quote!

When rates fluctuate, the quote that a lender gives you at the beginning of the process isn’t always what you end up with at closing. The only requirement is that you complete an application. It’s a simple way to get peace of mind.

There are ways, though, to lock in greater certainty and still keep it simple. For example, Freddie Mac Multifamily lenders provide a quote for the full mortgage coupon, not just the rate. Plus, at no additional cost, they will hold the coupon for 60 to 75 days— enough time to get you to closing. The only requirement is that you complete an application Learn More About Small Balance Loan program from reading 3 Things to Know Before Financing. It's a simple way to get peace of mind.

For more information on Freddie Mac Multifamily Small Balance Loans, click here. Learn More About Small Balance Loan program from reading 3 Things to Know Before Financing


The Surprising Truth About Agency Lending

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When you hear the words “agency financing” you’re probably thinking tortoise more than hare.

Joe Back, Vice President of FM Capital, a Florida-based commercial broker, has a different perspective.

“When I present the terms and explain how straightforward the process is, there is disbelief; but building by building, owners are converting to agency loans,” says Back. He sources small loans for Arbor, the top lender in Freddie Mac Multifamily’s Learn More About Small Balance Loan program from reading The Surprising Truth About Agency Lending article Balance Loan program.

So, why are small multifamily property owners opting for agency financing?

Always Lending, Everywhere

Bank regulations and rising rates are reducing available credit from local sources that most investors of small apartments use. Freddie Mac Multifamily, however, has expanded available capital for small apartment buildings with a nationwide program that’s funded over $5 billion so far. The company’s mission is to support liquidity, stability and affordability in all economic cycles.

More Competitive Terms

There’s no need to settle for full recourse when you can get non-course at no extra cost— which is the case on all Learn More About Small Balance Loan program from reading The Surprising Truth About Agency Lending article Freddie Mac Multifamily Small Balance Loans. Plus, you can lock in a low rate and payment for a longer term (up to 10 years) and get flexible prepayment options.

Room to Grow

It can be surprisingly easy to max out your credit limit with a local lender, bringing your portfolio growth to a screeching halt. Freddie Mac Multifamily Small Balance Loans, however, give you much more room to grow because they are not subject to the same local limits.

Plus, using a Freddie Mac Multifamily Small Balance Loan means you are building a track-record with a funding source that doesn’t geographically limit your growth.

Buckle Up, It’s Fast

How fast? That’s really up to you, but it’s not unheard of for Freddie Mac’s small loans to close in 30 days or less. In order to handle a lot of volume, the company created a fast and simple process, and provides all the requirements up front.

The Freddie Mac Multifamily Small Balance Loan program is available through a network of approved lenders who originate these small loans nationwide. To explore your small loan options, visit Learn More About Small Balance Loan program from reading The Surprising Truth About Agency Lending article www.freddiemac.com/small-loans.