Who is actually lending to you
This is the part borrowers get wrong most often. You cannot apply to Fannie Mae or Freddie Mac. Neither government-sponsored enterprise originates loans to property owners. Both work through closed networks of approved lenders, and your loan comes from one of those lenders.
Fannie Mae runs the DUS program, which stands for Delegated Underwriting and Servicing. Fannie Mae delegates underwriting authority to its DUS lenders, who underwrite, close, and service the loan and retain a portion of the credit risk on it. That risk sharing is the reason the delegation works, and the delegation is the reason DUS deals can move quickly, since most loans do not require Fannie Mae to pre-approve them.
Freddie Mac runs the Optigo lender network. On its conventional multifamily business, Freddie Mac generally underwrites and approves the loan itself before purchasing it, rather than delegating in the DUS sense, though its Small Balance Loan program gives Optigo lenders more delegated authority. Freddie Mac then aggregates loans and issues K-Deal securities backed by them.
Both paths end in the same place: the loan is securitized and sold to bond investors, which is why agency terms are standardized and why servicing behaves much like it does on a CMBS loan after closing.
What qualifies
Agency debt is overwhelmingly multifamily debt. Both agencies also finance manufactured housing communities, seniors housing, student housing, and affordable properties through dedicated programs, but the core product is conventional apartments.
- Property type — five or more residential units, held for investment
- Occupancy — generally stabilized, commonly around 90% occupancy sustained for roughly 90 days before closing
- Loan size — small balance programs typically start near $1,000,000, with conventional execution generally above the small-loan thresholds
- Leverage — typically up to about 75% to 80% loan-to-value, lower on tighter debt coverage or weaker markets
- Coverage — minimum debt service coverage ratios commonly around 1.25x, with variation by product, market, and leverage
- Structure — non-recourse with standard bad boy carve-outs, fixed or floating, terms often 5 to 30 years, frequently with a partial or full interest-only period
Both agencies also price down for green improvements and for properties meeting affordability thresholds, which can be worth a meaningful rate reduction and sometimes higher proceeds. If your rents are already at or below the relevant area median income limits, ask the lender to check it before pricing conventionally.
Worked example
An 84-unit stabilized garden apartment complex, 94% occupied, producing $1,150,000 of net operating income. Comparable properties trade around a 6.5% cap rate, so appraised value comes in near $17,700,000.
- Loan-to-value test at 70% — $17,700,000 × 0.70 = $12,390,000
- Coverage test at 1.25x — $1,150,000 ÷ 1.25 = $920,000 of maximum annual debt service
- Annual loan constant — at 5.85% fixed on a 30-year amortization schedule, about 7.08 cents of principal and interest per dollar borrowed
- Maximum loan by coverage — $920,000 ÷ 0.0708 = about $13,000,000
The coverage test allows roughly $13,000,000, but the leverage test caps the loan at $12,390,000, so leverage is the binding constraint. At that loan amount, annual debt service is about $877,000, which puts actual coverage at $1,150,000 ÷ $877,000 = roughly 1.31x, comfortably above the 1.25x floor.
That is the useful habit: run both tests every time and see which one binds. When coverage binds, more equity does not help, and the fix is lower leverage, a longer amortization, or a stronger income statement. When leverage binds, as it does here, the appraisal is what governs, and the improvements that raise value are worth more than the ones that raise cash flow this quarter.
What it means for you
For a stabilized apartment property, agency debt is usually the benchmark every other quote should be measured against. The combination of long fixed terms, non-recourse treatment, interest-only periods, competitive rates, assumability, and the availability of supplemental loans later is difficult for a bank to match on a like-for-like basis.
The tradeoffs are real, though. The property must already be stabilized, so a value-add deal generally needs a bridge loan first. Third-party reports, escrows, and replacement reserves are required. The process is document-heavy and takes longer than a bank loan. And because the loan gets securitized, post-closing changes go through a servicer under fixed rules rather than through a banker you know.
If you own or are buying five or more units, it is worth pricing agency execution against bank and permanent financing alternatives before you commit to either. Send us your rent roll and trailing twelve-month operating statement through our commercial loan application and we will size the deal under both tests and tell you which constraint is actually limiting your proceeds.
What to watch for
- Rate lock timing changes your economics. Agency loans offer early rate lock options that fix pricing well before closing, usually for a deposit. In a moving rate market that option can be worth far more than a small spread difference between lenders.
- Replacement reserves are underwritten, not optional. A per-unit annual reserve is built into the underwriting and escrowed monthly. Include it in your cash flow model from the start, because it reduces distributable cash every month.
- Prepayment is usually yield maintenance or defeasance. Fixed-rate agency loans carry meaningful prepayment protection. Know which one your loan has and where the open window sits before you plan a refinance or sale.
- Supplemental loans have rules. Both agencies allow additional debt behind the first mortgage, but only after a seasoning period and only if combined leverage and coverage still pass. Do not count on a supplemental in year two without confirming the tests.
- Your lender choice still matters. The guidelines are the agencies', but pricing, servicing quality, and how hard a lender will work a marginal file vary a great deal across the DUS and Optigo networks.
Can I get a loan directly from Fannie Mae or Freddie Mac?
No. Neither agency lends directly to property owners. You work with an approved lender in the Fannie Mae DUS network or the Freddie Mac Optigo network. That lender originates and closes the loan under agency guidelines, then sells it to the agency. A broker can put your file in front of several approved lenders at once to compare pricing.
What is the minimum loan amount for an agency multifamily loan?
Small balance programs from both agencies typically start around $1,000,000, with Freddie Mac's Small Balance Loan program and Fannie Mae's small loan execution covering the lower end of the market. Conventional agency execution generally applies above those thresholds. Exact ranges are updated by the agencies periodically, so confirm current limits with your lender.
Are Fannie Mae and Freddie Mac multifamily loans non-recourse?
Yes, typically, with standard bad boy carve-outs. You will sign a carve-out guaranty covering acts such as fraud, misapplying rents, unauthorized liens or transfers, and voluntary bankruptcy filings. Agency loans also usually require the property to be held in a single-purpose entity.
