Freddie Mac and Fannie Mae Loans When You Acquire More than 10 Properties

Freddie Mac and Fannie Mae only allow 10 properties…right?

Right…and wrong. It depends on the loan value of the asset.

For instance, if an investor purchases 10 properties (maximum of 40 units) that are considered residential (4 units or less), then that investor is capped and can not put any Freddie or Fannie properties in their name.

While one strategy has been to use a spouse to buy an additional 10 properties in their name ALONE, this is only possible if that spouse has the credit and income to support the purchase price.

Options with Fannie Mae and Freddie Mac when Investor exceeds 10 property cap

While it’s not always easy to find a lender that will work with an investor when they reach the 10 property limit, it’s certainly possible that a small bank or credit union will permit a “portfolio” loan as a non conforming loan option. These mortgages may cost the buyer a little more in closing costs and interest rate, if the hold time is long enough, the internal rate of return will be justified to move forward with the mortgage as a buy and hold investment.

Wait…doesn’t Fannie and Freddie have an option for me?

Yes! Fannie and Freddie do have an option for borrowers but it is a commercial product. Meaning, the following:

  • Must be on a TRUE multifamily building
  • 20% downpayment
  • Loan amount of $1M of more
  • Interest rates depend on market (as of January 2020 rates are below 4%)
  • Nonrecourse loan
  • Amortization term is 30 years
  • 2 or 3 year Interest Only options available
  • Application fee (paid upfront) can be $5000 or more
  • Legal fees can be $5000-7000
  • Origination fees can vary between 0%-1% of Loan amount
  • Some lenders permit a point paydown for improved rate
  • 5 year / 7 year / 10 year hybrid or balloon note is offered
  • Prepayment penalties for apply
  • Closing typically is 60 days

So…yes! Purchasing additional properties with Fannie or Freddie after exceeding 10+ properties is possible, but, the price point is $1.2M purchase price or more.

Other Fannie/Freddie Notes:

They don’t always like working with Series LLCs. So, if you’re purchasing a building in a series LLC or refinancing a building that is currently in a Series LLC, you may find that you will have additional underwriting requests.

Also, a borrower needs to have owned a building for 2+ years in order to have the income approach strongly considered on a refinance. Otherwise, either lender will look at a the refinance on a loan to cost value. Meaning, value of the building will be renovation costs plus purchase price when refinancing within two years.

Both will permit interest only on a note in exchange for an increase of basis points (+4 basis points per year of interest only as of January 2020) for a 7 or 10 year fixed SBL.

Application fee must be paid upfront!!! Yes, that’s a lot of cash if you’re “hoping” to perform a cash out refinance. So, be confident of your income approach value our ask your lending sponsor to conduct the appraisal upfront.

Rolling multiple buildings into one SBL is possible, but, require the buildings be within the same vicinity of each other and be 100% multifamily with no mixed use purpose.

Fannie/Freddie are pretty form on the $1M loan limit. So, if you think your building value will be $1.2M or less, this loan may not make sense for you. Again, do everything you can to obtain confirmation that the appraised value is going to make the minimum.

Finally, shop around! There are lots of Fannie and Freddie Small Balance Loan lenders these days. Some are direct lenders and some are brokers. They won’t charge the same to originate your loan so be confident you’re getting the best deal possible.

Start your search for SBL direct lenders here :