What Type of Apartment Mortgage Loan Should You Select?

The type of apartment mortgage loan you select will depend on your financial situation. Generally, conventional loans follow guidelines set by Fannie Mae and Freddie Mac and require that a condo be warrantable.


To determine what type of loan you can qualify for, consider your credit score and debt-to-income ratio. Also, look at the loan terms and if there will be a balloon payment at the end of the term.


FHA-insured loans are backed by the federal government, which gives lenders added security and protection against loan defaults. This allows them to lend to borrowers that they might ordinarily consider too risky. FHA loans also typically have lower down payment requirements than conventional loans, which can make them more accessible to borrowers with limited funds.

Despite their easier standards, HUD/FHA loans still carry some stipulations that potential borrowers should be aware of before pursuing one. For example, borrowers must meet minimum credit scores and debt-to-income ratios. They must also find a FHA-licensed lender to approve their loan application.

Additionally, borrowers must pay upfront and ongoing mortgage insurance premiums. These are calculated based on the loan amount and down payment and can be lumped into their monthly mortgage payments. These fees are intended to help offset the higher lending risks associated with these loans.

HUD offers several types of multifamily financing, including the FHA 223(f) loan and the HUD 221(d)(4) program. These programs can be used for new construction and substantial rehabilitation of apartment properties. They can offer loan-to-value (LTV) ratios of up to 85% and debt service coverage ratios of up to 1.18x for market-rate properties and lower LTV/DSCRs for affordable properties. These loan programs are non-recourse and require a minimum down payment of 3.5%. They also have long durations and fixed interest rates, which can be beneficial for borrowers.

RCN Capital

RCN Capital is a private lender that provides bridge loans for apartment complexes. It is a nationwide, direct private lender and works to provide time-sensitive financing for real estate investors and brokers. Its loan programs are ideal for fix-and-flip investors, allowing them to compete with all-cash offers in competitive markets. RCN offers a variety of other services, including table funding and a dedicated loan officer for every deal.

One specific type of apartment complex financing is the HUD FHA 223(f) loan, which allows for a maximum loan floor of $1 million and a maximum LTV of 87%. These types of loans are typically fixed-rate, but they can also be interest-only.

Another popular form of apartment investment financing is the bank balance sheet loan, which is held by the lender that issues it. Because these types of loans don’t conform to government guidelines, they can offer higher debt to income and loan to value maximums than government-backed loans.

RCN Capital also offers a white label program for loan originators that allows them to market their own version of RCN’s loan programs. This includes a dedicated account manager, loan servicing, and due diligence double-checks. This is especially important for lenders in markets that are highly competitive for non-owner occupied residential and commercial properties. This way, brokers can offer their clients the best options for their specific needs without having to worry about losing business.

Government-Backed Loans

Government-backed mortgage loans are offered by private mortgage lenders and are guaranteed by the federal government. They make homeownership more accessible to borrowers who may not qualify for conventional loans. This includes borrowers with lower credit scores, smaller down payments and existing debt loads that exceed certain limits. These borrowers often find that government loan programs offer competitive interest rates and more flexible requirements, and they can benefit from more generous financial documentation guidelines.

Government home loans operate outside of the standard conforming mortgage lending rules set by Fannie Mae and Freddie Mac. They are also non-conforming mortgage loans that have different cost structures and require different qualifications for borrowers. Government-backed loans are available for a variety of purposes, including buying a home, making renovations and more.

These loan programs are designed for specific groups of people, such as active and retired military members and their families, those who want to purchase homes in rural areas and others. These loans typically have fewer restrictions than conventional loans, with 3.5 percent down payment requirements and more lenient credit requirements.

When selecting a government-backed mortgage, it’s important to review all accompanying rules and regulations carefully. Mortgage lenders like Contour Mortgage can provide guidance on the different requirements and benefits of each loan program. They can also help you determine whether a government-backed loan is the right fit for your needs.

CMBS Loans

CMBS loans, or conduit loans, are an excellent financing option for multifamily housing properties. They have some of the lowest interest rates available for commercial real estate investments and are generally non-recourse. However, borrowers should carefully consider the loan terms and requirements, including minimum loan amounts, property financial performance and borrower creditworthiness, before making a decision. Professional guidance from mortgage specialists is crucial to ensure that a CMBS loan meets all of the borrower’s financing needs.

The CMBS securitization process involves pooling a number of commercial real estate loans together and selling them to investors on the secondary market. This gives the lender the capital they need to issue more loans and allows them to diversify their risk exposure. As a result, CMBS lenders are more willing to take on complex and riskier investment properties than other types of loans.

In general, CMBS loan underwriting is based on the property’s income rather than its owner’s financial history. As such, CMBS loans are ideal for multifamily investment property buyers with less-than-perfect credit histories and can be used to finance a variety of different types of income-producing commercial real estate assets. CMBS loans are also often assumable, which provides exit flexibility for the borrower and reduces prepayment risk for bondholders. However, CMBS loans typically come with stricter loan terms than other types of apartment mortgages.

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