Written by For those of you who do not know, when we are talking about a multifamily residence, we are talking about a property which is obviously designed to house multiple families, and is almost exclusively considered an investment property. Both individuals and firms are interested in these types of investments, because of the large cash flow that they can yield. Luckily, different programs, such as the multifamily fixed rate mortgage offered by Fannie Mae, allows for allows for jumbo loans to finance a large portion of these types of investments.
The first thing to know is that these loans only allow for you to finance up to 80% (75% is the loan is for less than five years) of the value of the property, and the loan must be for at least $2,000,000. This means that this loan will be available for properties that are worth at least $2,500,000. This loan type is very flexible and offers a wide range of options, including ballooning or fully amortizing mortgages, early rate locks, and supplemental loans. A key features of this loan type is that it allows for what is called a fixed rate +1 loan, which means the interest rate becomes adjustable for the last year of the loan term. Also, the origination requires one point paid, or a minimum of $20,000. This loan type is also assumable, meaning that another party can take over the loan in exchange for the deed. This action simply requires lender approval, as well as a %1 fee upon assumption of the loan.
There are standard third party fees that are required of this type of loan. Basic appraisal, legal, engineering, and environmental reports will be required. There may also be supplemental seismic and survey reports required in specific cases.
These types of loans have been made available for substantial investment purchases. By offering these types of loans, lenders are assuming that payment of the monthly charges is contingent upon the income produced by the property, generally in the form of rent. It is not uncommon to see mortgage underwriters to require a certain percentage of units in a building occupied for a certain period of time prior to the loan being approved. This reduced the bank’s risk in lending the money out, and it also ensures that the borrower will be likely to stay current on his loan. Late payments and penalties for loans of this magnitude can be costly, and some states allow for banks to sue for remaining monies owed, should there be a foreclosure on the property.
