Multifamily Small Balance Loan Program

The Fannie Mae Small Balance Loan Program is popular choice among multifamily investors, as it provides highly competitive rates, a low-cost structure, high leverage ratios (up to 80% LTV), flexible prepayment options and is non-recourse. Loan amounts are limited to $750,000 to $5,000,000. The program offers a variety of fixed and adjustable rate options to fit any budget, including a full term interest-only option. Loan proceeds may be used to acquire or refinance multifamily properties (5+ units), as well as mixed use properties (limited to 25% commercial rentable space with no greater than 20% of effective gross income), and certain condominium properties (without fractured ownership).

Program Overview

Loan Amount: $750,000 - $5,000,000
Term Length: 5, 7, 10, 12, 15, 30 years
Max LTV: Up to 80%
Amortization: Up to 30 years
Interest Rate: Starting in the 4%'s
Closing Time: 4 - 6 Weeks
Purpose: Purchase, Refinance &
Recourse: Non-Recourse

Pros And Cons Of Fannie Mae
Small Balance Loans


  • Low Rates & Costs
  • High Leverage (80% LTV)
  • Long Amortizations (30-yrs)
  • Cash Out Available
  • Variety of fixed rate products
  • Non-recourse
  • Limited Personal Financial
  • Flexible Prepayment Options
  • Assumable & Streamlined


  • Conservative Underwriting
  • Sponsor Liquidity
  • Requirement
  • Longer Closing Process
  • Property Must be Stabilized

Pros and Cons


  • Low rates & costs
  • High leverage (80% LTV)
  • Long amortizations (30-yrs)
  • Cash out available
  • Variety of fixed rate products
  • Non-recourse
  • Limited personal financial documentation
  • Flexible prepayment options
  • Assumable & streamlined


  • Conservative underwriting
  • Sponsor liquidity requirement
  • Longer closing process
  • Property must be stabilized

What Do I Need To Qualify

  • Net worth greater than the loan amount
  • Minimum of a 650 credit score
  • Liquidity (cash in the bank) greater than 9-months of principal and interest payments (before the refinance or after acquisition)
  • No prior defaults (e.g., foreclosures) or bankruptcies within last 7-years

Disclaimer: These are general qualifications. Other information might be considered during your application.

Eligible Properties

  • Apartment Complexes (5+ units)
  • Mixed Use (Subject to a cap of 35% commercial use)
  • Condominium properties (without fractured ownership)

Required Documents

Property Documents

  • Leases
  • Current Rent Roll
  • Last 3-Years of Operating Statements (P&L)
  • Trailing 12-month Operating Statements

Personal Documents

  • Personal Financial Statement
  • Real Estate Owned Schedule
  • Bio / Resume
  • Proof of Liquidity (Bank Statements 3 Months)

Required Documents

Property Documents

  • Current Rent Roll
  • Last 3-Years of Operating Statements (P&L)
  • Trailing 12-month Operating Statements

Personal Documents

  • Personal Financial Statement
  • Real Estate Owned Schedule
  • Bio / Resume
  • Proof of Liquidity (Bank Statements)

Underwriting Guidelines

  • Debt Service Coverage Ratio: Minimum 1.25x.
  • Occupancy: Property must demonstrate a minimum occupancy of 90% for the 90-day period prior to closing.
  • Replacement Reserves: Typically $200 per unit, per year.
  • Management Fee: Typically 5% of Effective Gross Income.
  • Escrows: Tax and insurance escrows generally not required for qualifying borrowers.
  • Replacement Reserve Escrows: Generally not required for qualifying borrowers.
  • Subordinate Financing: Supplemental mortgages are available after the first year.
  • Experience: Sponsors with no prior multifamily ownership experience requires local ownership, meaning the property must be within a close proximity to where the sponsor lives. Sponsors with less than 2-years of ownership experience may purchase non-local properties, but must retain a local management company to manage the property.
  • Mixed Use: Commercial space limited to 20% of total income or 40% of the total square footage.

Fees and Costs

  • Application Fee: $4,500 - $8,500 (covers third party reports (appraisal, property condition report, environmental), processing fees, legal fees, and documentation fees)
  • Origination Fee: Negotiable (generally 0.50% - 1.00% of the loan amount)

Fees and costs are estimates and may differ based on various factors, such as risk, property type and location, and loan programs, among others.

Prepayment Provisions

  • Standard yield maintenance
  • Declining balance / Step down

The prepayment provision is chosen by the borrower and may affect the rate or other terms based on the provision selected.

Markets and Tiers

Fannie Mae defines geographic markets into tiers based on the rental population. Markets define maximum loan amounts, pricing (better pricing for Top Markets), leverage limits, and debt service coverage requirements.

Top Markets

Top markets include the large cities like New York, NY, Los Angeles, CA, Chicago, IL, Washington D.C., San Francisco, CA, Miami, FL, Boston, MA, Seattle, WA, San Diego, CA, Minneapolis, MN, Denver, CO, Portland, OR, San Jose, CA and Stamford, CT.

Standard Markets

Standard markets include most other major cities that have rental populations greater than 60,000.

Small Markets

Small markets include cities with under 60,000 rental populations, while “Very Small Markets” include cities with less than 30,000 rental populations.

Borrower Entity

The borrower entity must be a single asset, single purpose entity. The typical structure is a limited liability company. The sponsors will form the entity in connection with the closing process.


Fannie Mae Small Balance Loans are non-recourse, subject to a standard limited bad-boy carveout guaranty. All individuals with at least a 20% or more ownership interest in the borrower entity must provide a bad-boy carveout guaranty.

Third Party Reports

Property related reports, such as an appraisal, property condition report, and environmental screen, are required. These reports are ordered by the lender and the costs are covered by the Application Fee.

Approval Process

1. Create loan request here.
2. Supply preliminary documents.
3. Select a loan program and product.
4. Receive preliminary approval.
5. Review and accept Application; remit deposit.
6. Lender completes underwriting.
7. Appraisal and third party reports ordered.
8. Loan approved. Commitment issued.
9. Loan closed and funded.