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Why choose Fannie Mae or Freddie Mac for multifamily financing?

With numerous options to finance a 5+ unit multifamily property, it can be difficult to determine which program will benefit you the most. Whether you are looking to secure the best rate, maximize the loan amount, or achieve some balance of the two, you should consider Fannie Mae and Freddie Mac's small loan programs.

The key competitive advantages the programs have to offer are:

  • Non-recourse debt. Fannie Mae and Freddie Mac’s small loan programs are non-recourse, meaning if your property does not perform as expected and you default on your loan, your personal assets are safe. Unless you commit a “bad-boy” act such as fraud, material misrepresentation or omission, intentionally declaring bankruptcy or unpermitted transfers, only your property is at risk, even if the value of the property is less than the outstanding loan amount. Most local banks DO NOT offer non-recourse.
  • Very competitive rates. When financing a multifamily property, everybody wants the lowest interest rate possible. Fannie Mae and Freddie Mac’s small loan programs typically offer financing at rates that are at or below most other options, including local banks, and especially on higher leverage loans. With Freddie Mac’s Optigo® Small Balance Loan Program, you get the added benefit of your rate being held as soon as you sign a loan application. Both programs also allow for closing within as few as 45 days.
  • Higher loan amounts. Many local banks will only offer up to 75% LTV, 5-year loan terms, 25-year amortization, no interest-only, and limited prepayment flexibility. Fannie Mae and Freddie Mac’s small loan programs offer up to 80% LTV, up to 30-year loan terms, 30-year amortization, partial-term interest-only, and a variety of flexible prepayment structures. They also offer specialized products including a hybrid arm with an initial 5-, 7-, or 10-year fixed-rate period followed by an adjustable-rate period which provides additional flexibility for paying off or refinancing your loan.
  • Popularity. Fannie Mae, Freddie Mac, and HUD financing comprise the vast majority of the multifamily mortgage debt outstanding at 50.1% as of 1Q21 – nearly twice the next closest segment which is bank and thrift. Why not benefit from the most popular lending programs amongst institutional multifamily investors – especially since Fannie Mae and Freddie Mac offer products and terms specifically tailored towards the needs of small loan borrowers like you.

Pie chart blog-1

Source: MBA Commercial / Multifamily Mortgage Debt Outstanding | Q1 2021


Below is a summary of the terms offered by Fannie Mae and Freddie Mac’s small loan programs:

Fannie Mae

Freddie Mac Terms


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