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Fannie Mae Multifamily Hybrid ARM Loans
Fannie Mae Hybrid ARM Loans have an LTV allowance up to 80%, are non-recourse, and are fully assumable
Borrowers looking for hybrid ARM financing for multifamily developments don't have to look beyond Fannie Mae's Hybrid ARM Loan for the funding they need.
Fannie Mae Hybrid ARM Loans have five-, seven-, and 10-year fixed-rate period options, after which the loan converts to an adjustable interest rate based on the 30-day average SOFR rate. Fannie Mae Hybrid ARM Loans have an LTV allowance up to 80%, are non-recourse, and are fully assumable (with lender approval.)
To learn more, check out our official Fannie Mae Hybrid Adjustable-Rate Mortgage Product Sheet or keep reading below for an in-depth explanation of Fannie Mae’s Hybrid ARM financing program.
Sample Fannie Mae Terms for Hybrid ARM Multifamily Loans in 2024
Size: Varies, though typically $6 million maximum (with a lower maximum in smaller markets)
Terms: 30 years, with a 5, 7, or 10-year fixed rate term, which then converts to an adjustable-rate for the rest of the loan
Amortization: Up to 30 years
Interest Rates: Adjustable rate term based on the 30-day average SOFR rate
Interest Rate Cap: Adjustable interest rate cannot exceed the initial interest rate by more than 5%, rate cannot be adjusted more than 1% up or down during each adjustment period
Maximum LTV: Up to 80%
Minimum DSCR: 1.25x (may vary based on market location)
Recourse: Loans are non-recourse with standard “bad boy” carve-outs
Prepayment Options: Yield maintenance or declining prepayment premiums during fixed-rate term, no prepayment fees during the adjustable-rate term
Eligible Properties
Properties must have between 5 and 50 units
Properties must be stabilized, and can include manufactured housing communities
For acquisitions or refinances, loans must be first lien
Competitive interest rates
Less fees than comparable Fannie Mae loans
Loans are non-recourse
Flexible prepayment options
30- 180 day rate locks available (streamlined and early rate locks also available)
Requires third-party reports including a property appraisal, property condition assessment, and a Phase I Environmental Assessment
Replacement reserves are required
Supplemental financing is not available
Advantages
Disadvantages
Case Study: Investing in Charleston
Mark, a real estate investor, found an appealing investment opportunity – a stabilized multifamily property with 20 units in Charleston, S.C., on the market for $4 million. To secure the property, Mark needed a flexible financing option that could meet his investment goals.
Considering the potential benefits of an adjustable-rate mortgage, Mark turned to Fannie Mae's Multifamily Hybrid ARM Loan program. He decided to put down 20% of the property price ($800,000) and sought to finance the remaining amount ($3.2 million) with the loan.
In line with the requirements of the Hybrid ARM Loan program, Mark's loan request fit comfortably within the typical terms, given the property's price and unit count. He went ahead and submitted his application, which was backed by the required third-party reports.
Fannie Mae approved his application, granting a $3.2 million loan with a seven-year fixed interest rate period. After this period, the loan would convert to an adjustable rate, tethered to the 30-day average SOFR rate. This flexibility, coupled with competitive interest rates and no prepayment penalties during the adjustable-rate term, made the loan an ideal fit for Mark's investment strategy.
With the loan secured, Mark could proceed with the acquisition, expanding his real estate portfolio in the multifamily space.
This is a fictional case study provided for illustrative purposes.