Due to the increased risk, qualifying for apartment building loans can be a financial challenge. You’ll generally need a lot of money upfront in the form of a large down payment and significant reserves. Lending standards, however, may be easier to satisfy. Commercial lenders care more about the value of the property than your personal credit qualifications.

Types of Apartment Loans

Despite the risk, there are multiple ways to finance the purchase of an apartment building. There will probably be several loan options to choose from for your multi-family apartment complex; and PHD Financial will guide you through the process and place you with the best loan for you.

Below are the more common types of multifamily apartment loans.

Fannie Mae Apartment Loans

Fannie May’s multi-family platform has numerous loan programs that might work for you. You can borrow as little as $750,000 with loan terms potentially up to 30 years.


Fannie Mae’s multifamily financing options include:


Specialty Loans: (Affordable Loans, Green Financing, Seniors Housing, etc.)

You’ll typically need a down payment of 20% or larger to borrow. Because the federal government backs the loans, they represent less risk for lenders. Therefore interest rates tend to be competitive when compared with other financing options.

Freddie Mac Apartment Loans

Freddie Mac provides several options to consider when you need multifamily housing loans. Whether you want to borrow $1 million or $100 million to purchase a real estate investment, Freddie Mac might have a solution that can help.


Freddie Mac’s multifamily loan offerings include:


  • Conventional Loans
  • Small Balance Loans
  • Targeted Affordable Housing
  • Seniors Housing

If you qualify for one of these loans for a purchase or refinance, you can generally expect competitive interest rates compared with other apartment building financing options. The federal government backs these loans as well — reducing the lender’s risk. Your repayment terms on some of the program’s fixed-rate loan options could potentially extend as long as 30 years. In general, you’ll need a sizeable down payment (20% or more) to qualify for funding.

HUD 223(F) Loans

The HUD 223(F) is intended for the purchase or refinance of apartment properties of any class, including cooperatives, affordable housing, independent living or subsidized multifamily properties. The minimum loan amount for an FHA apartment loan starts at $3 million.

HUD 223(F) loans are fixed and fully amortizing for up to 35 years (both the term and the amortization are 35 years). For new purchases, a lender may be willing to finance up to 83.3% of the purchase price. This could result in a smaller down payment amount for you as the borrower.


All FHA multifamily insured debt, including 223(F), are non-recourse with standard carveouts

Bank Balance Sheet Apartment Loans

Bank balance sheet apartment loans are another type of commercial financing that can be used to purchase an apartment building. However, banks don’t package up and sell these loans to a government-sponsored enterprise like Fannie Mae or Freddie Mac after closing. These loans are kept in house and sit on the bank’s balance sheet. These loans are often full recourse loans, which means you can be held personally liable for the debt if something goes wrong. In other words, the lender may be able to seize your personal assets to try to recuperate its losses.

Your personal credit score may also be reviewed as part of the application process; so, a better credit rating might help you land a better deal on financing. PHD Financial works closely with clients when necessary to advise on how to increase credit scores. Expect to pay at least 20% down for a bank balance sheet apartment loan. However, you might need to provide a more significant down payment depending on the lender’s requirements.

Apartment Construction Loans

If you want to rehabilitate an apartment building or build a new one from the ground up, PHD Financial will find you apartment construction loan options to consider, instead of traditional multifamily commercial financing.

Conventional Construction Loans

Conventional Construction loans backed by Fannie Mae or Freddie Mac, may have a program to help you secure the financing you need. The Rural Development Guaranteed Rural Rental Housing Program from Fannie Mae can fund the construction or rehabilitation of eligible multifamily properties. Freddie Mac also offers a Modern Rehab Loan that can fund rental property renovations.
Rates, terms, and fees vary by program. PHD Financial will bring you all applicable borrowing options to review.

The HUD 221(d)(4) Loan

Probably the best-known HUD product, its function is for the ground up construction and substantial rehabilitation of multifamily properties. Minimum loan amounts generally start at $4 million, but most loans are $10 million and up. Financing terms can extend up to 40 years. You may also be able to take advantage of interest-only financing during the construction period.

The HUD 221(d)(4) offers leverage up to 85% of cost for market-rate developments, 87% for affordable properties, and 90% on projects with 90% or greater rental assistance. HUD 221(d)(4) insured debt is non-recourse with standard carveouts.

Balance Sheet Loans

These loans can also be used to finance the construction or rehabilitation of an apartment complex. Because lenders hold the loans in house, they don’t have to comply with Fannie Mae, Freddie Mac, or FHA guidelines.

Alternative Apartment Financing Options

If none of the traditional multifamily apartment loans above work for your situation, an alternative apartment financing option could be a better fit.

Commercial Mortgage Backed Securities (CMBS)

A CMBS loan, also called a conduit loan, is a non-recourse commercial real estate loan you can use to purchase an apartment complex. The asset-based loans are secured by the property you’re buying. After closing, CMBS loans are packaged and sold on the secondary mortgage market, similar to government-backed loans.  The minimum loan amount for a CMBS is usually $2 million. The average maximum LTV is 75%, meaning you may need to put down 25% or more to secure funding. You may also need to show significant cash reserves to qualify.


Although the loans may feature a 30-year amortization period, you’ll generally receive a shorter repayment term of 5–10 years. CMBS loans may have a sizable prepayment penalty attached, but PHD Financial will carefully review fees and terms with you before you commit to this type of financing.


Hard Money Loans

Hard Money Loans, sometimes called bridge loans, are an alternative form of financing commonly used by real estate investors. Bridge loans are short-term funding solutions and must often be repaid or refinanced in 36 months or less.


Hard money loans may fund much faster than traditional property loans. You might receive funding in just a few days if you qualify. However, this convenience comes at a cost. Interest rates and fees on hard money loans may range from 8% to 15%. You may also be required to come up with a 20% to 30% down payment.  With a hard money loan, we will make sure you understand the risks and costs clearly upfront, explaining origination fees, repayment terms, prepayment penalties, and any balloon payment requirements. If your loan features a balloon payment, you’ll have to pay off the remaining balance or refinance your investment property by that date.