Apartment and Multifamily Lending

Stabilized Gets Agency Terms. Everything Else Needs a Plan.

Every multifamily financing decision starts with one question: does the trailing twelve months of income support the loan you need? Fannie Mae and Freddie Mac size to the T-12 and the current rent roll, not to what the property will earn after you fix it. A stabilized property with clean collections walks into agency or bank execution. A property with below-market rents, deferred capital work, or occupancy in the low 80s fails that test no matter how good the plan is, and the answer is bridge capital that underwrites to the stabilized value, followed by an agency refinance once the numbers are real. CapitalAx has closed four multifamily bridge loans, from $1.7M on a 70-unit property to $4.8M on a 100-unit community, plus a $6M ground-up construction loan in Dallas. The sections below walk through what each program requires, how long agency actually takes, and what stabilization means in practice, because the borrowers who get the best terms are the ones who bring the deal to the right execution in the first place.

Borrower Profiles

• Value-add syndicators acquiring properties with below-market rents and a renovation budget
• Operators refinancing out of bridge debt into agency or bank permanent financing after stabilization
• Developers building ground-up multifamily projects of 5 units and up
• Investors moving from 1 to 4 unit rentals into their first commercial multifamily purchase
• Owners facing a loan maturity who need to time an agency takeout against prepayment costs

Loan Structures

• Fannie Mae agency loans, with the Small Loan program covering deals up to $9M nationwide and standard DUS execution above that. Leverage generally reaches 75 to 80% LTV with DSCR floors of 1.25x, or 1.20x in top-tier markets. Terms run 5 to 30 years on 30-year amortization, non-recourse with standard carve-outs, and interest-only is available, including full-term IO on lower-leverage deals.
• Freddie Mac Small Balance Loans from $1M to $7.5M, with conventional execution above the SBL cap. Leverage generally reaches 80% LTV with DSCR of 1.20 to 1.25x depending on market tier. Terms come in 5, 7, and 10 year structures on 30-year amortization, non-recourse.
• Bank and conventional loans for 5+ unit properties. Banks generally lend 65 to 75% LTV with DSCR of 1.20 to 1.25x, on 5 to 10 year terms with 20 to 30 year amortization and rate resets built in. Recourse is typical below the $5M to $10M range. The trade against agency is speed and flexibility on property condition in exchange for shorter terms and personal guarantees.
• Bridge loans for value-add acquisitions and repositioning. Bridge lenders generally advance 70 to 80% of total cost including renovation, or 65 to 75% of as-is value, on 12 to 36 month interest-only terms at floating rates typically around SOFR plus 300 to 600 basis points. Renovation reserves disburse on a draw schedule, and every bridge lender requires a defined exit, either an agency or bank refinance or a sale.
• Construction financing for ground-up multifamily. Construction lenders generally fund 60 to 75% of total cost with DSCR of 1.20 to 1.25x underwritten at stabilization, on 18 to 36 month interest-only terms. Recourse is common, and non-recourse is achievable with strong sponsorship.
• HUD multifamily programs for borrowers who can wait. The 221(d)(4) covers construction and substantial rehab at up to 85% of cost for market-rate deals, 1.176x DSCR, on a 40-year fully amortizing term plus the construction period, non-recourse, and application to closing generally runs 9 to 12 months. The 223(f) covers acquisitions and refinances at up to 85% LTV, 1.176x DSCR, on a 35-year term, non-recourse, generally 6 to 9 months. Both carry a mortgage insurance premium, and construction carries prevailing-wage requirements. The trade is plain. This is the longest, cheapest, highest-leverage non-recourse debt in the market, against a timeline most deals cannot wait out.
• Every multifamily deal is underwritten on its own merits. The ranges above reflect where multifamily financing generally prices. Actual leverage, coverage requirements, and terms depend on the property's operating history, market, sponsor experience, and the specific lender or agency execution.

Underwriting Notes

• The T-12 is the gate. Agency lenders size the loan off trailing income and the current rent roll, so a property running below-market rents with elevated vacancy will not support agency proceeds at a viable loan amount, even when the stabilized numbers clearly work. That gap is what bridge capital exists to cross.
• The agency process runs 60 to 90 days in five stages. Quote and application take 1 to 2 weeks while the lender sizes the deal off the T-12 and rent roll. Rate lock happens at application or commitment depending on execution. Third-party reports, meaning appraisal, physical needs assessment, and Phase I environmental, take 3 to 4 weeks and are usually the long pole. Underwriting and agency review run 2 to 4 weeks. Closing and funding take 1 to 2 weeks.
• Standard rate lock happens at commitment, typically 30 to 60 days before closing. Early rate lock lets you lock 60 to 180 days out for a deposit, which is useful when rates are moving or third-party reports will take time. The deposit is at risk if the deal does not close.
• Yield maintenance is the standard prepayment structure on agency fixed-rate debt, and it makes the lender whole on lost interest, so the cost is rate-dependent and can be severe when rates have fallen. A step-down schedule, commonly 5-4-3-2-1, is available at a modest rate premium and gives a predictable exit cost. If you plan to sell in year 3, price step-down against yield maintenance before you sign, because this decides the exit math on any bridge-to-agency plan.
• Agency generally requires 90% physical occupancy sustained for 90 days. Economic occupancy is underwritten separately, with 5 to 10% economic vacancy typically applied, and newly renovated units usually need actual turn and lease-up history, not just physical completion.
• Stabilization is an operating job, not a construction job. On a 100-unit bridge deal CapitalAx arranged, the borrower renovated the first 40 units in six months, leased them at rents 18% above prior in-place rates, and took occupancy from 82% to over 93%, with effective gross income up roughly 25%, which is what positioned the property for a permanent refinance.
• Debt yield floors on agency execution generally run 7 to 8%. Freddie SBL starts at $1M, Fannie small loans generally start around $750K to $1M, and bank programs often have no formal minimum but get inefficient below $1M.
• Every multifamily deal is underwritten on its own merits. The ranges above reflect where multifamily financing generally prices. Actual leverage, coverage requirements, and terms depend on the property's operating history, market, sponsor experience, and the specific lender or agency execution.

Common Challenges

• A T-12 that supports only a fraction of the proceeds the purchase price requires
• Renovation reserves sized before contractor bids come in, leaving the budget short mid-project
• Prepayment lockouts that trap you in bridge debt after the property has already stabilized
• Insurance cost escalation that erodes DSCR, especially in coastal and storm-prone markets
• Rent regulation risk that caps the revenue growth a value-add underwriting depends on
• Bridge exits underwritten to cap rates the refinance market will not support

Why CapitalAx

The multifamily borrowers who struggle are usually the ones who brought a value-add deal to a stabilized-property lender, or waited in bridge debt past the point the property could have refinanced. CapitalAx's multifamily track record is in exactly that transition. We arranged a $4.8M bridge loan for a 100-unit community where the trailing twelve months could not support agency proceeds. The lender underwrote to stabilized value, the loan carried interest-only payments with a renovation reserve that disbursed per completed unit turn, and prepayment flexibility allowed a refinance as early as month nine. The borrower took occupancy from 82% to over 93%, lifted effective gross income by roughly 25%, and positioned the asset for permanent financing. Behind that deal sit three more multifamily bridge closings, $4.6M on 41 units, $2.4M on 63 units in Plainview, Texas, and $1.7M on 70 units, plus a $6M non-recourse ground-up construction loan in Dallas at 75% of cost on an 18-month term. When your deal is ready for agency, we know what the takeout requires, because we structure the bridge with the exit in mind from day one.

Frequently Asked Questions