As an investor, you may be interested in purchasing an apartment building. But since this is a much bigger financial commitment than purchasing a house, you may need to obtain an apartment loan first. It is important to understand the different types, so you know what you are getting into.
Apartment Loan Types
There are five types of apartment loans to choose from. Fannie Mae, Freddie Mac, Bank Balance Sheets, and FHA loans. Fannie Mae offers conventional and specialty loans, which you may qualify for if you can make a 20% down payment. They come with competitive interest rates because these loans are supported by the Federal government.
Freddie Mac runs a program called Optigo, specifically for multi-family housing. The program includes conventional and small balance loans, along with affordable housing, both for seniors and for younger individuals. Using Freddie Mac, you may be able to get a loan of up to $100 million.
A Bank Balance Sheet is a loan often given by traditional banks. But you also have the option of obtaining one of these loans from life insurance companies and even lenders that operate strictly online. These loans can be risky because if you get one and can’t pay it back, the bank or other lender can take assets from you if they need to.
FHA loans are best used for buildings that have at least five apartments in them. You can use this type of loan to either refurbish an apartment building you already own or buy a new one. Using an FHA loan almost always requires you to also have mortgage insurance on the building you are purchasing or refurbishing. However, you have up to 35 years to pay off this type of loan, which is higher than most other apartment loans.
New Horizon Capital Funding offers the most comprehensive FHA loans available nationwide, featuring tax credits, construction, and more. Contact our offices to learn more.