Multifamily Financing: A Guide to Apartment Building Loans

Multifamily properties are the backbone of many real estate investment portfolios. Whether you are acquiring a 5-unit apartment building or developing a 200-unit complex, understanding the financing landscape for multifamily assets is critical to structuring profitable deals and scaling your portfolio.

What Is Multifamily Financing?

Multifamily financing refers to any loan used to purchase, refinance, renovate, or build a property with five or more residential units. Properties with 2 to 4 units are typically financed with residential mortgage products, while properties with 5 or more units fall into the commercial lending category with different underwriting standards, qualification requirements, and loan structures.

Unit Count Thresholds That Matter

The number of units in your property determines which financing programs are available and how the loan is underwritten:

• 2-4 units — financed as residential. Conventional, FHA, and DSCR loans are all available. Underwriting focuses on the borrower’s personal credit and income (or property cash flow for DSCR).
• 5-49 units — small balance commercial. These properties are too large for residential programs but too small for institutional lenders. Private lenders, credit unions, and specialized commercial lenders are the primary sources.
• 50-199 units — mid-market commercial. A broader range of lenders compete for these deals, including banks, debt funds, and agency lenders (Fannie Mae and Freddie Mac).
• 200+ units — institutional. Large CMBS lenders, insurance companies, and agency programs offer the most competitive terms at this scale.

Types of Multifamily Loans

Multifamily Bridge Loans

Bridge loans are ideal for multifamily acquisitions where the property needs repositioning — renovating units, improving occupancy, or increasing rents — before qualifying for permanent financing. Typical terms include 12 to 24 month terms, 8% to 11% interest rates, and up to 75% LTV.

Construction Loans for Multifamily

Ground-up construction loans fund the building of new apartment communities. These loans disburse through a draw schedule as construction milestones are met. Expect 12 to 24 month terms, 8% to 12% interest rates, and up to 80% to 85% LTC.

DSCR Loans for Multifamily

For stabilized rental properties, DSCR loans offer long-term financing (5 to 30 year terms) based on the property’s cash flow. No personal income verification is required. These work well for buy-and-hold investors who want to maximize long-term returns.

Agency Loans (Fannie Mae / Freddie Mac)

For larger, stabilized multifamily properties, agency loans offer the most competitive rates and longest terms in the market. These programs typically require 90%+ occupancy, strong property condition, and experienced sponsors.

Value-Add vs. Stabilized Multifamily

The strategy behind your multifamily investment determines the right financing approach:

Value-Add Multifamily

Value-add properties have below-market rents, deferred maintenance, low occupancy, or operational inefficiencies that can be corrected to increase NOI. These projects typically require bridge financing during the renovation and lease-up period, followed by a refinance into permanent debt once the property is stabilized.

• Financing: Bridge loan or value-add bridge loan
• Term: 12 to 36 months
• Exit: Refinance into permanent debt or sell at stabilized value

Stabilized Multifamily

Stabilized properties are fully occupied (or near fully occupied) and generating consistent cash flow. These qualify for permanent financing products with lower rates and longer terms.

• Financing: DSCR loan, agency loan, or bank loan
• Term: 5 to 30 years
• Goal: Long-term cash flow and appreciation

How to Qualify for Multifamily Financing

Qualification requirements depend on the loan type, but common factors include:

• Property financials — rent roll, operating statements, and projected NOI after renovations (for value-add).
• Borrower experience — track record of owning or managing multifamily properties. First-time borrowers may need a more experienced co-sponsor.
• Credit score — 650+ for most bridge and DSCR programs; 680+ for agency loans.
• Liquidity — cash reserves equal to 6 to 12 months of debt service plus any planned capital expenditures.
• Net worth — many lenders require net worth equal to the loan amount for larger deals.

Finance Your Multifamily Deal with Passy Capital

Passy Capital specializes in multifamily financing across all property sizes and strategies. Whether you are acquiring a 10-unit value-add building or developing a 150-unit ground-up project, we connect you with the right lender and the best terms.

1. Submit your deal — tell us about the property, your strategy, and your experience.
2. We present the best multifamily financing options from our lender network within 24 hours.
3. We guide you from term sheet through closing.

Use our loan calculator to estimate monthly payments, or submit a deal to get started today.