Loans for small apartment buildings (5 to 50 units)

The short version, by loan size

Pick the lane by loan amount first, then by how much recourse and prepayment flexibility you want. The agency limits below are current as of each term sheet’s date.

Loan amount	First programs to price	Why
Under about $750,000	Bank, credit union, DSCR loan	Fannie Mae’s line for non-recourse: Non-recourse available for most loans above $750,0004. Fixed legal and report costs weigh heavily on a loan this small.
From there to Freddie Mac’s floor	Fannie Mae Small Loans, bank, credit union	Fannie is the only agency option here. For Freddie Mac there is generally a $2 million floor.
Freddie’s floor to Fannie’s cap	Fannie Mae Small Loans and Freddie Mac Conventional Small, bank	Two agencies compete, so get both quotes. Fannie Mae Small Loans go up to $9 million nationwide.
Fannie’s cap to Freddie’s cap	Freddie Mac Conventional Small, bank, life company at low leverage	For Freddie Mac there is generally a $10 million ceiling (loans of $10 million or less).
Above both caps	Fannie Mae DUS, Freddie Mac Optigo, FHA 223(f)	See large multifamily.

Two filters override the table. If the building is not stabilized (heavy vacancy, a gut renovation ahead, rents well below market), no agency program will take it yet; start with a bank or a bridge loan. If you need the money in a few weeks, a bank that already knows you or a DSCR lender is the realistic path.

Programs ranked for a 5 to 50 unit building

This is our order for a typical stabilized building owned by an individual investor or a small partnership. The table at the top of the page lists every program that lends on this property type, with its published leverage and coverage.

Rank	Program	Why it ranks here	Where it loses
1	Fannie Mae Small Loans	80% max LTV2 and 1.25x min DSCR2, non-recourse, long fixed terms, lighter reports	Agency loan documents, yield maintenance on many fixed loans, building must be stabilized
2	Freddie Mac Conventional Small	The same headline leverage on 7-year and longer terms, fixed rate, non-recourse	Higher floor; default prepayment ends in defeasance
3	Bank commercial mortgage	Fastest permanent lender for a known sponsor, light prepayment, takes buildings an agency will not	Personal guarantee, shorter fixed period, balloon to refinance
4	Credit union commercial loan	Local, relationship pricing, no regulatory LTV cap	Membership, smaller balance sheets, a hard cap on loans to one borrower
5	FHA 223(f)	Highest leverage and the longest fixed term, fully amortizing	Slow and document-heavy, a statutory lockout, fixed costs that rarely pay off on a small loan
6	DSCR commercial loan	Sizes on the property, little personal income documentation, quick	Higher rate and fees than a bank or agency loan
7	Portfolio and blanket loans	One loan over several small buildings, release prices when you sell one	Cross-collateral ties every building to the weakest one
8	Bridge loan	Funds a lease-up or renovation that no permanent lender will size today	Floating rate, short term, extension and exit fees

FHA 223(a)(7) is on the list only if the building already carries an FHA-insured loan. Its eligibility rule: Only loans already FHA-insured⁵. Construction loans and hard money are tools for one phase, not a hold loan.

What small buildings actually borrow at

HMDA is the only public dataset that shows small apartment loans one by one, so it is the closest thing to a market survey for this segment. These are 2025 originations from every HMDA reporter (banks, credit unions and other reporting lenders), grouped by building size. They are note rates on loans that closed during 2025, not today’s quotes.

Building size	Median note rate	Median loan
5 to 24 units	6.75% median rate on 5-24 unit properties1	$725,000 median loan on 5-24 unit properties1
25 to 49 units	6.35% median rate on 25-49 unit properties1	$2.4 million median loan on 25-49 unit properties1
50 to 99 units	6.20% median rate on 50-99 unit properties1	$5.1 million median loan on 50-99 unit properties1

Smaller buildings pay more. The gap between the smallest and the 50 to 99 unit bucket is the cost of a small loan: the same appraisal, title, legal and servicing work spread over a smaller balance, and a lender mix that leans toward banks and non-bank lenders.

Across all multifamily loans in the same data, three structure figures stand out:

• Interest-only: 41.2% had an interest-only period¹.
• Balloons: 75.2% carried a balloon payment¹.
• Leverage: 64.5% median combined loan-to-value¹.

So the typical apartment loan is moderate leverage with a balloon, which means most small owners refinance at least once. The state view is on multifamily rates by state.

Leverage and coverage, program by program

Program	Max LTV	Min DSCR	Amortization	Recourse
Fannie Mae Small Loans	80% max LTV2	1.25x min DSCR2	up to 30-year amortization6	Non-recourse, with standard carve-outs for fraud and bankruptcy2
Freddie Mac Conventional Small	80% (7-year+ terms); 75% (5 to under 7 years)3	1.25x minimum amortizing DCR3	30-year amortization3	Non-recourse except standard carve-outs3
FHA 223(f), market rate	87% LTV7	1.15x DSCR7	Fully amortizing, level monthly payments (no balloon)5	Non-recourse, with carve-outs for bad acts5
Bank	Bank policy, under the federal ceiling in the table above	Bank policy	Bank policy	Usually a full guarantee
Credit union	Board policy	Credit union policy	Credit union policy	Guarantee is policy, not regulation

Two regulatory notes explain the last two rows. For banks, the federal figure is a supervisory ceiling, not a target, and most bank credit policies on stabilized apartments sit well below it. For credit unions: Part 723 sets no fixed LTV cap; each credit union's board policy must set LTV limits by collateral type⁸. Their size limit is the one that bites on a growing portfolio. Commercial loans to one borrower are capped at the greater of 15% of net worth or $100,000 (plus 10% if fully secured by marketable collateral)⁸.

Interest-only reads differently at each agency. Freddie Mac Conventional Small allows it at lower leverage (Full-term interest-only: 65% LTV (7 years or less), 70% (over 7 years)), and Freddie Mac tests DCR on interest-only loans using an amortizing payment, not the interest-only payment. So an interest-only period lowers your payment but does not raise the loan amount.

What an underwriter checks on a 5 to 50 unit building

Large buildings come with audited statements and a professional manager. Small buildings usually come with a seller’s spreadsheet. Most of the friction in a small-balance loan is the lender rebuilding that spreadsheet.

• Rent roll against leases and deposits. The lender ties each unit’s rent to a lease and often to bank deposits. Units paying well under market, month-to-month tenants, and units occupied by the owner or a relative are all flagged.
• Trailing 12 months, then the lender’s own expense lines. The formula is simple (NOI = annual gross income less operating expenses), but the lender decides what the expenses are. Expect actual tax bills and a reassessment estimate on a purchase, a current insurance quote rather than last year’s premium, and a reserve line. Underwritten operating expenses include a replacement reserve, whether or not it is funded⁹.
• Management fee even if you self-manage. Lenders underwrite a market fee. On a building with no payroll, that one line can move the loan amount more than any rate negotiation.
• Vacancy. Lenders apply at least a market vacancy factor to a building that is full today. FHA’s factors, for example: 3% (90%+ assisted), 5% (affordable), 7% (market rate)⁷.
• Occupancy history. Agency loans need a stabilized building. Fannie Mae’s standard: Stabilized occupancy, typically 90% for 90 days before funding⁶. FHA 223(f): Stable occupancy of at least 85%⁵.
• Unit mix and utilities. Studios, three-bedrooms and master-metered utilities change the expense load. A building where the owner pays heat is underwritten on the actual utility bills.
• Physical condition. The inspection sets a repair escrow for life-safety items and deferred maintenance. Roofs, boilers, old plumbing and old wiring are where escrows grow on older small buildings.
• Environmental. Fannie Mae Small Loans get a lighter package: Streamlined inspection and environmental screening (ASTM E-1528-14) instead of full reports². Banks usually want a Phase I or a database screen, depending on loan size.
• Rent regulation. Rent-stabilized or rent-controlled units are underwritten at their legal rent, not a market rent you hope to reach.
• Commercial space. A storefront changes the program. FHA’s limit: Commercial up to 25% of net rentable area and 20% of effective gross income⁵. More than a little commercial income moves the building to mixed-use lenders.
• The sponsor. Credit, real estate experience, net worth and liquidity after closing. Agency borrowers close in a single-asset entity, and principals sign the carve-out guaranty. Fannie Mae’s ownership rule: Single-asset U.S. borrower with U.S. ownership; indirect foreign ownership possible with proper structuring⁶.

Sizing example (illustration)

An illustration, not a quote. An 18-unit building bought for $3,000,000 with $195,000 of lender-underwritten NOI (a 6.5% cap rate on the price). Two lenders size it:

• Agency small loan: 80% maximum LTV and 1.25x minimum DSCR, at an illustrative 6.40% on a 30-year amortization.
• Community bank: an assumed credit policy of 75% and 1.25x, at an illustrative 6.75% on a 25-year amortization. The bank terms are an assumption for this example, not a market figure.

Test	Agency small loan	Community bank
LTV test	$3,000,000 x 80% = $2,400,000	$3,000,000 x 75% = $2,250,000
Annual debt service the NOI supports	$195,000 / 1.25 = $156,000	$195,000 / 1.25 = $156,000
Loan constant	7.51% (6.40%, 30 years)	8.29% (6.75%, 25 years)
DSCR test	$156,000 / 7.51% = $2,078,000	$156,000 / 8.29% = $1,882,000
Loan (lower of the tests)	$2,078,000 (69% LTV)	$1,882,000 (63% LTV)
Monthly payment	about $13,000	about $13,000
Down payment before costs	about $922,000	about $1,118,000

The payment is the same because coverage binds in both cases. The difference is the amortization and the rate: a longer schedule at a lower rate lets each dollar of NOI carry more loan. That is why the agency loan wins on proceeds even with the same coverage ratio.

The balloon matters too. After ten years the agency loan would still owe about $1.76 million. After five years the bank loan would still owe about $1.71 million, and that balance gets refinanced at whatever rates are then. Run your own numbers in the loan sizer or the DSCR calculator, and see the balloon in the amortization schedule.

Edge cases a broker sees on small buildings

• Exactly five units. It is a commercial loan, but a thin one. One vacancy is a fifth of the income, so lenders read the rent roll harder, and some banks treat it more like a residential investment loan.
• Just over 50 units. Freddie Mac Conventional Small is for predominantly market-rate properties of 5 to 50 units. A larger building can still be a Fannie Mae Small Loan, because Fannie’s test is the loan amount: A Small Mortgage Loan is $9 million or less at origination¹⁰.
• Several small buildings. Separate agency loans on each, or one blanket loan from a bank. A blanket loan saves closing costs but cross-defaults every building.
• A purchase price above appraisal. On an acquisition, LTV uses the lower of the purchase price or the appraised value¹¹. Overpaying comes out of your equity, not the lender’s.
• Cash-out on a building you have owned a short time. On a cash-out refinance, Fannie Mae lenders must document how much hard equity remains after the new loan¹². See cash-out refinance.
• Affordable units. FHFA’s 2026 scorecard rule: Small 5-50 unit properties count as mission-driven pro rata to their affordable units¹³. So a building with rent-restricted or naturally affordable units is a loan the agencies want. The income line in a standard market is 80% of AMI or below (standard markets).
• Co-ops, student, seniors and manufactured housing. Freddie Mac Conventional Small does not take them. Its term sheet: Excludes student, seniors, MHC and co-op properties; no hard subordinate debt³. Those buildings go to student housing, seniors housing or manufactured housing lenders.

Prepayment: the cost small owners underestimate

Small-building owners sell, refinance and pull cash out more often than institutions, so the exit cost can matter more than a few basis points of rate.

Program	Default prepayment	Lighter option
Fannie Mae Small Loans	Yield maintenance on fixed-rate loans; declining prepayment premium on variable-rate loans4	A declining premium. 5-year: 5-4-3-2-1 (percent by loan year), no lockout14. 10-year: 5-5-4-4-3-3-2-2-1-1, no lockout14.
Freddie Mac Conventional Small	Yield maintenance until securitization, 2-year lockout, then defeasance; open final 90 days3	Step-down and yield maintenance without defeasance are available on Conventional Small for an added cost3
FHA 223(f)	Prepayment generally prohibited for 5 years from endorsement5	A negotiated declining premium after that
Bank	Commonly a step-down, or none on floating loans	Negotiable at term sheet

If there is a real chance you sell within five years, price the step-down option even if the rate is higher. The prepayment calculator shows yield maintenance against a step-down on your loan.

Programs to avoid on a small building

• CMBS conduit loans. Built for larger balances and institutional reporting. Defeasance carries fixed costs (an independent accountant’s sufficiency certificate, rating agency fees, legal work) that weigh heavily on a small balance.
• Life company loans below their minimums. Most life companies want larger loans on well-located property; at low leverage some will look at a high-quality building in a core market.
• SASB, mezzanine and preferred equity. Institutional structures that do not fit a small-balance capital stack.
• Hard money as a hold loan. It solves a timing problem. Plan the takeout before you close.

Where the market stands

Who holds apartment debt: Banks and thrifts hold 29% ($668 billion) of multifamily debt¹⁵. Agency and GSE portfolios and MBS hold 50% ($1.2 trillion) of multifamily debt¹⁵. Bank lending conditions loosened a little in 2026. The Fed’s July 2026 survey: Net 5.7% of banks eased multifamily standards¹⁶. Credit quality on bank apartment loans is steady, at 1.10% of bank multifamily loans noncurrent¹⁷ at mid-2026. A bank that already holds your deposits or another of your loans usually gives its best terms to you first, so ask it before you shop.