Requirements at a Glance
Lenders evaluate qualification across three independent boxes: the property fundamentals, the borrower and sponsorship profile, and the business plan or use of proceeds. A single failure in any box can derail a deal even when the other two are strong.
| Category | Requirement | Detail |
|---|---|---|
| Property | Asset type | Multifamily only, 5+ units. Fannie and Freddie do not finance office, retail, industrial, or hospitality. |
| Property | Occupancy | 90% physical occupancy sustained for at least 90 days prior to rate lock. |
| Property | DSCR | 1.25x minimum for market-rate properties, 1.20x for affordable housing designations. |
| Property | LTV | 65% to 80% of appraised value, determined by market tier. Tier 1 major markets allow up to 80%; Tier 3 to 4 markets may be capped at 65% to 70%. |
| Property | Stabilized trailing financials | Minimum 90 days of post-stabilization operating history required. T-3 and T-12 rent rolls reviewed. |
| Property | Physical condition | Property condition assessment required. No material deferred maintenance. Immediate repairs must be escrowed at closing. |
| Borrower | Net worth | Sponsor net worth at least equal to the loan amount, verified by personal financial statement dated within 90 days. |
| Borrower | Liquidity | Post-close liquidity of at least 10% of the loan amount in verifiable liquid assets. |
| Borrower | Credit | 680+ FICO for all key principals with greater than 20% ownership. No bankruptcy in the past 7 years. |
| Borrower | Experience | Demonstrated multifamily ownership and management experience. First-time multifamily sponsors typically require an experienced operating partner or property manager. |
| Borrower | Background and litigation | No active material litigation, no prior deed-in-lieu or foreclosure within 7 years, no criminal history involving financial crimes. |
| Documentation | Trailing financials | T-12 operating statements, T-3 rent roll, and year-to-date financials signed by borrower. |
Documentation You Will Need
Sponsors who arrive at term sheet stage with these documents in hand close 1 to 2 weeks faster than those who scramble during due diligence.
- Trailing 12-month property operating statement (T-12) and year-to-date P&L
- Current rent roll with unit mix, lease expirations, and concessions, dated within 30 days
- Last 2 years of property entity tax returns
- Personal financial statement (PFS) for each key principal, dated within 90 days
- Schedule of real estate owned with current debt balances, values, and cash flow
- 2 years of personal tax returns for all key principals with greater than 20% ownership
- 3 months of bank and brokerage statements verifying liquidity post-close
- Organizational documents for borrowing entity (operating agreement, articles of formation)
- Purchase contract or refinance summary with property legal description
- Property condition assessment ordered by lender-approved third-party firm
- Phase I environmental site assessment (Phase II if warranted by Phase I findings)
- Appraisal completed by lender-approved MAI appraiser
- Certificate of occupancy and any applicable affordable housing regulatory agreements
- Prior 2 years of insurance loss history on the subject property
What Qualifies You
These are the factors that materially improve qualification odds and pricing.
Strong occupancy well above the 90 percent threshold
Properties running 95 percent or above occupancy for 6 to 12 months underwrite with less lender scrutiny and are less likely to trigger additional reserves. Marginal 90 to 92 percent occupancy with high near-term lease rollover can create underwriting friction even if the minimum is technically met.
Market tier designation favoring higher LTV
Fannie DUS and Freddie Optigo assign market tier ratings (Tier 1 through Tier 4) based on market depth, employment diversity, and population trends. Tier 1 markets (Los Angeles, New York, Chicago, and similar metros) allow up to 80 percent LTV, while Tier 3 to 4 secondary and tertiary markets may cap at 65 to 70 percent. Sponsors who understand their market tier enter negotiations with realistic leverage expectations.
Sponsor net worth comfortably exceeding the loan amount
Agency underwriters verify net worth at or above 100 percent of the loan amount as a baseline. Sponsors with net worth at 150 percent or more of the loan have materially less friction through approval, particularly on larger loan sizes where liquidity verification becomes more intensive.
Clean borrower background with no prior agency losses
Fannie and Freddie maintain internal lists of sponsors associated with prior agency loan losses, defaults, or special servicing events. A clean prior agency track record, including no defaults on any DUS or Optigo loan in any prior entity, is one of the strongest qualifying signals available.
Affordable housing designation qualifying for lower DSCR
Properties meeting Low Income Housing Tax Credit (LIHTC), Section 8 HAP, or other affordable program thresholds qualify for a 1.20x DSCR instead of 1.25x. That 5 basis point reduction in required coverage can meaningfully increase allowable loan proceeds on a given NOI, making affordability designations a real underwriting advantage.
Green certification or energy efficiency upgrades
Both Fannie Mae Green Rewards and Freddie Mac Green Advantage programs offer loan proceeds incentives and pricing improvements for properties meeting energy and water reduction benchmarks. Sponsors who complete a Green Building Certification audit prior to application can access 5 percent additional loan proceeds in some executions.
Experienced property management with agency-approved track record
Agency programs require that on-site and third-party management meet experience standards. Sponsors using property management firms with prior agency execution history face fewer conditions. Self-managed sponsors or sponsors using first-time managers may be required to bring in an agency-approved management company as a condition of approval.
What Disqualifies You
Common decline reasons that surface during underwriting. Most can be addressed with structuring or by routing the deal to a different program.
Sub-90 percent occupancy or no stabilized operating history
Agency programs have a hard floor at 90 percent physical occupancy sustained for 90 days. A property at 87 percent occupancy, regardless of how close it is to the threshold, does not qualify and must be bridged to stabilization first. There is no waiver process for this requirement.
Non-multifamily property type
Fannie DUS and Freddie Optigo are strictly multifamily programs. Mixed-use properties with significant commercial income, student housing with individual-bed leases, or properties with more than 20 to 25 percent commercial square footage may be ineligible or require a specialized program execution.
Sponsor with prior agency loan default or foreclosure
Any key principal with a prior Fannie Mae or Freddie Mac loan default, deed-in-lieu, or foreclosure in the past 7 years will be flagged during background review and is typically disqualifying. This extends to any entity in which the principal held a significant ownership stake, not just deals where they were the named borrower.
Insufficient sponsor liquidity post-close
Liquid assets below 10 percent of the loan amount after funding are a hard underwriting failure. Sponsors who plan to use all available cash for the equity contribution and closing costs, leaving minimal post-close liquidity, routinely fail this test. Illiquid assets such as equity in other real estate do not satisfy the liquidity requirement.
DSCR shortfall at the underwritten rent
Agency underwriters apply vacancy and expense loads to gross potential rent, and the resulting net operating income must support 1.25x coverage at the loan constant. Properties with above-market asking rents, high expense ratios, or significant deferred maintenance reserves may fail DSCR underwriting even at 80 percent occupancy.
Typical Qualified Borrower
If your situation matches one of these profiles, the program is likely a strong fit.
- Experienced multifamily owner refinancing a stabilized apartment community in a primary or secondary market into long-term fixed-rate non-recourse debt
- Value-add sponsor who has completed a renovation and lease-up and is now taking out a bridge loan with an agency permanent at stabilization
- Affordable housing developer with LIHTC or Section 8 HAP contracts seeking 1.20x DSCR execution and favorable amortization
- Institutional or semi-institutional multifamily operator acquiring a stabilized 100-plus unit property and needing $10M to $50M non-recourse fixed-rate debt
- Small Balance borrower with a 5 to 50 unit apartment building seeking $1M to $7.5M Fannie Mae Small Balance or Freddie Mac Small Balance execution
- Sponsor seeking a 10-year fixed term to match a long-term hold strategy with prepayment flexibility built into yield maintenance or defeasance structure
- Multifamily owner pursuing a Fannie Green Rewards or Freddie Green Advantage execution to capture additional loan proceeds through documented energy efficiency improvements
Timeline
Agency loans through Fannie DUS or Freddie Optigo lenders typically close in 45 to 60 days from application, with rate lock occurring at or before loan commitment once the appraisal and property condition assessment are complete. Third-party reports (appraisal, environmental, property condition assessment) drive the critical path and take 3 to 4 weeks from order, so sponsors who authorize third-party ordering at application submission rather than after term sheet compress cycle time meaningfully. Deals with complete documentation packages, clean title, and no deferred maintenance conditions routinely close in the 45-day range.
Frequently Asked Questions
What occupancy does a multifamily property need to qualify for an agency loan?
Both Fannie Mae and Freddie Mac require 90 percent physical occupancy sustained for at least 90 days prior to rate lock. This is a hard program minimum with no waiver process. Properties below this threshold must be bridged to stabilization before agency execution is available.
What is the minimum DSCR for a Fannie Mae or Freddie Mac loan?
The standard minimum DSCR is 1.25x for market-rate properties, underwritten at the agency's applied vacancy and expense loads rather than actual in-place numbers. Properties with affordable housing designations, such as LIHTC or Section 8 HAP contracts, qualify for a reduced 1.20x DSCR minimum, which can meaningfully increase loan proceeds on a given NOI.
How does market tier affect LTV on an agency loan?
Fannie DUS and Freddie Optigo assign market tier ratings from Tier 1 to Tier 4 based on market size, employment depth, and demand fundamentals. Tier 1 major metro markets allow up to 80 percent LTV, while Tier 3 to 4 secondary and tertiary markets are typically capped at 65 to 70 percent LTV. Sponsors should confirm their market tier designation before modeling leverage assumptions.
Can I get an agency loan on a mixed-use property?
Agency multifamily programs accommodate limited commercial space, but properties where commercial income exceeds roughly 20 to 25 percent of effective gross income may be ineligible for standard DUS or Optigo execution. Properties with significant retail, office, or other non-residential components typically require a conventional bank or CMBS execution rather than an agency program.
What sponsor net worth and liquidity are required for agency loans?
Fannie Mae and Freddie Mac underwriting standards require sponsor net worth at least equal to the loan amount and post-close liquidity of at least 10 percent of the loan amount. Both are verified through a personal financial statement dated within 90 days. Equity in other real estate counts toward net worth but does not satisfy the liquid assets test.
Are agency loans recourse to the borrower?
Agency loans are structured as non-recourse debt with standard carve-outs for bad acts. Carve-outs cover fraud, intentional waste, misappropriation of rents, voluntary bankruptcy filings, and similar bad-act scenarios. Ordinary economic loss, including property value decline or missed debt service without bad acts, does not trigger personal liability under the non-recourse carve-out structure.
What is the difference between Fannie Mae Small Balance and standard DUS execution?
Fannie Mae Small Balance loans cover the $1M to $7.5M range with a streamlined underwriting process, reduced third-party report requirements, and faster timelines than standard DUS execution. Standard DUS starts at $7.5M and offers broader loan structuring flexibility. Both programs require the same 90 percent occupancy, 1.25x DSCR, and sponsor qualification thresholds.
Can I qualify for an agency loan if I have a prior foreclosure?
A prior foreclosure, deed-in-lieu, or Fannie or Freddie loan default within the past 7 years is typically disqualifying for agency execution. This applies to all key principals with significant ownership stakes in the borrowing entity, not just the named borrower. Sponsors with prior agency losses are flagged in internal review and rarely receive approval regardless of the current deal quality.
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