Multifamily Loan Programs

Overview of the Program:

This loan provides non-recourse, assumable financing for the purchase or refinance of existing apartment properties.

For refinancings, the maximum supportable loan is limited by the least of:

(a) 85% of market value;
(b) Estimated NOI multiplied by 85% (1.17 DSCR); or
(c) 100% of eligible costs or, if cash out, 80% of market value. Eligible costs include existing indebtedness, required repairs, any initial deposit to the replacement reserve, third party reports and other closing costs.

For a purchase transaction, the loan amount is the lowest of

(a) 85% of market value;
(b) DSCR of 1.17; or
(c) 85% of acquisition price plus allowable fees and costs, including required repairs and initial replacement reserve deposit.

Program Highlights:

• Property must be three or more years old since final certificate of occupancy.
• Loan term: fixed rate and fully amortizing to 35 years, or 75% of the remaining economic useful life as determined by the appraiser.
• Loan-to-value: up to 85% (80% if equity cash out).
• Debt service coverage of 1.1765 (85% of net operating income).
• Maximum processing occupancy: lower of current market occupancy or 95%.
• Underwritten on current market income plus consideration of improvements.
• Other allowable income includes laundry, vending, covered parking, storage, pet fees, cable TV fees and forfeited security deposits.
• Commercial space cannot exceed 20% of project income.
• Last three years of operating statements are reviewed along with market comparable expenses.
• Initial deposit to replacement reserve account is typically determined by a third party architectural report.
• Ongoing monthly replacement reserve deposits will be required.
• Escrow for property tax and insurance.

Required Repairs:

• Repairs cannot exceed $6,500/unit multiplied by the high-cost factor for the area, limited to one major component, and a maximum 15% of improved market value.
• Repair funds are escrowed at 120% of estimated cost; up to 100% in the mortgage and escrowed in cash and the additional 20% cash or letter of credit. Repairs are funded with 10% retainage.

Costs of Financing:

• LF processing fee is $5,000.
• The client must pay for all third party reports, which include a Phase I Environmental analysis, a full appraisal, and Property Capital Needs Assessment (PCNA) prepared by our third party contracted architect. Funds must be remitted to LF and these contractors are engaged and paid by LF directly.
• Financing and permanent placement fees of up to 3.5% are based on final loan amount, due upon commitment and payable from mortgage proceeds at closing.
• Annual Mortgage Insurance Premium (MIP) is 1.0% at closing (one year pre-paid) and 0.45% annually thereafter.
• HUD application fee is 0.3% of the loan amount.