Flexible, Non-Recourse Financing for Small Multifamily and Apartment Properties
This website is designed to teach you everything you need to know about the Optigo Small Balance Loan program from Freddie Mac, designed for the acquisition and refinancing of multifamily properties. Browse, learn, ask questions, and purchase or refinance apartment multifamily properties with these non-recourse, flexible, high leverage apartment loans.
For those who aren’t aware, Optigo is Freddie Mac’s new designation for its Multifamily Seller/Servicer network and lending programs. Announced in January 2019, the Optigo network is designed to increase lending flexibility while streamlining the loan application and approval process.
Principal Benefits of the Freddie Mac Optigo SBL Program
- Flexible loan sizing: Freddie Mac SBL financing begins at just $1 million, and generally goes up to $7.5 million. This allows borrowers to acquire or refinance smaller apartment buildings with as few as 5 units, without going to a bank, where getting non-recourse financing is often impossible, and loan terms don’t often exceed 5 years.
- Flexible terms: With a variety of fixed and floating-rate loan options between 5 and 20 years, as well as a variety of partial and full term interest-only (I/O) loan options, the Freddie Mac SBL program can meet the needs of multifamily investors in a variety of different situations.
- High leverage: The Freddie Mac SBL program permits up to 80% LTV for purchases and refinances in Top and Standard Markets, while permitting up to 75% LTV for purchases and up to 70% for refinances in Small Markets.
- Non-recourse: Optigo Small Balance Loans are non-recourse with standard carve-outs. As long as a borrower does not trigger one of the loan’s carve-outs, a lender will not be able to repossess the borrower’s personal property should they default on their loan. This significantly reduces risk for borrowers.
Other Benefits of Freddie Mac Small Balance Loans
- Long amortizations: These loans offer 30-year amortizations, reducing monthly payments and increasing cash flow, while keeping debt service coverage ratios higher (making it easier to qualify for larger loans).
- Long rate locks: SBL financing allows for 60-120 day rate locks, reducing risk for borrowers and allowing them to accurately estimate their monthly mortgage payments in advance. Rate locks are done at the time of application when deposits are secured.
- Full assumability: Small balance loans are fully assumable with lender approval and a 1% fee, making it easy for borrowers to avoid paying a prepayment penalty by allowing a new owner to assume their loan.
Top and Standard Markets for the Freddie Mac SBL Program
Most multifamily loans offer better terms to borrowers in major MSAs, and Freddie Mac Optigo Small Balance Loans are no different. In fact, Freddie Mac has specifically divided U.S. metro areas into four categories; Top Markets, Standard Markets, Small Markets, and Very Small Markets, offering superior terms to borrowers in larger markets.
Top Markets generally require a minimum 1.20x DSCR, and include the New York City/New Jersey Metro Area, Los Angeles, San Francisco, Washington DC, Boston Chicago, San Diego, Miami, Orange County, Sacramento, San Jose, Oakland, Dallas, Portland, Seattle, Denver, and Minneapolis.
It’s important to realize that these markets are generalized areas, and are not confined to city limits. For instance, the Miami market is generally considered to consist of the Tri-County area of Miami-Dade, Broward, and Palm Beach counties. For additional information, borrowers should consult a lender or Freddie Mac.
Standard Markets generally require a minimum 1.25x DSCR, and include Atlanta, Albany, Austin, Albuquerque, Pittsburgh, Baltimore, New Orleans, Salt Lake City, Orlando, Phoenix, Philadelphia, Providence, Cleveland, Las Vegas, St. Louis, Houston, Tampa, Indianapolis, Cincinnati, Richmond, San Antonio, Birmingham, Dayton, Hartford, Jacksonville, Tucson, Raleigh, Rochester, Riverside, Bakersfield, Detroit, Kansas City, Columbus, Charlotte, Oklahoma City, Nashville, Memphis, Richmond, Norfolk, Milwaukee, Tulsa, Knoxville, Buffalo, Omaha, Fresno, Louisville, and Honolulu.
Small and Very Small Markets
All markets not listed as Top or Standard Markets are considered to be Small or Very Small Markets, which generally require minimum DSCRs of 1.30x and 1.40x, respectively. In 2016, the minimum rentable population for a market to qualify as a Standard Market was raised from 60,000 to 105,000, causing 45 Standard Markets to be reclassified as Small Markets. Markets that were shifted from Standard to Small include Boise, Idaho, El Paso, Texas, Reno NV, Madison, Wisconsin, Syracuse, New York, and a variety of others.
Freddie Mac SBL Regions
In addition to dividing areas between Top, Standard, Small, and Very Small Markets, Freddie Mac has now divided the U.S. into 5 regions, each which offers slightly different pricing.
• Northeast: CT, DE, MA, ME, NH, NJ, NY, PA, RI and VT
• Southeast: AL, AR, DC, FL, GA, LA, MD, MS, NC, SC, TN, VA and WV
• North Central: IA, IL, IN, KS, KY, MI, MN, MO, ND, NE, OH, SD and WI
• South Central: CO, MT, NM, OK, TX and WY
• Western: AK, AZ, CA, HI, ID, NV, OR, UT, and WA
Current regional interest rates can be found here.
Multifamily Investor Resources
This site is designed to empower multifamily investors by providing an in-depth explanation of all aspects of the Freddie Mac Optigo Small Balance Loan program. It explains key terms, addresses pros and cons and FAQs, outlines the application process for the Freddie Mac SBL program, provides a streamlined loan application checklist, and reviews the Freddie Mac Multifamily property appraisal process.
More Freddie Mac SBL Investor Resources:
In addition to the information mentioned above, we also provide:
- Our Freddie Mac Optigo SBL Term Sheet
- A Freddie Mac Optigo SBL Refinance Guide
- Third-Party Report Requirements
- Freddie Mac Optigo SBL Prepayment Information
We also offer risk-free, no-obligation consultations with highly-experienced Freddie Mac multifamily mortgage bankers. After taking some time to browse our guide to Freddie Mac’s Optigo SBL program, reach out for a free quote and expert insight from our team of capital markets advisors.
Questions about Freddie Mac Small Balance Loans?
Email us directly at firstname.lastname@example.org. Or, call our toll-free number today at (800) 567-9631 to speak with a Freddie Mac multifamily finance specialist. Or, fill out the form below to get in touch. We will match you with the best lender or get you a free quote!