Credit Requirements & Underwriting Guidelines
for Fannie Mae Apartment Loans

Requirements may vary slightly between funding Lenders or if Fannie changes its guidelines, but the following should give you a good overview of what is generally expected to qualify for a Fannie Mae apartment loan. Waivers may be requested in some circumstances if there is a qualification you don't meet.

1. Personal Guarantees

Fannie Mae is a “non-recourse” loan product, but owners with at least 20% stake in the property (or any other required sponsor) will be required to sign a carve-out guarantee for the repayment of the loan.

2. Credit Requirements

FICO score of 680 or higher with no history of financial crimes and no foreclosures or bankruptcies in the last 7-10 years. Some exceptions may be made on a limited basis if there are multiple borrowers.

3. Net Worth & Liquidity

Loan sponsors (i.e. carve-out guarantors) should have a combined net worth equal to or greater than the loan amount being requested.

  • Net worth is the difference between the total value of all of your assets and the total value of your liabilities. This helps the lender assure that the loan will be repaid in the event of default.
    Net Worth = Total Assets – Total Liabilities
  • The easiest way to calculate your net worth is by filling out a Personal Financial Statement (which helps you list out your personal assets and liabilities), and including a schedule of real estate owned (SREO).

Loan Guarantors should have a combined post-closing liquidity of at least 12 months worth of the mortgage payments (although some lenders can go down as low as 9 months of mortgage payments, and some will go as high as 10% of your loan amount).

  • If you need help calculating your potential mortgage payments, you can use our monthly payment & amortization schedule calculator.

Example of 12 months of Mortgage Payments Post-Closing Liquidity: If you are buying a building that is $1,500,000 and need to put down $300,000, your loan would be $1,200,000. If your loan will be at 5% interest with a 30-year amortization, your monthly mortgage payments would be $6,442, so you would therefore need to have $77,304 in post-closing liquidity after your down payment of $300,000, which means you are starting with at least $377,304 total before the down payment.

Example Calculations:

$1,500,000 (Purchase Price) - $300,000 (Down Payment) = $1,200,000 (Loan Amount)

$300,000 (Down Payment) + $77,304 (Post-Closing Liquidity) = $377,304 (Funds Required to Purchase)

4. Down Payment Requirements

Borrowers should plan on contributing anywhere from 20-30% of the purchase price as a down payment (depending on the economic cycle and current cap rates).

  • Final required down payment will depend on the loan tier & underwritten debt service coverage ratio (explained below).

5. LTV & Debt Service Coverage Requirements

The multifamily property being financed should have an underwritten Debt Service Coverage Ratio of at least 1.25x for “Top/Eligible Markets”, and at least 1.20x for “Strong Markets” (explained below) for the last 12 months.2

  • Tier II LTV/DSCR Requirements: 75% (Refinance) - 80% (Purchase) / 1.20x (Strong) - 1.25x (Top)
  • Tier III LTV/DSCR Requirements: 65% (Refi/Purchase) / 1.35x (All Markets)
  • Tier IV LTV/DSCR Requirements: 55%(Refi/Purchase) / 1.55x (All Markets)
  • The Debt Service Coverage Ratio (DSCR) is the property’s net operating income divided by the annual debt service (mortgage payments), and is usually expressed as a whole number rather than a percentage (i.e. 1.25x rather than 125%).

    Debt Service Coverage Ratio = Net Income / Annual Mortgage Payments

  • Having additional income from other tenants (i.e. utilities, storage units, parking, etc.) can also help add to the cash flow, increasing your DSCR.
  • If you need help computing your DSCR, you can use our DSCR Calculator.

Example: Your apartment building’s annual net operating income (not including depreciation, amortization, or mortgage payments) is $135,000 and the annual mortgage payment on your new $1,000,000 mortgage is $72,000 ($6,000 x 12). $135,000/$72,000 is 1.875x, so you would meet the DSCR requirement.

Example Calculations:

$6,000 (Monthly Mortgage Payment) x 12 = $72,000 (Annual Debt Service)

$135,000 (Business NOI) / $72,000 (Annual Debt Service) = 1.875x

6. Experience

For Fannie Mae multifamily loans, prior experience with 5+ unit properties is a loan requirement that usually will not receive a waiver. In the event of a refinance, you must have owned the subject property for the preceding 2 years to qualify. In the event of a purchase, you must currently own at least one building of similar size for the previous 2 years.

7. Due Diligence & Inspections

All loan will require the following diligence reports:

  • Appraisal
  • Environmental Engineering Report
  • Structural Engineering Report
  • Seismic Risk Assessment (for some areas prone to earthquakes)
  • Fannie and Lender site inspections
  • Zoning Reports
  • Credit Reports
  • Legal Searches
  • Flood Zone Reports

8. Other Loan Requirements

  • Having the property located within 100 miles of one of the primary sponsors/managers is strongly preferred unless the borrower has a professional management company.
  • Property must be stabilized for at least 90 days before funding.
  • Tier II loans will require property taxes and insurance to be escrowed.
  • Tier II loans will require all determined replacement reserves to be fully funded at closing.
  • Tier III/IV loans will require replacement reserves to be funded if the amount is over 4% of the loan amount on refinances or 6% of the loan amount on purchases.

9. Strong Markets


  • Berkeley
  • Oakland
  • San Francisco
  • San Jose
  • Santa Clara
  • Sunnyvale


  • Boston
  • Cambridge
  • Newton

New Jersey

  • Jersey City
  • Newark

New York

  • New York City


  • Bellevue
  • Seattle
  • Tacoma

10. "Top/Eligible" Markets


  • Anaheim
  • Carlsbad
  • Chula Vista
  • Folsom
  • Long Beach
  • Los Angeles
  • Oxnard
  • Roseville
  • Sacramento
  • San Diego
  • Thousand Oaks
  • Ventura


  • Aurora
  • Denver
  • Lakewood


  • Wilmington

District of Columbia

  • Washington


  • Fort Lauderdale
  • Miami
  • Pompano Beach


  • Chicago
  • Elgin
  • Naperville


  • Baltimore
  • Calvert County
  • Cecil County
  • Charles County
  • Columbia
  • Frederick County
  • Montgomery County
  • Prince George's County
  • Towson


  • Bloomington
  • Minneapolis
  • St. Paul

New Jersey

  • Camden


  • Philadelphia


  • Portland


  • Salt Lake City


  • Alexandria
  • Arlington


  • Hillsboro
  • Vancouver

West Virginia

  • Jefferson County

11. "Pre-Review" Markets (Require additional credit screening)3


  • Sierra Vista – Douglas
  • Tucson
  • Yuma


  • Orlando – Kissimmee – Sanford MSA


  • Macon – Bibb County
  • Statesboro
  • Valdosta
  • Warner-Robbins


  • Decatur


  • Entire state, except Louisville – Jefferson County KY MSA


  • Evansville IN/KY MSA


  • Entire State


  • Entire state (except Ann Arbor & Grand Rapids – Wyoming)
  • Additional Restriction apply to Detroit – Warren – Dearborn & Flint


  • Grand Forks ND/MN MSA


  • Lafayette County


  • Columbia

New Jersey

  • Atlantic City

North Carolina

  • Fayetteville
  • Jacksonville

North Dakota

  • Entire State


  • Entire state, except Columbus & Cincinnati MSAs


  • Entire state
  • Additional restrictions apply to Tulsa


  • Jackson


  • Abilene
  • College Station – Bryan
  • Corpus Christi
  • Houston – The Woodlands – Sugarland
  • Longview
  • Lubbock
  • Midland
  • Odessa
  • Victoria
  • Waco
  • Wichita Falls


  • Entire State

  • 1A carve-out guarantee (also known as a “bad-boy carve-out” or “springing recourse”) requires the guarantor to repay the loan (or portions thereof) if the borrower commits any of the specified “bad acts,” or where the borrower takes steps to prevent the lender from enforcing on its collateral, such as filing for bankruptcy and invoking the automatic stay. Today, there are at least two types of carve-out guarantees: one for borrower acts that trigger full recourse liability to the guarantor, and another more limited variety that is usually tied to actual damages incurred by the lender arising out of a specific bad act by the borrower.
  • 2 The Funding Lender or Fannie Mae may limit the LTV for change DSCR requirements for smaller markets, at their discretion.
  • 3 Only eligible for Tier 3 & 4 mortgages loans (i.e. max loan amount 70% LTV)