Picture this. You find a multifamily property that looks like a winner. The numbers check out, the location is solid, and you can almost see the rent checks stacking up. But then it hits you. How do you pay for it? The financing piece can make or break your deal.
Not every loan works the same way. Some give you speed, others give you long-term security, and a few are there when you don’t fit into traditional boxes. If you choose the wrong option, your profits shrink or worse, the deal slips away.
This guide walks you through the main types of multifamily loans, what it takes to qualify, and the credit score lenders look for. By the end, you’ll know exactly which option lines up with your plan.
1. Short-term Multifamily Loans (Bridge Loans)
Bridge loans help investors move fast. They’re short-term, usually six months to three years, and they come with higher interest rates than traditional mortgages.
These loans are popular for value-add projects. Say you buy a building that needs upgrades before it qualifies for permanent financing. A bridge loan covers the purchase and gives you the breathing room to improve the property. Once it’s stabilized, you can refinance or sell.
According to CBRE, bridge loan originations in the multifamily sector jumped by more than 30% in 2023 because investors wanted flexibility in a rising rate environment.
Who Should Consider a Short-term Multifamily Loan
Bridge loans make sense if you:
- Need to close quickly
- Plan to renovate or reposition a property
- Expect to refinance or sell within a few years
Pros and Cons of Short-term Multifamily Loans
Pros
- Fast approval and funding
- More flexible than banks
- Lets you act quickly in competitive markets
Cons
- Interest rates around 8% to 12%
- Short repayment terms
- Requires a clear exit plan
If you’re confident in your strategy, the speed can be worth the cost.
Tip: Always have a refinance lender lined up before you close. According to Fitch Ratings, 18% of bridge loan borrowers face refinancing challenges if property performance lags.
2. Conventional Multifamily Mortgages
Conventional loans are the standard option most investors think of. Banks, credit unions, and private lenders offer them, usually with 15- to 30-year terms. They work best for stabilized properties that already generate steady income.
With lower rates and predictable payments, conventional mortgages are ideal for long-term investors who want to buy and hold.
According to the Mortgage Bankers Association (MBA), conventional multifamily loan rates in 2024 averaged around 6.5% to 7.2%, making them more attractive compared to bridge loans.
Who Should Consider a Conventional Loan
This path fits if you:
- Are buying a property with existing cash flow
- Want to hold for the long run
- Have strong credit and documented income
Pros and Cons of Conventional Multifamily Mortgages
Pros
- Competitive interest rates
- Long repayment terms
- Stable, predictable payments
Cons
- Stricter requirements, often higher credit scores
- Slower approval timeline
- Less flexible than private lenders
If your focus is long-term stability, conventional mortgages deliver peace of mind.
Tip: Always have a refinance lender lined up before you close. According to Fitch Ratings, 18% of bridge loan borrowers face refinancing challenges if property performance lags.
3. Government-backed Multifamily Loans
If you’re looking for long-term savings, government-backed loans are worth considering. Programs from Fannie Mae, Freddie Mac, HUD, and the FHA often come with lower rates and longer payback periods. The reason is simple: since the government shares the risk, lenders are more willing to give better terms.
These loans usually fit bigger projects and affordable housing deals. They can take longer to process, but the trade-off is stability and savings that last for decades.
To give you an idea of scale, Fannie Mae alone poured more than $69 billion into multifamily financing in 2023, much of it aimed at affordable and workforce housing. That shows just how big of a role these programs play in keeping housing options within reach.
Who Should Consider a Government-backed Loan
This option works best if you:
- Are investing in larger or affordable housing projects
- Want long-term financing with lower rates
- Can handle a more detailed approval process
Pros and Cons of Government-backed Multifamily Loans
Pros
- Some of the lowest rates available
- Terms up to 40 years in certain programs
- Higher leverage, meaning you borrow more against the property
Cons
- Approval process takes longer
- More requirements for both borrower and property
- Extra paperwork and compliance
Tip: HUD loans often allow loan-to-value (LTV) ratios as high as 85%, compared to 75% for conventional loans. According to HUD data, this higher leverage helps developers maximize capital efficiency.
4. Portfolio Multifamily Loans
Unlike other loan types, portfolio loans stay with the lender instead of being sold on the secondary market. That means the lender sets the rules and can be more flexible.
These loans work for investors with unique situations, mixed-use properties, or multiple buildings they want to finance together.
Portfolio lenders often tailor underwriting based on their relationship with the borrower, making them a solid choice for investors who don’t fit conventional molds.
Who Should Consider a Portfolio Loan
You might choose this option if you:
- Own several properties and want to consolidate debt
- Don’t qualify for conventional loans
- Are buying non-traditional properties
Pros and Cons of Portfolio Loans
Pros
- Flexible terms and underwriting
- Can finance multiple or unique properties
- Often built on a direct relationship with the lender
Cons
- Higher interest rates than conventional loans
- Shorter repayment terms
- May need more collateral
Tip: Portfolio loans are especially useful if your property has unique features that don’t meet Fannie Mae or Freddie Mac requirements, such as high vacancy rates or mixed residential-commercial spaces.
Quick Comparison of Multifamily Loan Types
| Loan Type | Best For | Term Length | Interest Rates | Key Advantage | Key Drawback |
| Bridge Loan | Fast purchases, value-add projects | 6 months to 3 years | 8% -12 % | Speed and flexibility | High cost, short term |
| Conventional Mortgage | Stabilized properties, long-term holds | 15 – 30 years | Competitive | Predictable payments | Stricter qualifications |
| Government-backed | Large projects, affordable housing | 30 – 40 years | Lowest rates | Long-term savings | Slow approval process |
| Portfolio Loan | Non-traditional borrowers/properties | Varies by lender | Higher | Flexible terms | Higher rates, shorter |
Qualifications for Multifamily Financing
No matter which loan you choose, lenders evaluate both you and the property.
Borrower requirements:
- Credit score of 660 or higher (some exceptions)
- Net worth equal to or greater than the loan amount
- Liquidity equal to about 9 months of debt payments
Property requirements:
- DSCR of 1.20 to 1.25
- Occupancy rate above 90%
- Stabilized rental income for conventional and government-backed loans
Properties with DSCR below 1.20 face much higher default risk, which is why lenders enforce this threshold.
Meeting these standards puts you in a stronger position for approval and better loan terms.
What Is the Minimum Credit Score for a Multifamily Loan?
Here’s what lenders usually expect:
- Bridge loans: Some accept 620+
- Conventional loans: Usually 660–680+
- Government-backed loans: FHA programs may allow 620, though many require 660+
- Portfolio loans: Varies by lender, often 650+
According to Experian, borrowers with scores above 700 not only qualify for more loan types but also receive interest rates up to 0.5% lower than those closer to the minimum.
The higher your score, the better your options and terms. If you’re close to the minimum, it might be worth improving your credit first.
FAQs
What is DSCR and why does it matter?
DSCR stands for Debt Service Coverage Ratio. It shows how much net operating income a property earns compared to its debt. Most lenders want at least 1.20.
Can I use a bridge loan and then refinance into a government-backed loan?
Yes, that’s a common strategy. Investors often use a bridge loan to buy and improve a property, then refinance once it’s stabilized.
How much down payment do I need?
Conventional loans often require 20% to 25%. Government-backed options can be lower. Portfolio and bridge loans depend on the lender.
Do lenders offer interest-only payments?
Some bridge and portfolio loans allow interest-only periods. This helps with cash flow during renovations or stabilization.
Conclusion
Getting the right financing is about matching your loan to your investment strategy. Bridge loans give speed for short-term plays. Conventional loans reward you with stability. Government-backed programs save you money over decades. Portfolio loans open doors when traditional options don’t fit.
At RTI Bridge Loans, we help California investors secure the right financing for multifamily properties. If you need quick capital for a value-add opportunity or advice on long-term financing, our team is ready to guide you.
Call us today at (310) 532-5008 or visit our website to explore your loan options and move forward with confidence.