Freddie Mac Acquisition Upgrade and Acquisition Rehabilitation Mortgages
Freddie Mac Acquisition Upgrade and Acquisition Rehabilitation MortgagesSM enable you to purchase a property and make cosmetic or substantial improvements in order to reposition the property in your market.
Key Benefits
- The ability to obtain funds to purchase, then upgrade or rehabilitate an existing multifamily property.
- Reduced interest-rate risk when combined with the Freddie Mac Early Rate-Lock delivery option.
- Clearly defined lending parameters and predictable rate-lock and closing timeframes.
- Guaranteed permanent financing since the acquisition/upgrade or rehabilitation proceeds are funded at the same time.
At-a-Glance Comparison
| Product Summary | Acquisition Upgrade | Acquisition Rehabilitation |
| Eligible properties | Garden, mid-rise or high-rise multifamily | Garden, mid-rise or high-rise multifamily |
| Maximum Loan-to-Value |
As Is: Remaining term < 7 years: 70% Remaining term 7 to < 10 years: 75% Remaining term ≥ 10 years: 80% |
Same as Upgrade |
|
Minimum Debt Coverage Ratio Fixed-Rate *Refer to grids below for ARM sizing parameters |
As Is: Remaining term < 7 years: 1.30x amortizing Remaining term ≥ 7 years: 1.25x amortizing |
As Is: Remaining term < 7 years: 1.30x amortizing Remaining term ≥ 7 years: 1.25x amortizing |
| Minimum Upgrade/Rehab Costs Per Unit |
$3,000 per unit | $10,000 per unit |
| Maximum Upgrade / Rehabilitation Cost | Lower of $10,000 per unit or 20% of acquisition cost | Lower of $30,000 per unit or 30% of acquisition cost |
| Maximum Period to Stabilization | 24 months | 36 months |
| Stabilization Period Extension Option | 2-6 months or 1-12 months, for fee | 2-6 months or 1-12 months, for fee |
| Acquisition Repair Escrow Required | Yes, in the form of cash, Letter of Credit, or Construction Completion Guaranty | Yes, in the form of cash, Letter of Credit, or Construction Completion Guaranty |
| Debt Service Coverage Shortfall Reserve Required | Yes, in the form of cash, Letter of Credit, or Construction Completion Guaranty; maximum 6x NOI shortfall | Yes, in the form of cash, Letter of Credit, or Construction Completion Guaranty; maximum 6x NOI shortfall |
| Collateral During Rehab | First lien on "as is" property, repair escrow, debt service coverage reserve | First lien on "as is" property, repair escrow, debt service coverage reserve |
Adjustable-Rate Mortgage (ARM) Sizing Grids
Acquisition Upgrade:
| Term | Final ARM Loan-to-Value |
As Is |
As Stabilized
|
Cap Provider: Borrower or Freddie (B/F) | Min Term for Borrower-Provided Cap | |||
| Sizing Requirement at Max Rate: Min. IO DCR |
IO Available for Loan Term? |
Maximum IO Period for Loan Term |
Minimum IO DCR for Full Term IO |
Minimum Amortizing DCR @ Max Rate |
||||
| 5-year |
≥ 65% to ≤ 70%
|
1.05x
|
Partial
|
Upgrade Period
|
NA
|
1.05x
|
B/F
|
3-yr w/ escrow
|
|
> 60% to < 65%
|
1.05x
|
Y
|
Full-term
|
1.35x
|
1.05x
|
B/F
|
3-yr w/ escrow
|
|
|
≤ 60%
|
1.05x
|
Y
|
Full-term
|
1.35x
|
1.05x
|
B/F
|
Cap not required
|
|
| 7-year |
≥ 70% to 75%
|
1.05x
|
Partial
|
Upgrade Period
|
NA
|
1.05x
|
B/F
|
4-yr w/ escrow
|
|
≥ 65% to <70%
|
1.05x
|
Partial
|
Upgrade Period
|
NA
|
1.05x
|
B/F
|
4-yr w/ escrow
|
|
|
> 60% to < 65%
|
1.05x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
4-yr w/ escrow
|
|
|
≤ 60%
|
1.05x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
Cap not required
|
|
| 10-Year |
≥ 75% to 80%
|
1.05x
|
Partial
|
Upgrade Period
|
NA
|
1.05x
|
B/F
|
10-yr
|
|
≥ 70% to <75%
|
1.05x
|
Partial
|
Upgrade Period
|
NA
|
1.05x
|
B/F
|
5-yr w/ escrow
|
|
|
≥ 65% to <70%
|
1.05x
|
Partial
|
Upgrade Period
|
NA
|
1.05x
|
B/F
|
5-yr w/ escrow
|
|
|
> 60% to < 65%
|
1.05x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
5-yr w/ escrow
|
|
|
≤ 60%
|
1.05x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
Cap not required
|
|
Acquisition Rehabilitation:
| Term | Final ARM Loan-to-Value |
As Is |
As Stabilized
|
Cap Provider: Borrower or Freddie (B/F) | Min Term for Borrower-Provided Cap | |||
| Sizing Requirement at Max Rate: Min. IO DCR |
IO Available for Loan Term? |
Maximum IO Period for Loan Term |
Minimum IO DCR for Full Term IO |
Minimum Amortizing DCR @ Max Rate |
||||
| 5-year |
≥ 65% to ≤ 70%
|
1.0x
|
Partial
|
Rehab Period
|
NA
|
1.05x
|
B/F
|
3-yr w/ escrow
|
|
> 60% to < 65%
|
1.0x
|
Y
|
Full-term
|
1.35x
|
1.05x
|
B/F
|
3-yr w/ escrow
|
|
|
≤ 60%
|
1.0x
|
Y
|
Full-term
|
1.35x
|
1.05x
|
B/F
|
Cap not required
|
|
| 7-year |
≥ 70% to 75%
|
1.0x
|
Partial
|
Rehab Period
|
NA
|
1.05x
|
B/F
|
4-yr w/ escrow
|
|
≥ 65% to <70%
|
1.0x
|
Partial
|
Rehab Period
|
NA
|
1.05x
|
B/F
|
4-yr w/ escrow
|
|
|
> 60% to < 65%
|
1.0x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
4-yr w/ escrow
|
|
|
≤ 60%
|
1.0x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
Cap not required
|
|
| 10-Year |
≥ 75% to 80%
|
1.0x
|
Partial
|
Rehab Period
|
NA
|
1.05x
|
B/F
|
10-yr
|
|
≥ 70% to <75%
|
1.0x
|
Partial
|
Rehab Period
|
NA
|
1.05x
|
B/F
|
5-yr w/ escrow
|
|
|
≥ 65% to <70%
|
1.0x
|
Partial
|
Rehab Period
|
NA
|
1.05x
|
B/F
|
5-yr w/ escrow
|
|
|
> 60% to < 65%
|
1.0x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
5-yr w/ escrow
|
|
|
≤ 60%
|
1.0x
|
Y
|
Full-term
|
1.30x
|
1.05x
|
B/F
|
Cap not required
|
|
Contact Us
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The information in this document is not a replacement or substitute for information found in the Freddie Mac Multifamily Seller/Servicer Guide. Terms set forth herein are subject to change without notice.