If you’re investing in small multifamily properties, you may have come across Freddie Mac small balance loans. These are loans that are targeted at providing finance to property owners who may require financing that would be between the range of 1 million to 7.5 million. They provide fixed-rate security and favorable conditions on properties with 5-50 units in properties.
But are Freddie Mac small balance loans the best option for your project?
In this article, we will consider its advantages, disadvantages, and the alternatives that are worthy.
What Are Freddie Mac Small Balance Loans?
Freddie Mac created its small balance loan program to support small multifamily property owners. This national program offers terms that compete with traditional bank loans and receives backing from Freddie Mac, a government-sponsored enterprise (GSE). The same support enables lenders to feel safer and acquire capital more comprehensively.
Typically, these loans are available for properties like:
- Apartment buildings
- Student housing
- Workforce housing
- Affordable multifamily housing
You can choose fixed or floating interest rates and loan terms ranging from 5 to 30 years. Most importantly, Freddie Mac small balance loans are non-recourse, meaning your personal assets are protected in case the investment doesn’t pan out.
Pros of Freddie Mac Small Balance Loans
So, let’s start with what makes these loans popular.
- Competitive Interest Rates
Because the loans are backed by Freddie Mac, lenders offer low interest rates—often more favorable than what you’d find with private loans or traditional commercial mortgages.
- Non-Recourse Loans
This is a big deal. With non-recourse terms, you’re not personally liable if the loan defaults (as long as there’s no fraud or major negligence). That lowers your financial risk.
- Flexible Terms
You can choose from amortization schedules up to 30 years. Whether you want a short-term exit strategy or a long-term hold, Freddie Mac small balance loans can fit either.
- Nationwide Availability
These loans are offered in all 50 states, so location is rarely a barrier.
- Streamlined Underwriting
Compared to other government-backed loans, Freddie Mac small balance loans have a relatively quick and standardized underwriting process—though still not as fast as private loans.
Cons of Freddie Mac Small Balance Loans
While these loans sound attractive, they aren’t for everyone. So, here’s where they fall short.
- Strict Property Requirements
Your property must be stabilized, meaning it should already be performing well with high occupancy. If your project is a fix-and-flip or under heavy renovation, this loan isn’t a match.
- Longer Approval Times
Although underwriting is “streamlined,” the process can still take 30 to 60 days, especially if you’re not working with an experienced lender. If you need fast capital, that’s a problem.
- High Upfront Costs
Expect appraisal, inspection, legal, and processing fees. These can add up to thousands of dollars before you even get the loan.
- Minimum Loan Size
If you need less than $1 million, Freddie Mac small balance loans are off the table. This makes them inaccessible to many smaller investors.
- Inflexibility
Government-sponsored loans come with a lot of rules. If you need to close quickly, change terms mid-deal, or structure a creative repayment plan, these loans offer little wiggle room.
Best Alternatives
Sometimes, the best loan is the one that meets your timeline and needs—not just the one with the lowest rate on paper. Here are a few smart alternatives.
Private lenders like Loan Locker specialize in speed and flexibility. If your deal involves:
- Fix and flip properties
- RV park development
- Raw land
- Mobile home park
- Distressed multifamily assets
…then a private lender will likely fund your project faster than Freddie Mac can. At Loan Locker, we control our own capital, which allows us to close in days, not weeks. Plus, we work with you to find creative solutions—even for unconventional deals.
- Bridge Loans
Bridge loans are great if you’re in a transitional phase—say, renovating a property or waiting for long-term financing. They’re short-term, interest-only loans that help you move quickly. Once the property is stabilized, you can refinance into a Freddie Mac small balance loan.
- SBA Loans (504 & 7a)
For owner-occupied multifamily properties, SBA loans offer longer repayment terms and lower down payments. But they do come with more paperwork and personal guarantees.
- Community Banks & Credit Unions
Some regional banks and credit unions offer multifamily loans for smaller properties. Their loan officers often have more leeway and personal oversight, making them a decent option for niche projects.
Freddie Mac Small Balance Loans vs Private Lending
So, here’s a quick comparison to help you decide which path fits best:
| Feature | Freddie Mac SBL | Private Lending (Loan Locker) |
| Loan Size | $1M – $7.5M | $250K – $15M+ |
| Approval Time | 30 – 60 days | As fast as 3 – 10 days |
| Property Condition | Stabilized only | Any condition (fix & flip OK) |
| Recourse | Non-recourse | Options available |
| Flexibility | Low | High |
| Upfront Costs | High | Lower |
| Ideal For | Long-term holds | Speed, creative projects |
So, Is a Freddie Mac Small Balance Loan Right for You?
If you own a stabilized multifamily property and are looking for a long-term, low-interest loan, then yes—Freddie Mac small balance loans can work well.
But when the urgency of your project calls on you, when you want to move faster or more flexibly or to structure your project creatively, then your ideal answer could be by using private financing. Freddie Mac loans do not work with all investors, especially the ones who made rapid movements in a very competitive world.
Final Thoughts
Freddie Mac small balance loans are a solid option for stable, long-term multifamily investments. They however come with red tape and long timelines. Private money lenders, such as Loan Locker, are quick, adaptive, and offer the personal touch needed to close deals under pressure.
So, ready to fund your next deal fast? Visit Loan Locker and get in touch with our lending experts today!