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Fannie Mae Multifamily Affordability Formula:
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The Fannie Mae Multifamily Affordability calculation determines the affordability ratio for multifamily properties by comparing income to debt payments. This metric helps assess the financial viability of multifamily housing investments and ensures properties meet lending criteria.
The calculator uses the Fannie Mae affordability formula:
Where:
Explanation: This calculation determines how many times the property's income covers its debt obligations, with higher values indicating better affordability.
Details: This affordability metric is crucial for lenders, investors, and property managers to evaluate the financial health of multifamily properties, assess risk, and make informed lending and investment decisions.
Tips: Enter total property income in dollars, monthly debt payment in dollars, and the debt service coverage ratio. All values must be positive numbers.
Q1: What is a good affordability ratio?
A: Typically, ratios above 1.25 are considered acceptable, with higher values indicating stronger financial performance and lower risk.
Q2: How does this differ from single-family affordability calculations?
A: Multifamily calculations consider the entire property's income and expenses rather than individual borrower income, focusing on property-level cash flow.
Q3: What income sources should be included?
A: Include all rental income, ancillary income (laundry, parking, etc.), and other property-related revenue streams.
Q4: What expenses are considered in the payment?
A: The payment typically includes mortgage principal and interest, but may also include property taxes, insurance, and other debt obligations.
Q5: How often should this calculation be performed?
A: Regular monitoring is recommended - typically quarterly or annually - especially when considering refinancing or property acquisitions.