Eligibility: The structural requirements a property and sponsor must meet before Freddie Mac will underwrite. Fail these tests, and no amount of clean documentation saves your deal.
What Is SBL Eligibility?
Before you audit a single line item of a T-12, ask one question: "Does this deal fit the box?"
The SBL program is high-volume and streamlined. Zero tolerance for structural exceptions. These are binary tests—you either pass or you don't.
What Makes a Property Eligible?
Freddie Mac buys "vanilla" multifamily. Anything exotic is a deal killer. But even vanilla properties face different rules depending on where they sit.
What Is Your Market Tier?
Before you calculate LTV or DSCR, you need to know your market classification. Freddie Mac rates every zip code into one of four tiers—and each tier has different underwriting limits.
| Market Tier | Definition | Max LTV | Min DSCR |
|---|---|---|---|
| Top Markets | Major metros (NYC, LA, Chicago, Dallas, etc.) | 80% | 1.20x |
| Standard Markets | Secondary metros (Austin, Nashville, Denver, etc.) | 80% | 1.20x |
| Small Markets | MSAs with 100K-500K population | 75% | 1.25x |
| Very Small Markets | MSAs under 100K population | 70% | 1.30x |
The Zip Code Trap: Your property in Dallas proper might be "Top Market" (80% LTV). But 25 minutes away in a smaller suburb? That could be "Small Market"—capped at 75% LTV and 1.25x DSCR. Same property economics, $50,000+ less in proceeds. Check your zip code before you quote terms.
Insider Tip: Market tier is determined by MSA classification, not city limits. Ask your lender for the Form 1103 Market Tier Designation for your specific property address before you run numbers.
The 90-for-90 Rule
This is the most common failure point for refinances.
| Requirement | 90% physical occupancy for trailing 3 months + month of submission |
| Measured By | Rent roll history, not current snapshot |
The Trap: A property at 95% today that dipped to 88% two months ago during renovations? Ineligible. Wait until it restabilizes.
Bhumi Fix: Verify the rent roll history specifically for the T-3 period. One bad month kills the deal.
What Are the Commercial Income Limits?
Mixed-use properties are dangerous territory in SBL.
| Metric | Maximum |
|---|---|
| Commercial income (% of GPR) | 40% |
| Commercial square footage (% of NLA) | 40% |
The Trap: "Phantom income" from commercial leases—aggressive CAM charges, percentage rent—can artificially inflate the commercial percentage. You inadvertently disqualify yourself.
What Property Types Are Automatically Rejected?
Stop working immediately if the property contains:
| Student Housing | >50% student concentration |
| Military Housing | >50% military concentration |
| Seniors Housing | Any facility with resident services (assisted living, skilled nursing) |
| Broken Condos | Condo regime where borrower doesn't own 100% of units |
What Makes a Sponsor Eligible?
SBL underwriting is "Asset First," but a bad sponsor can still kill a good deal.
Who Is the Key Borrower Principal?
Freddie Mac lends to people, not just LLCs.
| Requirement | Identify a Key Borrower Principal with decision-making control |
| Must Have | Direct or indirect equity interest in borrower entity |
The Trap: "Silent partners" or complex equity stacks where no single individual has clear control. Freddie requires a "warm body" to sign the Form 6025 Guaranty—the "bad boy carve-outs" that create personal liability for fraud, misrepresentation, and environmental issues.
What Happens to First-Time Borrowers?
| Definition | No Freddie Mac transaction in last 10 years |
| Consequence | Stricter scrutiny, lower LTVs, mandatory Sponsor Meeting (interview) |
First-time sponsors are still eligible—just expect a harder path. Be prepared to prove operational competence.
Why Does the SPE Requirement Matter?
Borrowers must be a Single Purpose Entity (SPE).
The Trap: Borrowers want to use existing LLCs with other assets or business history. Freddie prefers newly formed SPEs. "Recycled" SPEs require proving all other assets and liabilities have been stripped—a paperwork nightmare that delays closing.
How Do I Check Eligibility Before Wasting Time?
Before you invest time in documentation, verify these three data points:
Eligibility Verification
- Occupancy Check: Does T-3 rent roll history show any dip below 90%?
- Commercial Ratio: Does commercial income exceed 20%? (Proceed with caution. >40% = dead.)
- Sponsor History: Is this the sponsor's first Freddie Mac loan? (Flag for additional scrutiny.)
The Bottom Line: These are the gatekeepers. Pass them, and you move to underwriting. Fail them, and no amount of clean data will save your deal.