Agency, bank or bridge: choosing the right loan for a Dallas apartment building

The quick answer for a stabilized building

For a stabilized apartment building with a solid income history, a Fannie Mae or Freddie Mac agency loan is often the strongest option: long fixed-rate terms, 30-year amortization and non-recourse structure. A bank loan fits better for smaller properties, short business plans or owners whose deposit relationship earns better pricing, usually with a personal guarantee. A bridge loan makes sense only when the property has a specific, dated plan to raise its income, such as finishing a renovation or lease-up, before moving to permanent debt.

We compare all three on almost every apartment deal that comes through Terrydale Capital, because apartments are where our deepest experience is. The right answer depends less on which loan is best in general and more on your property's income today, your timeline and how much risk you are willing to keep personally.

How each of the three loans is put together

In a post on our site about agency loans for Dallas apartment owners, we laid out illustrative terms for each option on the same property. The rates were examples tied to the market at the time of writing, not quotes, but the structures are typical.

• Agency: fixed rate, 10-year term, 30-year amortization, non-recourse, sized at 1.25 times debt service coverage in our example.
• Bank: fixed rate, 5-year term, 25-year amortization, typically with a personal guarantee, sized at 1.30 times coverage in our example.
• Bridge: floating rate, interest-only, 2- to 3-year term, sized at 70 percent of value in our example rather than on current income.

One property, three very different loan amounts

The example in that post was a 120-unit Class B property appraised at 15 million dollars, producing 900,000 dollars of net operating income, with a 10-million-dollar bridge loan maturing in six months. On paper, that is 66.7 percent loan-to-value, which looks comfortable. The coverage tests told a different story.

At the example terms, the agency loan sized to about 9.29 million dollars, roughly 711,000 dollars short of the payoff. The bank loan, with a shorter amortization and a higher coverage requirement, sized to about 8.24 million, leaving a gap of about 1.76 million. The bridge loan, sized on value, could reach 10.5 million and cover the payoff with room for costs, but coverage was only 1.16 times, and a half-point rise in the floating rate would push it to 1.08 times.

The post also calculated that the property would need about 968,900 dollars of net operating income, roughly a 7.7 percent increase, for the agency loan to size to the full 10 million. That one number frames the decision. If the income can realistically get there, a short bridge followed by agency debt may make sense. If it cannot, the owner needs equity or a different structure, not a bet on rates.

What agency debt gives you, and what it asks in return

Fannie Mae and Freddie Mac have room to lend. The Federal Housing Finance Agency set their 2026 multifamily purchase caps at 88 billion dollars each, 176 billion combined, requires that at least 50 percent of their multifamily business be mission-driven affordable housing, and excludes loans that finance workforce housing from the caps. Workforce housing qualification depends on income tests the lender runs, so ask whether your rents qualify.

The trade-offs are real. Agency underwriting requires full financials and an acceptable trailing income history, and it takes longer than a bank loan. Fixed-rate agency loans carry prepayment penalties, commonly yield maintenance or defeasance, which become more expensive if rates fall after you lock. If you might sell or refinance in three years, that penalty can outweigh the benefits. Our post recommends starting an agency refinance about 12 months before maturity to allow time for third-party reports and the rate lock.

Smaller buildings still have agency options. As the same post explains, Freddie Mac folded its small balance loan program into its conventional platform in April, consolidating rather than leaving the space, and Fannie Mae's small loan program covers properties of 5 to 50 units. Whether a small agency loan beats a local bank on your particular building is exactly the kind of question worth pricing both ways.

When a bank is the better partner

A bank loan is not a consolation prize. It often fits smaller properties that sit below agency minimums or do not fit agency programs well, owners who keep significant deposits with the bank and can earn better pricing, and business plans built around a five-year hold. Banks can also be more flexible on unusual situations, because the loan stays on their books and the decision is made by people you can meet.

The costs are the personal guarantee and the shorter term. A five-year loan means facing another refinance decision in five years, in whatever market exists then. If you are choosing between agency and bank terms on your own building and want to see both sized side by side, this is a good time to talk.

Bridge loans are a tool with a deadline

Bridge debt exists for properties that are not yet what a permanent lender needs: mid-renovation, in lease-up, recently purchased below market occupancy, or carrying a loan that matures before the income history is ready. Bridge lenders size on value and the business plan, so they can lend more than the coverage tests allow today, at a higher floating rate and with a short term.

Our post put it bluntly: bridge only makes sense when there is a dated path to higher income, and using a bridge loan simply to wait for lower rates is a bet. If rates rise instead, coverage falls and the takeout loan gets smaller. When the plan is real, bridge-to-agency is one of the most useful structures in apartment lending. When the plan is hope, it moves the problem two years down the road and makes it more expensive. If you are weighing even shorter, higher-cost money, I cover that separately in the real costs of hard money.

Your submarket matters as much as the loan type

Whichever lender you choose, the income it underwrites will be checked against the properties around yours, not against a metro-wide headline. Appraisers rely on nearby comparables, and lenders compare your rent roll and collections with conditions in your submarket. In a post on our site about DFW apartment vacancy, we noted that Cushman and Wakefield put stabilized metro vacancy at 9.6 percent in the second quarter of 2026, while its figures for Grapevine and for Uptown and the Park Cities were 5.5 and 6.5 percent.

That gap translates directly into loan dollars. In the same post, we worked through a 100-unit property at 1,470 dollars a month: the difference between 5.5 and 9.6 percent vacancy is about 72,300 dollars a year of collected rent, which at a 9 percent debt yield means roughly 800,000 dollars less in loan proceeds. If your building sits in a tight submarket, make sure the comparables in your package show it. If it sits in an area with heavy new deliveries, expect the lender to test your lease-up and renewal pace against the new buildings nearby, and be ready with your own numbers.

Five questions that usually settle it

When owners ask me which loan to pick, I ask them these first. The answers almost always point to one structure.

• Is the property stabilized today, with a trailing twelve months a lender can underwrite?
• How long do you plan to own it, and how likely is an early sale or refinance?
• How important is it to avoid a personal guarantee?
• Does the income support the loan you need at current rates, and if not, what specifically will raise it, and by when?
• Do you have, or want, a deposit relationship with a bank that values your business?

Where owners go wrong choosing between them

The most common mistake is choosing on rate alone. A slightly lower agency rate with yield maintenance can cost far more than a slightly higher bank rate if you sell in year four. The second is assuming the loan amount follows the appraisal. As the example above shows, the coverage test frequently produces a smaller loan than the loan-to-value figure suggests.

The third is taking bridge debt without a takeout plan written down: the income, occupancy and coverage the property must reach, and the permanent lender that will refinance it. The fourth is waiting too long. Agency execution needs months, and owners who start late lose the option and end up negotiating extensions. I cover that timeline in more depth in my guide to refinancing a maturing apartment loan.

How we put the three options side by side for you

Send us the rent roll, trailing twelve months, current loan documents or purchase contract and your plan for the building. We size the deal under agency, bank and bridge structures at current market terms, show you the loan amount each one produces, the cash you would need to bring, and the recourse and prepayment terms you would live with. If you are buying rather than refinancing, my guide to down payments on Texas apartment buildings shows how the loan type changes the equity you need.

Then we take the deal to the lenders who fit and manage it through closing. Terrydale is based in Dallas, and our apartment experience runs from small buildings of eight units to properties of 500 units and more. You can submit the deal through Terrydale Live or schedule a call with me. Whichever loan you choose, plan for life after closing too; I explain the reporting and covenants in what a lender expects after the loan closes.

Questions people ask me