What are the Requirements for HUD 223(f) Loans?
While they have a variety of benefits, HUD 223(f) loans do have some requirements, which include:
Property Age and Condition: An eligible property must be at least three years old. For substantially rehabilitated properties, the work must have been completed at least three years prior. Standard, non-substantial repairs are allowed.
Replacement Reserves: Must be funded monthly. For older properties, initial funding of replacement reserves could be as much as $1,000 per unit.
Audits: Annual operational audits are required.
With $2.8 Billion of Loans Closed in 2017, the HUD 223(f) Program is Exploding In Popularity
While HUD's FHA 223(f) mortgage program has become more popular in the past decade, it's still misunderstood. Many market-rate multifamily owners and operators still believe that FHA 223(f) loans are only designed for nonprofits, low-income housing, or affordable housing projects. As a result, they've missed out on one of the housing industry's most affordable and highest-leverage financing options.
The program offers long-term financing at low interest rates with longer amortizations than Fannie Mae®, Freddie Mac® or CMBS loans. Although they do take longer to originate (average origination times are four months from application to closing), the benefits often outweigh the waiting time. On average, that's only 60 days longer than the average closing for a Freddie Mac multifamily loan or a Fannie Mae DUS multifamily mortgage.
This website offers a review of the HUD 223(f) loan program, which is designed for existing multifamily rental properties. We introduce key terms, address FAQs, and outline the application and approval process. If you have additional questions, please don’t hesitate to contact us today.