FHA/HUD 223(f) Loans Guide

Long Term, Fixed-Rate, Non-Recourse Financing for Multifamily Acquisition and Refinancing

HUD 223(f) loans, which are insured by the FHA, provide the lowest-cost source of non-recourse, fixed-rate financing for the purchase or refinance of multifamily properties. Our expert HUD multifamily mortgage bankers can help you acquire HUD 223(f) financing for your project as quickly and easily as possible. As experienced capital markets advisors, we have the knowledge and expertise to guide you through each aspect of HUD’s low interest, high-leverage, 35-year mortgages to acquire large multifamily properties at a low cost. 

Major Benefits of the HUD 223(f) Loan Program

With decades of experience in multifamily lending, we've seen the benefits of HUD 223(f) loans firsthand. Some of the most important benefits for borrowers include: 

  • Flexible Loan Amounts: HUD 223(f) loans have a minimum loan amount of $1 million. However, exceptions may be made on a individual basis.

  • Long Mortgage Terms: The maximum mortgage term must be the lessor of 35 years or 75% of the project’s estimated remaining economic life. In addition, the term must be long enough to allow a 10-year mortgage.

  • High Leverage: 85% LTV for market rate properties, 87% LTV for affordable properties, 90% LTV for properties using rental assistance

  • Low Interest Rates: As of January 2019, rates ranged from 4.10% to 4.75% (including MIP) for 35-year, fixed-rate, fully amortizing loans.

  • Lenient DSCR Requirements: 1.18x DSCR for market rate properties, 1.15x DSCR for affordable properties, and 1.11x DSCR for rental assistance properties. 

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.

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