Fixed-Rate Loans and the HUD 223(f) Loan Program
Fixed-rate loans are those loans with monthly payments at fixed interest rates . While FHA-insured mortgages for single family homes typically come in both fixed and adjustable-rate versions, FHA/HUD-insured multifamily loans, such as the HUD 223(f) loan , are always fixed-rate.
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Are HUD 223(f) Loans Fixed Rate?
Fixed-rate loans are those loans with monthly payments at fixed interest rates. While FHA-insured mortgages for single family homes typically come in both fixed and adjustable-rate versions, FHA/HUD-insured multifamily loans, such as the HUD 223(f) loan, are always fixed-rate. This reduces risk for borrowers and can help them make accurate financial projections for future years.
TO LEARN MORE ABOUT FHA 223F LOANS, FILL OUT THE FORM BELOW AND A HUD LENDING EXPERT WILL GET IN TOUCH.
Related Questions
What is a fixed-rate loan?
A fixed-rate loan is a mortgage loan with monthly payments set at fixed interest rates. This means that the loan will stay immune to fluctuations in the market, and borrowers can expect the same monthly payments during the life of the mortgage. The primary benefit of a fixed-rate loan is that borrowers can accurately predict monthly costs and future expenses, allowing them to budget accordingly.
Fixed-rate loans are the best financing option when interest rates are predicted to rise significantly, as the borrower is not exposed to sudden changes in the economy, and the monthly mortgage payments will stay the same. However, it should be noted that qualifying for fixed-rate loans during a high-interest-rate environment is more difficult, simply because the cost of borrowing money is higher.
What are the benefits of a fixed-rate loan?
The main benefit of a fixed-rate loan is that borrowers can accurately predict monthly costs and future expenses, allowing them to budget accordingly. Fixed-rate loans are the best financing option when interest rates are predicted to rise significantly, as the borrower is not exposed to sudden changes in the economy, and the monthly mortgage payments will stay the same.
The table below contains several current interest rate indexes. While all are more or less tied to the federal funds rate, be sure you understand what index your current or future loan is tied to.
Index Rate Prime Rate 3.25% LIBOR 2.25% Treasury Bill 1.50% What is the HUD 223(f) loan program?
The HUD 223(f) loan program is a loan program designed to finance the acquisition or refinancing of existing multifamily properties. Loan terms are typically far more favorable than conventional loans, with fully amortizing terms of up to 35 years. The HUD 223(f) loan program also allows for more flexible underwriting guidelines and lower mortgage insurance premium than other government-insured loan programs. These loans can be used for both market-rate and affordable housing properties, making it a great option for a wide range of investors.
The terms of HUD 223(f) loans are as follows:
Loan amount Terms Leverage Interest rates DSCR requirements $1 million, no set maximum Between 10 and 35 years Up to 85% LTV for market-rate properties, 87% LTV for affordable properties, 90% LTV for properties using rental assistance. Fixed for the life of the loan. Includes a mortgage insurance premium, or MIP. 1.18x for market-rate properties, 1.15x for affordable properties, and 1.11x for rental assistance properties. What are the eligibility requirements for the HUD 223(f) loan program?
Eligible Borrowers for HUD 223(f) Loans: If you're an investor or developer who wants to use a HUD 223(f) loan to acquire or refinance a multifamily property, you'll need to make sure you that your borrowing entity has the correct legal structure. In general, HUD 223(f) loans require that the borrower is a single asset, special purpose entity (SPE), which can either be a for profit or a non-profit entity.
Eligible Properties for HUD 223(f) Loans: HUD 223(f) Loans Permit Nearly All Property Types. In general, to be eligible for HUD 223(f) financing, a property:
- Must have 5+ residential units
- Must have complete kitchens and bathrooms for each unit
- Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
- Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
- Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
- Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
- Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
Additional Hud Requirements and Items For Consideration:
- Loans greater than $75 million are subject to stricter DSCR constraints and more conservative leverage
- HUD 223(f) multifamily financing can be used with LIHTCs (Low-Income Housing Tax Credits)
- HUD 223(f) loans can be used for refinancing or purchasing Section 202, Section 236, and Section 8 funded properties
- A PCNA (Project Capital Needs Assessment) must be completed every 10 years
- Davis-Bacon prevailing wage rules are not applicable to repairs
To learn even more about the basics of submitting a file for consideration, visit the Apply Page of our website.
What are the advantages of the HUD 223(f) loan program?
The HUD 223(f) loan program offers many advantages, including:
- Non-recourse financing
- High leverage, up to 85% LTV for market-rate properties, 87% LTV for affordable properties, and 90% LTV for properties using rental assistance
- Low interest rates, fixed for the life of the loan
- Lenient DSCR requirements, 1.18x for market-rate properties, 1.15x for affordable properties, and 1.11x for rental assistance properties
- Fully assumable loans (with FHA/HUD approval)
For more information, please visit https://hud223f.loans and https://www.multifamily.loans/hud-232-223f-loans.