What are the Interest Rates for HUD 223(f) Loans?
If you're considering taking out a HUD multifamily loan, like the HUD 223(f) loan , it's essential that you know the interest rate you'll be charged. Fortunately, low interest rates are one of the major benefits of HUD 223(f) loans , and, as of Nov. 2017, they average around 4.10% to 4.
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HUD 223(f) Loan Interest Rates: What You Need to Know
If you're considering taking out a HUD multifamily loan, like the HUD 223(f) loan, it's essential that you know the interest rate. Fortunately, low interest rates are one of the major benefits of HUD 223(f) loans. However, it is important for borrowers to remember that these loans do require borrowers to pay an annual MIP, or mortgage insurance premium.
Do Interest Rates Stay the Same if Another Borrower Assumes a HUD 223(f) Loan?
If a new borrower assumes a HUD 223(f) loan, the interest rate will stay the same for the rest of the loan term. This is a fantastic benefit for both the old borrower and the new one. The new borrower gets to enjoy the original interest rate (especially if rates have risen), while, for the old borrower, it's that much easier to find someone willing to assume the loan.
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What is the average interest rate for HUD 223(f) loans?
The average interest rate for HUD 223(f) loans is fixed for the life of the loan and includes a mortgage insurance premium (MIP). The MIP rate is 0.60% for market-rate properties, 0.45% for Section 8/LIHTC properties, and 0.25% for projects with Green MIP Reduction.
For more information, please see the following sources:
What are the current interest rates for HUD 223(f) loans?
The current interest rates for HUD 223(f) loans are fixed for the life of the loan and are determined by current rates and prevailing market conditions. The specific interest rate can be found here.
Are HUD 223(f) loans fixed-rate or adjustable-rate mortgages?
HUD 223(f) loans are always fixed-rate. This means that the interest rate remains the same throughout the entire life of the loan product. This reduces risk for borrowers and can help them make accurate financial projections for future years.
For more information, please visit www.hud223f.loans/glossary/fixed-rate-loans and www.hud223f.loans/hud-223f-faqs/are-hud-223f-loans-fixed-rate.
What are the benefits of a HUD 223(f) loan?
HUD 223(f) loans offer some of the best terms in the industry for the acquisition and refinancing of multifamily and apartment properties. These loans are non-recourse, offer high leverage, low interest rates, and lenient DSCR requirements.
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.
In addition, HUD 232/223(f) loans offer the following advantages:
- Low, fixed interest rates
- Loans are fully assumable (with FHA/HUD approval)
- HUD 232/223(f) loans are non-recourse, limiting risks for developers
What are the eligibility requirements for HUD 223(f) loans?
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.