HUD 223(f) loans for Section 202 projects have a maximum LTV allowance of 90%, and a minimum DSCR of 1.11x. Additional requirements include:

• Additional Hud Requirements
• 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.

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. When HUD 223(f) loans are used to acquire Section 202 properties, they are subject to the same LTV and DSCR parameters as properties using other rental assistance properties, such as Section 8. In practice, this means that HUD 223(f) loans for Section 202 projects have a maximum LTV allowance of 90%, and a minimum DSCR of 1.11x.

The risks associated with using HUD 223(f) loans to finance Section 202 properties include the potential for higher interest rates and balloon payments, as well as the potential for the loan to be non-recourse. Additionally, the loan may be subject to geographic restrictions, and the borrower may be required to meet certain financial capacity requirements.

Interest rates for HUD 223(f) loans are typically lower than other types of loans, but they can still be higher than other loan types. Additionally, the loan may include a balloon payment, which is a lump sum payment due at the end of the loan term. This can be a significant risk for borrowers, as they may not be able to afford the balloon payment.

HUD 223(f) loans are typically non-recourse, meaning that the lender cannot pursue the borrower for any deficiency if the loan is not repaid. However, there are certain exceptions to this rule, such as fraud or misrepresentation. Additionally, the loan may be subject to geographic restrictions, meaning that the loan may only be available in certain areas.

Finally, the borrower may be required to meet certain financial capacity requirements, such as a minimum debt service coverage ratio (DSCR) and loan-to-value (LTV) ratio. These requirements can be difficult to meet, and can increase the risk of the loan.

To be eligible for HUD 223(f) financing for Section 202 properties, the property must:

• Have 5+ residential units
• Have complete kitchens and bathrooms for each unit
• Be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
• Be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
• Be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
• Not be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
• Have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process

In addition, HUD 223(f) loans for Section 202 projects have a maximum LTV allowance of 90%, and a minimum DSCR of 1.11x.

For more information, please see the following sources:

• https://www.hud.gov/program_offices/housing/mfh/progdesc/eld202
• /hud-223f-faqs/department-of-housing-and-urban-development
• /loan-facts
• /hud-223f-faqs/ltv-loan-to-value
• /hud-223f-faqs/dscr-debt-service-coverage-ratio
• /hud-223f-faqs/hud-section-8
• /terms-qualifications-and-guidelines
• /hud-223f-faqs/market-rate-vs-affordable-properties
• /hud-223f-faqs/hud-223f-rehabilitation-limits
• /hud-223f-faqs/senior-housing

The advantages of using HUD 223(f) loans to finance Section 202 properties compared to other financing options include:

• Borrowers are allowed some of the highest LTV (loan-to-value) ratios available:
  • 85% - market-rate properties (the maximum for these type of properties)
  • 87% - affordable housing
  • 90% - project-based rental assistance properties (i.e. Section 8, Section 202)
• Debt service coverage ratio (DSCR) set at generous minimums of:
  • 1.18x - market-rate properties
  • 1.15x - affordable housing
  • 1.11x - rental assistance or subsidized housing properties
• Low, fixed-rate loans based on GNMA securities for up to 35 years. These low rates eliminate the risk of refinancing at a higher interest rate. Plus, borrowers won’t have to fear hefty balloon payments.
• Longer amortization periods (35 years versus 30 years) offer lower monthly payments than other loans, freeing up more capital for property owners.
• Loans are non-recourse and fully assumable.
• No geographic restrictions - These loans are available for multifamily properties in all 50 states in the U.S. and several U.S. territories.
• Funds are available for repairs and improvements.
• Supplemental financing is available.
• No financial capacity requirements.
• No population requirements.