HUD 223(f) loans have terms including:

• Loan Amount: Minimum loan amount of $1 million (exceptions can be made on a case by case basis)
• Loan Term: Minimum loan term of 10 years, and a maximum term of 35 years (or 75% of the property's remaining economic life)
• Leverage:
  • Market rate properties: 83.3% LTV
  • Affordable properties: 85% LTV
  • Rental assistance properties: 87% LTV, 90% LTV for properties with 90% or more rental assistance
• Interest Rates: Fixed, terms range from 4.10% to 4.75% (including MIP), as of Jan. 2019
• DSCR:
  • Market rate properties: 1.17x minimum DSCR
  • Affordable properties: 1.15x minimum DSCR
  • Rental assistance properties: 1.11x minimum DSCR
• MIP: 1% upfront mortgage insurance premium for all property types, then, annual MIP of:
  • 0.65% for market rate properties
  • 0.45% for affordable properties (typically must be Section 8 or new money LIHTC projects to qualify)
  • 0.25% for Energy Star SEDI (Statement of Design Intent) certified properties
• FHA Application Fee: 0.30% of the total loan amount
• Cash Out: For 223f refinances, cash out is allowed under specific conditions. LTV must be at least 80% (including transaction costs in the loan amount). At that point, 50% of funds above 80% adjusted LTV are released, with the remaining 50% to be released after property rehab is complete.
• Repair Limitations: While the 223(f) program is not intended for substantial rehabilitation, loan funds may be used for repairs of up to $6,500/unit (more in high-cost areas), or 15% of the property value, or 20% of the mortgage. If the second or third calculation is used, repairs are limited to $15,000/unit (more in high-cost areas). No more than half of any essential structural component (e.g. roofing, HVAC) may be replaced.

In addition, properties being acquired or refinanced with a HUD 223(f) loan must:

• Be at least three years old (for new properties), or have had the last substantial renovation three years ago or more

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

Yes, HUD 223(f) loans can be used for student housing under certain conditions. Properties financed with HUD 223(f) loans cannot take in more than one source of rent from a single unit, and rental rates must be comparable to other non-student apartment housing in the area. Borrowers may use traditional 221(d)(4) and 223(f) loans for eligible student housing properties, albeit with certain restrictions.

Source: www.hud223f.loans/hud-223f-faqs/student-housing and apartment.loans/hud-fha-apartment-loans

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. Additionally, HUD 223(f) loans can finance student housing under certain conditions. Specifically, properties financed with HUD 223(f) loans cannot take in more than one source of rent from a single unit. In addition, student housing rents must be comparable to other multifamily properties in the area. In general, rents cannot be discounted just because the property is marketing units to students.

The advantages of using HUD 223(f) loans for student housing include:

• Low, fixed interest rates
• Loans are fully assumable (with FHA/HUD approval)
• Non-recourse, limiting risks for developers

The disadvantages of using HUD 223(f) loans for student housing include:

• Somewhat longer closing times than comparable loans (i.e. Freddie Mac® or Fannie Mae® multifamily loans)
• Can require a lot of documentation, including appraisals, market studies, and environmental reports
• Requires the payment of a mortgage insurance premium (MIP), as a one-time fee at closing and on a monthly basis
• Like most other HUD multifamily loans, HUD 223(f) loans require replacement reserves and annual operational audits
• Owner distributions are limited to 2x a year
• HUD is a government agency, which translates into more time to process loans, usually 100 to 120 days, but sometimes longer.
• A borrower's rate won't be locked until HUD gives a commitment. This may take 3-4 months, which can lead to some uncertainty.
• Additional HUD requirements include:
  • HUD property inspections
  • Annual audits (these often cost around $2,500)
  • Replacement reserve escrows (in addition to regular tax and insurance escrows)
• Restrictions include:
  • Cash out restrictions (including certain restrictions on cash out refinances)
  • Owner distribution restrictions (these are limited to 2x a year, once after the annual audit, and one time after a certification is signed by the borrower)
• HUD and FHA fees which increase the loan’s overall cost:
  • FHA inspection fees
  • Third-party reports
  • Title and recording fees
  • Financing fees
  • Legal fees