FHA mortgage insurance premiums, or MIPs, are one of the most important expenses that HUD 223(f) borrowers need to factor into their budget. For most HUD 223(f) borrowers, annual MIP is 0.60% of the loan amount for conventional properties, while affordable properties receive an reduced MIP of 0.45%. However, with HUD's Green MIP Reduction program, borrowers can get a discounted 0.25% annual MIP, as long as they make energy-efficient improvements to their development.
If you're a multifamily investor interested in purchasing or refinancing a property with a HUD 223(f) loan, you might be wondering if you're allowed to rent some of your space to commercial tenants-- and the answer is yes. HUD 223(f) loans allow for commercial development, albeit with somewhat strict limits: commercial tenants are restricted to using 25% of net rentable area and must not generate more than 20% of the project's effective gross income.
Fortunately for borrowers, HUD 223(f) loans are fully assumable with lender approval and a 0.05% fee. In order to approve the loan for assumption, the FHA has to examine the new borrower's financial credentials to ensure that they have the financial strength to pay back the loan. To do so, they'll have to perform due diligence, which is why they charge a small fee of 0.05% of the original loan amount in order for the loan to be assumed by the new borrower.