Debt Service Coverage Ratio, or DSCR, is one of the most important metrics that lenders examine when determining whether to give a HUD 223f loan to a potential borrower. DSCR is designed to compare a property's annual cash flow and its annual debt service in order to assess the likelihood that a borrower will pay his or her debts on time, and avoid a mortgage default.
HUD 223f loans have a variety of advantages and disadvantages for investors and developers. While they allow great amount of leverage, have low interest rates, and are non-recourse, they can also require somewhat lengthy wait times and a significant amount of documentation. In this easy-to-read FAQ, we'll go over some more of the pros and cons of HUD 223(f) loans.
Before being approved for a HUD Multifamily loan, a borrower must have mortgage insurance. HUD-requires borrowers to pay MIP (Mortgage Insurance Premium) on FHA loans. This insurance policy is not to be confused with PIM (private mortgage insurance) which is required on some conventional mortgage loans.