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HUD Multifamily Loans

A quick guide introducing potential borrowers to the major HUD multifamily loan programs, including HUD 223(f), HUD 221(d)(4), and HUD 232 loans.

Table of contents

HUD Multifamily Financing Guide

While HUD 223(f) loans are a highly effective way to acquire or refinance multifamily properties, HUD also insures other multifamily loans for a variety of different purposes. In this easy-to-read guide, we’ll look at how HUD 223(f) financing compares to HUD’s other types of FHA multifamily financing.

HUD 223(f) Loans

HUD 223(f) loans offer terms including:

  • Loan Use: Acquisition or refinancing of multifamily properties with 5+ units

  • Loan Size: Minimum $1 million (exceptions may be made for smaller loans)

  • Leverage/LTV/DSCR:

    • Market-Rate Properties: 85% maximum LTV, 1.18x minimum DSCR

    • Affordable Properties: 87% LTV maximum LTV, 1.15x minimum DSCR

    • Subsidized Properties: 90% LTV maximum LTV, 1.11x minimum DSCR

  • Interest: Fixed-rate

  • Assumable: Fully assumable with FHA approval and a 0.05% fee

  • Prepayment: Typical 1-2 year lockout, followed by 8-1% declining prepayment penalty

  • Recourse: HUD 223(f) loans are non-recourse with standard bad boy carve-outs

Click here to download our easy-to-understand HUD 223(f) loan term sheet.

HUD 221(d)(4) Loans

HUD 221(d)(4) loans are HUD’s flagship loan product for the construction or substantial rehabilitation of multifamily properties. HUD 221(d)(4) loans have terms including:

  • Loan Use: Construction or substantial rehabilitation of multifamily properties with 5+ units

  • Loan Size: Minimum $2 million (average loan is usually around $15 million)

  • Leverage/LTV/DSCR:

  • Interest: Fixed-rate

  • Assumable: Fully assumable with FHA approval and a 0.05% fee

  • Prepayment: Typical 1-2 year lockout, followed by 8-1% declining prepayment penalty

  • Recourse: HUD 221(d)(4) loans are non-recourse with standard bad boy carve outs

Click here to download our easy-to-read HUD 221(d)(4) loan term sheet.

HUD 232 Loans

HUD 232 loans are specifically designed to finance healthcare facilities for seniors, including assisted living facilities and skilled nursing facilities. HUD 232 loans have terms including:

  • Loan Use: Construction or substantial rehabilitation of senior healthcare properties with 20+ units, including:

    • Assisted living facilities

    • Skilled nursing facilities

    • Intermediate care centers

    • Continuum of care facilities

    • Independent living units may be no more than 25% of all units

  • Loan Size: Minimum $2 million (average loan is usually around $15 million)

  • Leverage/LTV:

    • Skilled Nursing Facilities/Independent Living Units: 80% LTV (for profit), 85% LTV (non-profit) 

    • Assisted Living Facilities: 

      • New Construction: 75% LTV (for profit), 80% (non-profit) 

      • Purchase: 80% LTV (for profit), 85% LTV (non-profit) 

      • Substantial Rehabilitation: 80% LTV (for profit), 85% LTV (non-profit) 

        • Or, 90% of HUD eligible replacement costs (whichever is less)

        • For borrower owned properties, 100% of the existing mortgage debt or 90% of the “as is” market value of the property before rehabilitation (95% for non-profits)

        • For properties that will be bought and substantially rehabilitated, 85% of the purchase price of the property or 90% of the current market value of the property before rehabilitation (95% for non profits)

        • This applies to Skilled Nursing Facilities/Independent Living Units as well

  • DSCR: 1.45x minimum

  • Interest: Fixed-rate

  • Assumable: Fully assumable with FHA approval and a 0.05% fee

  • Prepayment: Typical 1-2 year lockout, followed by 8-1% declining prepayment penalty

  • Recourse: HUD 232 loans are non-recourse with standard bad boy carve outs

Click here to download our easy-to-read HUD 232 loan term sheet.

HUD 232/223(f) Loans

Like HUD 232 loans, HUD 232/223(f) are specifically designed to finance healthcare facilities for seniors, including assisted living facilities and skilled nursing facilities. HUD 232/223(f) loans have terms including:

  • Loan Use: Acquisition or refinancing of senior healthcare properties with 20+ units, including:

    • Assisted living facilities

    • Skilled nursing facilities

    • Intermediate care centers

    • Continuum of care facilities

    • Independent living units may be no more than 25% of all units

  • Loan Size: Minimum $2 million (average loan is usually around $15 million)

  • Leverage/LTV:

    • Purchase:

      • 85% of the acquisition price or appraised value, whichever is less(for-profits)

      • 90% of the acquisition price or appraised value, whichever is less (non-profits)

    • Refinance::

      • 100% of the cost to refinance or 85% of the appraised value, whichever is less (for-profits)

      • 100% of the cost to refinance or 90% of the appraised value (non-profits)

  • DSCR: 1.45x minimum

  • Interest: Fixed-rate

  • Assumable: Fully assumable with FHA approval and a 0.05% fee

  • Prepayment: Typical 1-2 year lockout, followed by 8-1% declining prepayment penalty

  • Recourse: HUD 232/223(f) loans are non-recourse with standard bad boy carve outs

Click here to download our easy-to-read HUD 232/223(f) loan term sheet.

HUD 223(a)(7) Refinancing

HUD 223(a)(7) refinancing is perhaps the easiest HUD multifamily loan to obtain. However, only properties that are already being financed with HUD multifamily loans are eligible. Unlike most other HUD loans, which require a full suite of third-party reports, HUD 223(a)(7) loans only require a PCNA (a project capital needs assessment). HUD 223(a)(7) refinancing terms include:

  • Loan Use: Refinancing loans for current HUD multifamily borrowers, including borrowers for:

    • HUD 223(f) loans

    • HUD 221(d)(4) loans

    • HUD 232 and HUD 232/223(f) are not eligible for traditional 223(a)(7) refinancing, but can use another variant of the loan, the HUD 232/223(a)(7) refinance

  • Leverage/DSCR: 1.11x (for-profits), 1.05x (non-profits)

    Interest: Fixed-rate

  • Assumable: Fully assumable with FHA approval and a 0.05% fee

  • Prepayment: Typical 1-2 year lockout, followed by 8-1% declining prepayment penalty

  • Recourse: HUD 223(a)(7) loans are non-recourse with standard bad boy carve outs

Click here to download our easy-to-read HUD 223(a)(7) loan term sheet.

HUD 241(a) Loans

HUD 241(a) loans are a form of supplemental financing intended specifically for use by current HUD multifamily borrowers (much like HUD 223(a)(7) refinances. HUD 241(a) loans have terms including:

  • Loan Use: Refinancing loans for current HUD multifamily borrowers, including borrowers for:

  • Loan Size:

    • Up to 90% value for new construction projects (for-profit entities), or 95% (for non-profits)

    • An amount that will not surpass the insurable amount of the project as specified by HUD

    • Up to 90% net operating income (NOI), including the original HUD multifamily mortgage payments

  • Leverage/DSCR: 1.11x (for-profits), 1.05x (non-profits)

  • Interest: Fixed-rate

  • Assumable: Fully assumable with FHA approval

  • Prepayment: Varies, common options include:

    • 5-year lockout with a 5-1% declining prepayment penalty

    • 2-year lockout with a 8-1% declining prepayment penalty

  • Recourse: HUD 241(a) loans are non-recourse with standard bad boy carveouts

Click here to download our easy-to-read HUD 241(a) loan term sheet.

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