Basic Facts About HUD 223(f) Financing
Used for purchasing or refinancing multifamily properties, the HUD 223(f) program “insures mortgage loans to facilitate the purchase or refinancing of existing multifamily rental housing." As is the case with other FHA-insured mortgages, the program (also known as FHA 223(f)) consists of HUD-backed, non-recourse, fully assumable mortgages that insure and protect lenders from borrower defaults.
Because they offer fixed interest rates, longer terms, and greater leverage, this program is ideal for anyone thinking of purchasing or refinancing a multifamily rental property. Below are some basic facts about FHA 223f loans:
The project’s original financing can be either FHA-insured or a conventional mortgage (or mortgages).
Non-profit and for profit borrowers may apply.
Can be used for affordable housing, cooperatives, and subsidized multifamily properties in any class of market rate property. They can also be used for rental assistance properties (tenant-based or project-based with a required 30-day minimum lease).
Eligible properties must have a minimum of 5 residential units, each with a complete kitchen and bath. There is also a three-year stabilization requirement - substantial renovations must have been completed at least three years prior to application for HUD 223f mortgage insurance.
Properties needing significant repairs or rehabilitation are excluded. Before a project can be eligible, all critical repairs must be completed before endorsement. Eligible properties should need no more than one major system to be replaced. However, some non-critical repairs are permitted after endorsement which must be completed with a year of closing.
Not every lender offers these types of mortgages, but only HUD-approved lenders.
There are no income-based restrictions for occupants of HUD 223(f) properties and no rent restrictions. The exception is any normal restrictions already in place for the property.