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FHA 223(f) Terms, Qualification & Guidelines

Keep reading below to learn about FHA 223f loans, or click here to download our easy-to-understand HUD 223(f) loan term sheet.

Eligible Properties

Multifamily properties with at least 5 units including various classifications (market-rate, subsidized multifamily, low-to-moderate income, affordable housing properties, and cooperative housing) and various types (detached, semi-detached, walkup, row, and elevator-type).

Eligible Borrowers

Non-profit borrowers, for profit borrowers, or public owners are eligible for the HUD 223f program. These are typically single-asset entity (SAE) and bankruptcy-remote entities.

Commercial Space Limitation

HUD multifamily loans limit commercial space to the lesser of:

  • 20% of the property’s effective gross income OR

  • 25% of the property’s net rentable area

Leverage (Loan Amount or DSCR*)

HUD multifamily loans provide the following leverage. The loan amount is subject to the lesser of:

  • 85% LTV for Market Rate Properties

  • 87% LTV for Affordable Housing Properties

  • 90% LTV or the total debt that can be serviced by 90% of net operating income or more for Rental Assistance Properties

  • For purchases: 100% of mortgageable transaction costs, excluding grants, public loans, and tax credits


  • The greater value between 80% LTV or 100% of the total cost of refinancing the existing debt and other mortgageable transaction costs

Replacement Reserves


HUD guidelines require minimum replacement reserves of $250 per unit, per year. In addition, HUD requires an initial deposit at closing. This can be funded by mortgage proceeds.


With HUD multifamily financing, insurance and taxes are escrowed monthly.

MIP (Mortgage Insurance Premium)

HUD-required MIP is paid upfront and annually. HUD requires 1% of the total loan amount at closing as the first year’s MIP. For each year after, it is 0.60% annually. HUD allows an adjustment for affordable properties to 0.45%. Properties qualifying for a Green MIP Reduction are charged a reduced MIP of 0.25%. 

Term & Amortization

For up to 35 years, terms are fixed and fully amortizing. The terms cannot exceed 75% of the property’s remaining economic life.

Interest Rate

Throughout the life of the loan, interest rates are fixed. The specific interest rate is determined by current rates and prevailing market conditions.


HUD multifamily loans are non-recourse and subject to standard carve-outs.


Based on FHA approval along with a 0.05% fee of the original FHA loan amount, these loans are fully assumable.


There are no prepayment penalties if an FHA multifamily loan is assumed. Also, after 10 years, there are no prepayment penalties. However, there is usually a zero or one year lockout and a 10% to 1% declining prepayment penalty. Additional prepayment options are available.


Prior to application for HUD 223f loans, properties must have an average occupancy of 85% for the preceding six months. This occupancy rate must be maintained throughout the application process. For market rate properties, the maximum underwritten occupancy is 93%. For affordable properties this occupancy is 95%, and for rental assistance properties, it is 97%. 

Repairs and Improvements

Some repairs, maintenance, and improvements can be included in the loan (subject to leverage and DSCR limitations) for the greater of:

  • 15% of the property value OR

  • $6,500 per unit (adjusted for high-cost areas) OR

  • 20% of the mortgage proceeds can be included in the loan amount

However, these repairs cannot exceed $15,000 per unit (also adjusted for high-cost areas), and cannot replace more than 50% of a major building system (i.e. plumbing, electrical, building structure.)


FHA 223(f) loans applications can be submitted by both MAP and non-MAP lenders.

MAP Lenders vs Non-MAP Lenders


According to HUD, MAP (Multifamily Accelerated Processing) is designed to establish national standards for approved lenders to prepare, process and submit loan applications for Federal Housing Administration (FHA) multifamily mortgage insurance.

MAP Lenders - Applications that are eligible for Multifamily Accelerated Processing (MAP) are submitted through a MAP-approved lender. If approved, HUD issues a commitment to the lender.

Non-MAP Lenders - These applications must be processed by a HUD field office under Traditional Application Processing (TAP) which has two stages:

  • The conditional commitment stage during which the sponsor has a pre-application conference to determine the property’s appraised value and mortgage amount.

  • The firm commitment stage during which HUD determines the amount of the mortgage and issues a commitment to the lender.

For additional details on MAP, see HUD’s Guide to Multifamily Accelerated Processing.


In general, FHA 223(f) loans take between 100 and 150 days (4 to 5 months) to close. The actual time frame depends on specifics of each deal.

Synopsis Of Fees and Costs

  • Application fee - usually $25,000; covers due diligence and third-party reports like:

  • FHA application fee - 0.30% of the total loan amount

  • FHA inspection fee:

    • $30 per unit where repairs total over $100,000, but $3,000 or less per unit

    • If required repairs are greater than $3,000 per unit, the fee is the greater of:

      • $30 per unit OR

      • 1% of the cost of repairs

  • Finance and permanent placement fees - usually capped at 3.50% of the total loan amount. Paid from the mortgage proceeds.

  • Good-faith deposit (commitment and rate lock) - 1% of the total loan amount. Paid at commitment and refunded at closing.

  • Standard borrower closing costs - lender's legal fees, title fees, and other fees

Additional Hud Requirements and Items For Consideration

  • Loans greater than $75 million are subject to stricter DSCR constraints and more conservative leverage

  • HUD 223(f) multifamily financing can be used with LIHTCs (Low-Income Housing Tax Credits)

  • HUD 223(f) loans can be used for refinancing or purchasing Section 202, Section 236, and Section 8 funded properties  

  • A PCNA (Project Capital Needs Assessment) must be completed every 10 years

  • Davis-Bacon prevailing wage rules are not applicable to repairs

The preceding is a thorough synopsis of the HUD 223(f) program. Throughout the remainder of this guide, you’ll find more extensive details on HUD 223(f) multifamily loans. To learn even more about the basics of submitting a file for consideration, visit the Apply Page of our website.