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Last updated on Feb 1, 2023
3 min read

HUD 241(a) Loans

HUD 241(a) loans provide non-recourse supplemental financing for existing HUD Multifamily borrowers. They can be used to make energy-efficient upgrades, purchase safety equipment, or expand current buildings.

In this article:
  1. Supplemental Financing for HUD-Insured Multifamily Properties
  2. HUD 241(a) Loan Terms in 2023
  3. Pros:
  4. Cons:
  5. Other HUD 241(a) Fees and Costs 
  6. Get Financing
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Supplemental Financing for HUD-Insured Multifamily Properties

If you currently own a property financed with a HUD multifamily loan, like a HUD 223(f) loan or a HUD 221(d)(4) loan, a HUD 241(a) loan can provide you extra funds to make your property more energy-efficient, purchase new safety equipment, or expand the footprint of one of the existing buildings on the property. Just like other HUD multifamily loans, HUD 241(a) loans are assumable (with FHA approval), are non-recourse, and have generous DSCR and leverage requirements.

At Commercial Real Estate Loans, we know that HUD multifamily loans are an effective way to build, renovate, and purchase multifamily properties. Sometimes, however, developers need additional funds for necessary property improvements. Fortunately, our highly-qualified mortgage bankers can assist you with every stage of the HUD 241(a) application, approval, and closing process.  

Keep reading below to learn more, or simply click here to download our easy-to-read HUD 241(a) loan term sheet.

HUD 241(a) Loan Terms in 2023

HUD 241(a) loans have terms including: 

  • Loan Size: The maximum loan size is the lesser of:

    • 90% of the value of a new construction project (for profits), or 95% (for non-profit entities)

    • The project's maximum insurable amount, as calculated by the FHA/HUD

    • 90% of the project's NOI (net operating income), including monthly payments for the original HUD multifamily loan

  • Loan Term: Must be the same as the original loan. If there are less than 25 years left on the original loan, the term can go up to 40 years (or up to 75% of the useful life of any new improvements that are financed with the loan)

  • DSCR: 1.11x minimum DSCR

  • Pros:

    • Generous DSCR requirements; loans allow for a minimum of 1.11x DSCR

    • Loans offer fixed interest rates

    • Loans are fully assumable with FHA approval

    • HUD 241(a) loans are non-recourse, which limits liability for investors and developers

    • Cons:

      • Mortgage insurance premiums (MIPs) are still required

      • An FHA application fee of 0.30% of the entire loan amount is required

      • An FHA inspection fee of 0.50% of the loan amount is also required

      • Developers are required to pay for a variety of third-party reports, including environmental assessments

      • Other HUD 241(a) Fees and Costs 

        As briefly mentioned in the previous section, one of the biggest costs of HUD 241(a) loans can often be the third party reports that are required, which usually include: 

        • Market studies

        • Environmental assessments

        • Seismic reports (in certain areas)

        • Full HUD/FHA appraisals

        • Architectural and engineering reports

        • In addition, HUD 241(a) loans typically require borrowers to pay financing/permanent placement fees at closing, which often come out to 3.5% of the loan amount. 

          Commercial Real Estate Loans is the partner you need to help acquire or refinance your next multifamily or commercial real estate project. Whether you're a small startup or an established company, we have the knowledge and experience to give you more financing options.

          Get a free quote by filling in the form below.

          In this article:
          1. Supplemental Financing for HUD-Insured Multifamily Properties
          2. HUD 241(a) Loan Terms in 2023
          3. Pros:
          4. Cons:
          5. Other HUD 241(a) Fees and Costs 
          6. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

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Commercial Real Estate Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

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