HUD Multifamily Loan Options 

Each year, the U.S. Department of Housing and Urban Development (HUD), finances billions of dollars in multifamily and apartment loans. HUD multifamily loans are particularly attractive to investors and developers since they are non-recourse, and offer up to 40-year fixed rate terms with up to 90% leverage for some loan types. 

HUD 221(D)(4) Loans 

The HUD 221(d)(4) loan is HUD's flagship multifamily construction and property rehabilitation loan. It offers terms including: 

  • Loan Size: Minimum $2 million with no upper limit (some exceptions may be made for smaller loans) 
  • Loan Purpose: Loan can be used for new construction or substantial rehabilitation, which is defined as one of the follow: 
    • 15% of the property’s replacement cost after of all work is completed 
    • $6,500 per unit, as adjusted by the local HUD office (using local high-cost multipliers for specific areas) 
    • Replacing two or more building systems, regardless of cost
  • Loan Term: 40 year fixed-rate term (with up to 3 year, interest-only construction period) 
  • Leverage:  
    • Market Rate Properties: 85% LTV allowance
    • Affordable Properties: 87% LTV allowance
    • Low Income Properties: 90% LTV allowance (must have at least 90% low income units to qualify) 
  • Rate locks: Yes, both early and extended available 
  • Recourse: Non-recourse (standard carve-outs apply) 
  • DSCR:
    • Market Rate Properties: 1.20 DSCR 
    • Affordable Properties: 1.15 DSCR 
    • Project Based Rental Assistance Properties: 1.11 DSCR 
  • Prepayment PenaltyTypically negotiable, often a two year lockout, then step down premiums for a certain number of years

HUD 223(f) Loans 

In comparison to HUD 221(d)(4) loans, which are designed for construction or substantial rehabilitation, HUD 223(f) loans can be used for as-is acquisitions of multifamily properties. The HUD 223(f) program offers terms including: 

  • Loan Size: Minimum $1 million with no upper limit (some exceptions may be made for smaller loans) 
  • Loan Purpose: Loan can be used for acquisition or refinance 
  • Loan Term: 35 year fixed-rate term
  • Leverage:
    • Market Rate Properties: 83.3% Maximum LTV 
    • Subsidized Properties: 87% Maximum LTV 
  • DSCR:
    • Market Rate Properties: Minimum 1.17 DSCR 
    • Affordable Properties: Minimum 1.15 DSCR 
  • Assumability: Assumable (with lender approval) 
  • Recourse: Non-recourse (standard carve-outs apply) 
  • Prepayment Penalty: Typically negotiable, often a two year lockout, then step down premiums for a certain number of years 

HUd 232/223(f) Loans 

The HUD 232/223(f) loan was created to help developers acquire, renovate, or refinance (or some combination of those) existing healthcare properties, such as skilled nursing facilities. The HUD 232/223(f) loan offers terms including: 

  • Loan Term: 10- 35 year fixed-rate term
  • Loan Purpose: Loan can be used for acquisition, rehabilitation and/or refinance
  • Leverage:
    • For Profit Entities: 85% Maximum LTV for purchase, 85% Maximum LTV or 100% of refinancing cost (whichever is less) for refinancing 
    • Non-Profit Entities: 90% Maximum LTV for purchase, 90% Maximum LTV or 100% of refinancing cost (whichever is less) for refinancing 
  • DSCR: Minimum 1.45 DSCR 
  • Assumability: Assumable (with lender approval and 0.05% fee) 
  • Recourse: Non-recourse (standard carve-outs apply) 
  • Prepayment Penalty: Typically negotiable, often a two year lockout, then step down premiums for a certain number of years

HUD 223(a)(7) Refinancing 

For borrowers who already have a HUD multifamily loan, such as the HUD 221(d)(4) or HUD 223(f) loans mentioned above, the HUD 223(a)(7) refinancing program can help borrowers: 

  • Improve monthly cash flow 
  • Potentially reduce interest rates
  • Reduce a borrower's chance of default 

Unlike typical HUD multifamily loans, which require a significant amount of documentation, such as market studies, environmental assessments, appraisals, and architectural and engineering reports, a HUD 223(a)(7) refinance only requires one, a project capital needs assessment (PNCA). 

HUD Multifamily Cons

  • Require longer than many other loan types to be approved
  • May require significant documentation 
  • Investors/borrowers likely need one or more professional advisors to guide them through the entire process 

HUD MUltifamily Pros

  • Highly competitive, fixed-interest rate loans 
  • Non-recourse 
  • Long loan terms (35-40 years) 
  • Loans are fully assumable (subject to lender approval) 

Want to learn more about HUD multifamily loans? Fill out the form below and a HUD multifamily loan specialist will get in touch. 

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