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Multifamily Construction or Substantial Rehab Loans

FHA/HUD Section 221 (D)(4)

  • 2.75% to 4.5% single fixed rate for interest only construction loan and 40 year fully amortizing permanent loan
  • Eligible properties: Market rate, low to moderate income and subsidized multifamily properties 
  • $3 to 100 Million+
  • Nationwide
  • Commercial space limited to 25% of net rentable area & 15% of gross income (30% underwritten EGI in urban renewal areas under Section 220)
  • Term & amortization: interest only construction loan for actual construction period + 2 months for cost certification then 40 years fully amortizing
  • No upfront fees. We are paid when your loan is funded at closing.
  • High LTC: Subsidized: 90% LTC with 1.11X debt service coverage; Affordable: 87% LTC with 1.15X debt service coverage; Market Rate: 85% LTC with 1.18X debt service coverage; Subsidized and Affordable: 80% LTC with 1.25 debt service coverage 
  • Minimimum Scope of Work:All construction of new buildings plus renovation of existing buildings that meet one of the following conditions:
    a) Renovation costs total more than $15,000 per unit times a local cost factor (typically 190%-270%)
    b) Renovation will replace more than 50% of two or more building systems: electrical, plumbing, mechanical, building envelope, structural.
  • 0.5% rate lock deposit refunded at closing
  • Non-recourse
  • Low fees and points
  • Prepayment and assumption: negotiable with best pricing for 10 years of call protection (can be a combination of lock out and/or penalty; loan is fully assumable subject to HUD approval
  • 660+ Credit
  • Strong borrower/sponsor: experience owning & building similar properties in last 5 years, liquidity, net worth and financials required
  • Must close tile in single asset, special purpose entity
  • Davis Bacon wages required by HUD and determined by Department of Labor
  • Escrows: (1) prior to construction, reserves for interest, taxes, insurance, working capital (2 to 4% of loan) and initial operating deficit; balances released to borrower 6 months after 6 consecutive months of break-even operations; (2) Post construction: taxes, insurance and mortgage insurance premium escrowed monthly and a capital needs reserve maintained with monthly deposits in accordance with HUD guidelines
  • Mortgage insurance premium: 0.65% (0.70% for urban renewal projects under section 220; 0.25% to 0.35% for affordable and subsidized properties; 0.25% for Energy Star-certified properties;amount due during construction term paid at closing).
  • HUD application fee: 0.15% of estimated loan amount due with submission of initial application; plus 0.15% due with final application (entire 0.30% due with final application for affordable and subsidized properties). Application fees are lower for properties in opportunity zones.
  • Third party reports: appraisal, market study, environmental & future Capital Needs Assessment plus a review of final construction and architectural docs by HUD approved 3rd party contractor.
  • Timeline: 12+ months from due dilligence to closing

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