Property Information

• The name of the project

• The property address or location

• A loan request

• Brief narrative describing the project

• Details of commercial spaces (if any)

• An estimate construction timeline through stabilization

• The purchase price of the existing property and the settlement date (if property has not yet been purchased)

• Photos

• Any completed third party reports such as market studies, HUD appraisals, environmental assessments, etc.

• The value of the site (if different from the purchase price)

• Offering memorandum (for purchases only, if available)

• Breakdown of types of units

• As-is value (for rehabilitations only)

Financial Information

• A pro forma through a year (12 months) of stabilization

• Both hard and soft construction costs

• A Section 8 contract (if applicable)

• Planned repairs for the next year (12 months)

Sponsorship



• Borrower’s name/ entity name

• Management company name and relevant experience

• The names and experience of major principals

• Schedule of real estate owned (major principals)

There are also additional HUD requirements and other items for consideration:

• An initial operating deficit account to cover operating shortfalls prior to stabilization.Typically, equal to

  • the greater of underwriter's estimate or an appraiser's, OR

  • 4 months of debt service (garden apartments), OR

  • 6 months of debt service (elevator buildings).

• HUD requires a 4% working capital deposit on all new construction projects (4% of the loan amount). For substantial rehabilitation, HUD requires 2% of the loan amount. This amount could be either cash or a letter of credit.

• After either 12 months from final endorsement or six months of break-even occupancy (whichever is later), unused working capital and initial operating deficit escrows are released.

• Projected stabilization must be achieved within 18 months of receiving the property’s certificate of occupancy.

• A qualified ‘arms-length’ supervisory architect must be retained by the borrower during construction.

• Upon construction completion, a cost certification for both the general contractor and owner are required.

• The general contractor must:

  • execute a GMP contract

  • provide a 100% performance and payment bond (either cash escrow or a letter of credit is acceptable)

  • have a liquidity position equal to a minimum of 5% of the project’s construction contract as well as all unfinished construction work.

• Loans greater than $40 million could be subject to more conservative DSRC and leverage requirements.

A maximum 93% underwritten occupancy for market rate properties and 95% for 90% rental assistance properties.

TO LEARN MORE ABOUT FHA 221(D)(4) MULTIFAMILY LOAN OPTIONS, FILL OUT THE FORM BELOW AND A HUD LOAN EXPERT WILL GET IN TOUCH.
In this article:
1. HUD 221(d)(4) General Contractor Requirements
2. Property Information
3. Financial Information
4. Sponsorship
5. There are also additional HUD requirements and other items for consideration:
6. Get Financing