A HUD mortgage insurance premium, or MIP, is paid annually, beginning at closing for each year of construction and then annually.
Underwriting is the process through which a lender determines if a borrower meets certain parameters. Underwriters mainly look at three C’s - credit, capacity and collateral. When it comes to HUD 221(d)(4) loans, potential borrowers must have excellent credit, as defined by their personal and business credit scores, as well as have a good borrowing capacity, as defined by their property’s DSCR.
As defined by HUD, substantial rehabilitation of HUD-assisted multifamily rental housing occurs when either the required repairs, replacements, and improvements involve the replacement of two or more major building components, or, when the cost of the repairs exceeds certain other thresholds.
Subsidized affordable housing is housing where residents receive rent assistance, but must pay at least 30% of their income for their rent and utilities. Examples include Section 8 Public Housing, Homeless Project-Based Units and HOPWA Facility-Based Housing.
Sponsor’s Profit and Risk Allowance, or SPRA, is no more than 10% of the total estimated cost of: architect's fees, carrying and financing charges, legal, organizational, and audit expenses. In contrast to Builder-Sponsor’s Profit and Risk Allowance (BSPRA), SPRA is used when there is no identity of interest between the mortgagor and general contractor.
Housing consisting of single room dwelling units that are the occupants’ primary residences. HUD requires new construction, conversion of non-residential space and reconstruction SRO units to have either food preparation areas or bathrooms (or both).