Underwriting and the HUD 221(d)(4) Loan Program
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. To recap, DSCR requirements for HUD 221(d)(4) loans are 1.20x for market-rate properties, 1.15x for affordable housing properties, and 1.11x for rental assistance properties. Since HUD multifamily loans are completely asset based, the property itself is typically considered sufficient collateral for the loan.
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