FHA/HUD 221(d)(4) Loans Guide
Long Term, Fixed-Rate, Non-Recourse Financing for Multifamily Construction and Rehabilitation
This website will show everything you need to know about Federal Housing Administration (FHA) multifamily construction financing insured by the US Department of Housing and Urban Development (HUD). Read, learn, reach out to us, ask questions and build market rate or affordable multifamily property with high leverage, non-recourse, fixed-rate, multifamily construction loans.
Major Benefits of the HUD 221(d(4) Loan
High loan-to-value ratio (LTV) allowance means that developers can get a larger loan with less money down. For the HUD 221(d)(4) program, market rate properties can qualify with 85% LTV, affordable properties with 87% LTV, and properties with 90% or more low-income units can qualify with a huge 90% LTV.
Non-recourse means that developers and investors do not have to sign a PG (personal guarantee) to take on the loan. So, if they default on their mortgage, the lender can’t try to repossess their personal property to repay the loan.
Fixed-rate loans guarantee greater financial stability for investors and developers. This is because the interest rate won't go up or down during the life of the loan. Plus, these HUD multifamily construction loans have a maximum term of 40 years (43 with construction). This makes them incredibly attractive to investors.
Flexible loan size, with a minimum of $2 million, and no maximum loan size. Most loans, however, are $15 million+.
Other HUD 221(d)(4) Benefits
LIHTC: These HUD multifamily loans can be used with the federal government's Low Income Housing Tax Credit (LIHTC) program for affordable properties. This can save developers and investors significant amounts of money by giving them a 10-year tax deduction (provided the property qualifies).
BSPRA: HUD multifamily construction loans allow the general contractor (GC) to turn their profit into equity, deferring it until later. This program, called Builder Sponsor Profit Risk Allowance (BSPRA), can reduce the amount of cash needed at closing.
No income limits: The FHA 221(d)(4) loan is often used to create housing for moderate-income families, the elderly, and handicapped residents who have been priced out of the rental apartment market. However, there are no income limits for the FHA's multifamily financing program.
Low MIP: FHA MIP for HUD 221(d)(4) loans is 0.65% for market rate properties, 0.45% for Section 8 or LIHTC properties, 0.70% Section 220 urban renewal projects. In addition, ultra-low 0.25% green MIP is available for Energy Star-approved energy efficient development projects.
Special Tools for Developers and Investors
Designed to empower developers, builders, and investors, this website explains the FHA's role in multifamily construction financing. It introduces key terms, addresses FAQs and pros and cons, outlines the application process for HUD 221(d)(4) loans, explains developer fees, reviews the HUD multifamily appraisal process, and provides an easy-to-understand loan application checklist.
More HUD 221(D)(4) Resources for Developers
In addition to the tools mentioned above, our site also provides:
Information on HUD multifamily statutory limits
A HUD 221(d)(4) refinance guide
Ultra-specific developer information, including:
Our site also offers risk-free consultations with highly-qualified HUD multifamily mortgage bankers. After reading our guide to HUD multifamily construction financing, reach out for a free quote and insight from our team of experts.
Learn More About HUD221(D)(4) Financing
FHA Multifamily financing doesn't need to be as complicated or tedious as it may have been in the past. Click the button below to speak with a HUD Multifamily construction lending specialist and get a free quote today.