Are HUD 221(d)(4) Loans Available for Age-Restricted Communities?
If you're considering getting an FHA multifamily construction loan to build an age-restricted or senior community, it's important to understand what this type of loan does and does not allow. First, let's define "senior community"-- in the eyes of FHA/HUD, that means any community for individuals 62 years and older.
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesHUD 221(d)(4) Loans for Age-Restricted Communities
If you're considering getting an FHA multifamily construction loan to build an age-restricted or senior community, it's important to understand what this type of loan does and does not allow. First, let's define "senior community"in the eyes of FHA/HUD. According to HUD, a senior community is any community for individuals 62 years and older.
HUD Multifamily Construction Loans Cannot Be Used for Assisted Living
The main limitation of HUD 221(d)(4) loans for senior living projects is that they must not be assisted living. This means that communal dining facilities are not allowed. So, for instance these loans do not fund traditional nursing homes. Instead, they only fund "independent living facilities," where seniors live independently in apartments, generally without any supervision from the project itself. A meal service may or may not be offered, or, it may be offered by an independently contracted company.
Instead of using the 221(d)(4) loan, some developers decide to use the Section 231 program to help fund senior developments. However, this program has become much less popular in recent years in favor of FHA 221(d)(4) financing.
To learn more about HUD 221(d)(4) loans for senior communities, fill out the form below and a HUD loan advisor will get in touch.
Related Questions
Are HUD 221(d)(4) loans available for age-restricted communities?
Yes, HUD 221(d)(4) loans are available for age-restricted communities. However, these loans must not be used for assisted living. This means that communal dining facilities are not allowed. Instead, these loans only fund "independent living facilities," where seniors live independently in apartments, generally without any supervision from the project itself. A meal service may or may not be offered, or, it may be offered by an independently contracted company.
Instead of using the 221(d)(4) loan, some developers decide to use the Section 231 program to help fund senior developments. However, this program has become much less popular in recent years in favor of FHA 221(d)(4) financing.
What are the eligibility requirements for HUD 221(d)(4) loans?
The eligibility requirements for HUD 221(d)(4) loans include a maximum Loan-to-Value (LTV) ratio of 85% for market-rate properties, 87% for affordable properties, and 90% for properties with 90% or more low-income units. Additionally, a bonded, licensed, and insured general contractor must execute a GMP contract. The loan must also undergo an annual review and be in compliance with Davis Bacon wage requirements.
What are the benefits of HUD 221(d)(4) loans for age-restricted communities?
HUD 221(d)(4) loans offer a number of benefits for age-restricted communities. These include:
- Low interest rates: HUD 221(d)(4) loans offer some of the lowest interest rates available for multifamily construction loans.
- Long-term financing: HUD 221(d)(4) loans offer up to 40-year terms, allowing developers to spread out their payments over a longer period of time.
- Flexible repayment terms: HUD 221(d)(4) loans offer flexible repayment terms, allowing developers to choose the repayment schedule that best fits their needs.
- No prepayment penalty: HUD 221(d)(4) loans do not have a prepayment penalty, allowing developers to pay off their loan early without incurring additional costs.
For more information on HUD 221(d)(4) loans, please visit our FAQ page.
What types of projects are eligible for HUD 221(d)(4) loans?
HUD/FHA 221(d)(4) loans are eligible for the construction or substantial rehabilitation of multifamily rental or cooperative housing for moderate-income families, elderly, and the handicapped. These projects must have at least five residential units and can include mixed-use projects with commercial space. Source
Eligible projects for HUD 221(d)(4) loans include new construction, substantial rehabilitation, and moderate rehabilitation of multifamily rental or cooperative housing. Source
How long does it take to get approved for a HUD 221(d)(4) loan?
The HUD 221(d)(4) loan process, from initial concept to final close, takes around 46 weeks on average. For a MAP one-stage application, the process will take about 5-7 months. For a MAP two-stage application, the process is more likely to take around 8-10 months. For more information, please refer to this page and this page.
What are the interest rates for HUD 221(d)(4) loans?
HUD/FHA 221(d)(4) Loan Interest Rates: HUD/FHA 221(d)(4) Loans Have Fixed Interest Rates Throughout the life of HUD multifamily construction loans (both construction and permanent stages), interest rates remain fixed. That means that investors and developers using HUD loans can rest easy knowing that their interest rates won't suddenly rise. An early rate lock feature is available, allowing the borrower to lock the rate after preliminary underwriting. There is a 1% rate lock deposit payable at the time of rate lock, to be refunded at closing. 30 to 80-day rate lock commitments are available.