Assumability of HUD Multifamily Construction Loans
The Importance of Loan Assumability
When many investors and developers consider taking out a HUD multifamily construction loan, like the HUD 221(d)(4) loan, they want to know the potential turnaround time of the project. In other words, how long will they have to wait before making a profit? Selling a multifamily development is one of the best ways to cash out, but if there is still large a mortgage on the property, it can make it unattractive to potential buyers-- especially if interest rates are high and they don't have the cash to buy the property outright.
One of the biggest benefits of the FHA 221d4 loan is its assumability, which allows qualified buyers to simply take on the mortgage of the original owner with the same interest rate. That can be an attractive proposition, especially if the original owner locked in a rate lower than the current market average.
HUD Multifamily Construction Loans are Assumable, But a Fee is Required
For HUD multifamily construction loans, like the HUD/FHA221(d)(4) loan, a 0.05% fee of the original FHA-insured loan amount is required to assume the loan. First, however, the new borrower must be approved by the FHA. So, it's important to consult with an HUD loan specialist if you're attempting to sell or buy a multifamily property and have the future owner assume the current loan. That way, you can better understand the moving parts of the process and ascertain the feasibility of the loan assumption.