HUD 221(d)(4) Loans

AMI: Area Median Income in Relation to HUD 221(d)(4) Loans

AMI: Area Median Income in Relation to HUD 221(d)(4) Loans

Area Median Income, or AMI, is a statistic published by HUD that estimates the median wealth of households in a specific area. AMI is used to determine qualification for a variety of housing programs, including Section 8 programs, as well as to determine eligibility for LIHTC credits. 

Market Rate vs. Affordable Properties in Relation to HUD 221(d)(4) Loans

Market Rate vs. Affordable Properties in Relation to HUD 221(d)(4) Loans

One of the biggest questions that developers need to ponder before starting a HUD 221(d)(4) financed project is whether to include any affordable housing. Since a developer's goal is (naturally) to maximize profit, the obvious answer would be no. However, there are a variety of advantages to including at least some affordable units in a HUD multifamily construction loan project. 

Section 8 Housing and HUD 221(d)(4) Loans

Section 8 Housing and HUD 221(d)(4) Loans

Section 8 is a U.S. government housing program managed by HUD that allows for the payment of rental assistance subsidies to landlords across the country. Right now, more than 4.8 million households use some form of Section 8 program assistance. For projects using HUD 221(d)(4)  financing, having Section 8 rental assistance units can have a variety of financial benefits. 

Escrows and Replacement Reserves for HUD 221(d)(4) Loans

Escrows and Replacement Reserves for HUD 221(d)(4) Loans

If you want to apply for a HUD multifamily loan, part of the HUD 221(d)(4) process involves making sure you have enough money saved in escrow-- i.e., in a third-party account, to cover a variety of expenses.

Large HUD 221(d)(4) Loans: What You Need to Know

Large HUD 221(d)(4) Loans: What You Need to Know

While we mentioned in the loan facts section of this website that the minimum HUD 221(d)(4) loan is $2 million, and there is no upper limit, the reality can be a little bit more complex. While there technically is no financial ceiling for the program, particularly large loans are typically subject to stricter requirements, especially those involving DSCR and LTC

HUD 221(d)(4) Loan Appraisals: What You Need to Know

HUD 221(d)(4) Loan Appraisals: What You Need to Know

One of the most important of the third-party reports required in the HUD 221(d)(4) application process is the appraisal, during which a qualified property appraiser will examine the development project to determine it's potential value, income, and profitability. This information has been taken directly from the HUD Multifamily Summary Appraisal Report

HUD Seismic Assessments: What You Need to Know

HUD Seismic Assessments: What You Need to Know

One of the parts of the HUD loan application and approval process is getting a HUD seismic assessment, which is needed if your HUD 221(d)(4) project is located in seismic zones 3 or 4. Seismic zones 3 and 4 (based on 1997 UBC seismic zone maps) are generally located in areas including all of California, large amounts of Alaska and Hawaii, some Oregon, Washington, and Nevada, and a small amount of Tennessee, Kentucky, Illinois, and Arkansas. 

MIP: Mortgage Insurance Premiums in Relation to HUD 221(d)(4) Loans

MIP: Mortgage Insurance Premiums in Relation to HUD 221(d)(4) Loans

Just like a borrower who takes out a private real estate loan has to pay private mortgage insurance (PMI), a developer who takes out an FHA multifamily construction loan has to pay a mortgage insurance premium (MIP). While the FHA doesn't make a profit on its loans, it still has to protect itself against unforeseen losses, such as a borrower defaulting on their mortgage. 

LTV: Loan-to-Value Ratio in Relation to HUD 221(d)(4) Loans

LTV: Loan-to-Value Ratio in Relation to HUD 221(d)(4) Loans

Loan-to-value ratio (or LTV) is an assessment of risk that lenders use to determine the viability of a loan. Loans with higher LTVs are considered riskier, and therefore often have higher interest rates. Lenders believe that borrowers who have loans with higher LTVs have a greater likelihood of defaulting on their mortgages because of the lack of equity within the property. However, a higher LTV allowance means that investors and developers can get a sizable loan with less cash down. 

BSPRA: Builder Sponsor Profit & Risk Allowance in Relation to HUD 221(d)(4) Loans

BSPRA: Builder Sponsor Profit & Risk Allowance in Relation to HUD 221(d)(4) Loans

BSPRA, or Builder Sponsor Profit & Risk Allowance, is an additional 10% FHA 221(d)(4) loan credit, sometimes referred to as "paper equity," that can be added to the calculated replacement cost of the property. Specifically, BSPRA is calculated by taking 10% of the "hard costs" of the project, which does not including the land, and adding that to the total development costs.

LTC: Loan-to-Cost Ratio in Relation to HUD 221(d)(4) Loans

LTC: Loan-to-Cost Ratio in Relation to HUD 221(d)(4) Loans

When looking at traditional, single-family residential loans, loan-to-value ratio (LTV) is often one of the most important factors to examine. However, when we look at HUD multifamily construction loans, like the HUD 221(d)(4) loan, and other similar types of financing, loan-to-cost ratio (LTC) also becomes an important factor.

Are HUD 221(d)(4) Loans Available for Age-Restricted Communities?

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. 

Can you get a rate commitment on a FHA/HUD 221(d)(4) Loan?

Can you get a rate commitment on a FHA/HUD 221(d)(4) Loan?

If you're a builder or developer interested in taking out a FHA/HUD 221(d)(4) loan to construct or rehabilitate a multifamily development, understanding what interest rate you might be paying is essential to your financial decision making process. After the preliminary underwriting on your loan is complete, a 30 to 180 day rate lock is available. However, it's subject to a 1% rate lock deposit payable which is refunded at closing.

What are the terms and amortization of HUD multifamily construction loans/financing loans?

What are the terms and amortization of HUD multifamily construction loans/financing loans?

During construction, HUD multifamily construction loans are fixed and interest only (for up to 36 months). This is followed by an additional 40 years of fully amortized, fixed-rate payments. Altogether, there is a maximum term of 43 years, including construction.