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HUD 221(d)(4) Frequently Asked Questions
2 min read

Developer Fees for HUD 221(d)(4) Loans

When it comes to developer fees for HUD 221(d)(4) projects, eligibility can vary significantly from project to project. Affordable developments, as well as those using the LIHTC program, can often qualify for a developer fee. Typically, these developer fees can be anywhere between 10 and 15% of the eligible project costs.

In this article:
  1. HUD 221(d)(4) Developer Fees
  2. Developer's Fees for Rental Assistance Demonstration (RAD) Conversion Projects 
  3. Developer's Fees for Market Rate HUD 221(d)(4) Projects 
  4. To learn more about how FHA 221(d)(4) financing can work for your HUD multifamily development project, fill out the form below and a HUD loan advisor will get in touch. 
  5. Related Questions
  6. Get Financing
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HUD 221(d)(4) Developer Fees

When it comes to developer fees for HUD 221(d)(4) projects, eligibility can vary significantly from project to project. Affordable developments, as well as those using the LIHTC program, can often qualify for a developer fee. Typically, these developer fees can be anywhere between 10% to 15% of the eligible project costs, or $12,000- $15,000 per unit. However, this varies upon the authority issuing the tax credit. Developer's fees are more commonly available to non-for-profit borrowers, though this can also vary. Because of this, it's essential to consult a HUD loan expert to learn more. 

Developer's Fees for Rental Assistance Demonstration (RAD) Conversion Projects 

Developers interested in Rental Assistance Demonstration (RAD) conversion projects, which convert older, housing subsidy/voucher projects into more modernized, updated housing, can qualify for:

  • A 10% developer's fee with tax credits

  • An an up to 15% developer's fee without tax credits

  • HUD issued approximately $5 billion in loans for RAD conversion projects last year, making this an incredibly popular option for developers and investors. 

    Developer's Fees for Market Rate HUD 221(d)(4) Projects 

    Technically, there are no developer fees for market-rate HUD loan projects. However, developers can use BSPRA in order to cut the amount of equity needed for the project (and to reduce cash at closing.) BSPRA can be calculated as 10% of the project's "hard costs" (usually counting direct construction costs, but not counting land).

    To learn more about how FHA 221(d)(4) financing can work for your HUD multifamily development project, fill out the form below and a HUD loan advisor will get in touch. 

    Related Questions

    What are the typical developer fees associated with HUD 221(d)(4) loans?

    When it comes to developer fees for HUD 221(d)(4) projects, eligibility can vary significantly from project to project. Typically, these developer fees can be anywhere between 10% to 15% of the eligible project costs, or $12,000- $15,000 per unit. However, this varies upon the authority issuing the tax credit. Developer's fees are more commonly available to non-for-profit borrowers, though this can also vary. Because of this, it's essential to consult a HUD loan expert to learn more.

    Source: https://www.hud.loans/hud-221-d4-faqs/developer-fees-for-hud-221d4-loans

    In addition to developer fees, other fees associated with HUD 221(d)(4) loans include:

    Fee Description
    $25,000 application fee Covers lender’s due diligence and third-party reports: Appraisal, Phase 1 environmental, construction cost review, market study, plans and specs review
    0.50% FHA inspection fee Paid from mortgage proceeds
    0.30% FHA exam fee Paid in two payments - 0.15% at pre-application, 0.15% at application
    Financing and placement fees Usually capped at 3.50% of the loan amount. Paid from mortgage proceeds at closing
    Good-faith deposit Between 0.50% and 1% of loan amount. Paid at commitment, refunded at closing
    Standard borrower closing costs Such as lender's legal, title, and others

    Source: https://www.hud.loans/fha-221d4

    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 advantages of HUD 221(d)(4) loans for developers?

    The HUD 221(d)(4) loan program offers developers several advantages, including long terms up to 43 years (with 3-year, interest only construction period), low interest rates, loans that are assumable (with FHA/HUD approval), and non-recourse loans. Source 1 and Source 2.

    What are the maximum loan amounts for HUD 221(d)(4) loans?

    The maximum loan amount for HUD 221(d)(4) loans is not limited. According to HUD 221(d)(4) Loans: What You Need to Know, there is no financial ceiling for the program. Additionally, according to HUD 221(d)(4) Loans, the minimum loan amount is $4 million, but exceptions are made on a case-by-case basis. Generally, most 221(d)(4) construction loans are $10 million and above. There is no maximum loan amount.

    What are the typical interest rates for HUD 221(d)(4) loans?

    Interest rates for HUD 221(d)(4) loans are fixed throughout the life of the loan (both construction and permanent stages) and determined at commitment by prevailing market conditions. 30 to 80-day rate lock commitments are available. 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. Source

    What are the typical repayment terms for HUD 221(d)(4) loans?

    HUD 221(d)(4) loans have a maximum term of 43 years, which includes a maximum 36 months for construction and an additional 40 years of fully amortizing, fixed-rate payments. The loan size is typically $2 million or more, with leverage of 85% Loan-to-Value (LTV) for market rate, 87% for affordable, and 90% for rental assisted properties. Interest rates are fixed and the loans are non-recourse with standard bad-boy carve-outs. Mortgage Insurance Premium (MIP) is 0.65% for market rate, 0.45% for Section 8/LIHTC properties, and 0.25% for projects with Green MIP Reduction. HUD Multifamily Loans and HUD 221(d)(4) Construction & Rehab Loans provide more information.

    In this article:
    1. HUD 221(d)(4) Developer Fees
    2. Developer's Fees for Rental Assistance Demonstration (RAD) Conversion Projects 
    3. Developer's Fees for Market Rate HUD 221(d)(4) Projects 
    4. To learn more about how FHA 221(d)(4) financing can work for your HUD multifamily development project, fill out the form below and a HUD loan advisor will get in touch. 
    5. Related Questions
    6. Get Financing
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