The requirements for an FHA/HUD 221(d)(4) loan include a full scope of third party reports (environmental assessment, market study, appraisal, etc.), annual review, a bonded and licensed general contractor, and compliance with Davis Bacon wage requirements.

In addition, borrowers must have a maximum LTV of 85% for market-rate properties, 87% for affordable properties, and 90% for properties with 90% or more low-income units. A bonded, licensed, and insured general contractor must also execute a GMP contract.

The types of commercial development eligible for an FHA/HUD 221(d)(4) loan are limited to 25% of the property’s net rentable area or 15% of the the property’s underwritten effective gross income (up to 30% of underwritten EGI permitted in urban renewal areas under Section 220). For example, if you had a ten story residential building, two stories might be commercial, and the rest residential. Learn more about HUD 221(d)(4) loan commercial limits.

The FHA/HUD 221(d)(4) loan offers many advantages for multifamily investors and developers. These loans provide the industry’s longest-term form of fixed-rate construction and substantial rehabilitation financing, with terms of up to 40 years (43 years with the 3-year construction period). Additionally, these loans are non-recourse, fully assumable, and offer high leverage.

In comparison to other financing options, FHA/HUD 221(d)(4) loans are more cost-effective and efficient. For example, it’s difficult for investors and developers to find financing that will cover both the construction and post-construction period for a multifamily property, all in one loan. In most cases, multifamily investors and developers will have to take out an expensive bank loan, which will only permit up to 75% LTC in most cases. After, they’ll need to refinance into a permanent loan, which will often come in the form of CMBS financing, Freddie Mac, Fannie Mae, or even a HUD multifamily refinancing loan, such as the HUD 223(f) loan. Having to deal multiple closings can be expensive, as appraisals, third-party reports, legal, and other costs will be repeated twice in the span of a year or two.

For more information on HUD multifamily loans, please fill out the form here and a HUD lending expert will get in touch.

The minimum loan amount for an FHA/HUD 221(d)(4) loan is $4 million, and there is no maximum loan amount.

The interest rates for an FHA/HUD 221(d)(4) loan are fixed throughout the life of the loan. This means that investors and developers using HUD loans can rest easy knowing that their interest rates won't suddenly rise. As a result, estimating annual profit margins is significantly easier. The interest rates for FHA 221(d)(4) loans are incredibly competitive. For more information, please visit this page.

The repayment period for an FHA/HUD 221(d)(4) loan is 43 years, including a maximum 36 months for construction and an additional 40 years of fully amortizing, fixed-rate payments. HUD 221(d)(4) Construction & Rehab Loans and HUD 221(d)(4) Loans.