How long does it take for an HUD 221(D)(4) application to be approved?
Just how long does it take to process an HUD 221(d)(4) loan? It depends on several factors, but you can typically expect a lengthy timeline of around a year.
The HUD 221(D)(4) Application Approval Timeline
Just how long does it take to process an HUD 221(d)(4) loan? That depends. For a MAP one-stage application, the process could take about 8 to 10 months. In contrast, for a MAP two-stage application, the process is more likely to take around 12 months or longer.
What is MAP?
MAP, or the Multifamily Accelerated Processing Guide, is a HUD loan processing guide intended to reduce the time it takes for a loan to get approved. To do this, the HUD created a more standardized system of documentation, and gave slightly more responsibility to designated MAP lenders.
One-Stage vs. Two-Stage MAP Applications
If you're considering getting an HUD 221(d)(4) loan for a new construction, it will pretty much always be a two-stage application. Faster, one-stage application processing is reserved for market-rate properties that will undergo rehabilitation, but won't undergo:
Major unit reconfiguration
Tenant displacement (except for short durations)
Reduction in current occupancy
Negative cash flow
How does the HUD 221(d)(4) loan process work?
The HUD 221(d)(4) loan process typically follows a two-step process for market rate properties: first the pre-application, then the firm application. Affordable and rental assistance properties may use MAP one-stage processing. For more information, please consult our loan facts, checklist, developer requirements and fees guide, and our typical loan timetable.
What are the eligibility requirements for an HUD 221(d)(4) loan?
The eligibility requirements for an HUD 221(d)(4) loan include having a maximum Loan-to-Value (LTV) ratio of:
- 85% for market-rate properties
- 87% for affordable properties
- 90% for properties with 90% or more low-income units
In addition, borrowers must have a bonded, licensed, and insured general contractor execute a GMP contract and must be in compliance with Davis Bacon wage requirements.
What documents are required for an HUD 221(d)(4) loan application?
For a market rate property, the HUD 221(d)(4) loan application requires a two-step process. The first step is the pre-application, which requires a full scope of third party reports, such as an environmental assessment, market study, and appraisal. The second step is the firm application. For affordable and rental assistance properties, the process may use MAP one-stage processing. Additionally, the loan must undergo an annual review, and the general contractor must be bonded and licensed, and in compliance with Davis Bacon wage requirements.
What are the advantages of an HUD 221(d)(4) loan?
The HUD 221(d)(4) loan program offers several advantages for borrowers, including:
- A 40-year loan term (+3 years construction, for a 43-year total)
- Competitive, fixed interest rates
- Non-recourse
- High LTV allowance (up to 90% for properties with significant rental assistance)
What are the disadvantages of an HUD 221(d)(4) loan?
The disadvantages of an HUD 221(d)(4) loan include a somewhat lengthy application and approval process (46 weeks on average), a lot of paperwork and documentation, expensive approval fees, and a 40-year term (43-year including construction).
For more information, please see this page.
What is the maximum loan amount for an HUD 221(d)(4) loan?
The maximum loan amount for an HUD 221(d)(4) loan is not limited. According to Apartment Loans, there is no maximum loan amount for 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.
MAP one-stage processing is also available for properties that are affordable or rental-assisted.