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

MIP and HUD Multifamily Construction Loans 

Just as 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 borrowers defaulting on their mortgages. 

FHA MIP for Multifamily Loans Declines Over Time 

For HUD multifamily financing, like the HUD 221(d)(4) program, MIP lasts for the life of the loan, and is set at a fixed rate. However, as a borrower pays off the principal balance of their loan, the amount of MIP they’re required to pay declines as well. 

FHA MIP Can Vary Based on Property Type 

Right now, the MIP rate for HUD 221(d)(4) loans is 0.65% for market rate properties, 0.45% for Section 8 or LIHTC (low-income housing tax credit) properties, and 0.70% for Section 220 urban renewal projects (those that aren't already Section 8 or LIHTC.) However, developer/owners who make their building energy efficient can qualify for a green MIP reduction, as long as they score high enough on Energy Star's Statement of Energy Design Intent (SEDI) assessment. 

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