How the Federal Housing Administration (FHA) Works
The Federal Housing Administration (FHA), founded in 1934, is a U.S. government agency under the U.S. Department of Housing and Urban Development (HUD). The main purpose of the FHA is to insure residential real estate loans. While many of the FHA's loans focus on individual homebuyers, the FHA's role in multifamily financing is also important— as it provides financing for multifamily builders and developers through its FHA 221(d)(4) loan program,
Overall, FHA loans have many benefits for both individual home purchasers and multifamily developers. These loans generally require smaller down payments, have more competitive interest rates, and have fewer fees than similarly-sized privately insured mortgage loans.
The FHA Insures Multifamily Loans for a Variety of Purposes
While the HUD 221(d)(4) is one of the most popular FHA multifamily construction loans, it's far from the only type of loan that the FHA insures. For example, the HUD 223(a)(7) program insures refinancing on existing debt on HUD multifamily and assisted living properties in order to improve the property's cash flow and reduce the risk of a potential default. And, the HUD 223(f) loan program insures mortgage loans for the purchase or refinance of existing multifamily developments.
In addition, while it may not technically be "multifamily", the HUD 232 loan program is designed to insure loans for the construction or rehabilitation of assisted-living, senior, or skilled-nursing facilities.