HUD 221(d)(4) loans are available for a variety of multifamily property configurations, including row homes, walkup apartments, detached, semi-detached, and elevator-type multifamily properties. This includes market rate and low-to-moderate income housing, subsidized affordable housing properties and multifamily, cooperative housing with a minimum of 5 units.

To qualify for HUD 221(d)(4) financing, a property must have 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, a bonded, licensed, and insured general contractor must execute a GMP contract and the property must undergo an annual review. The property must also be in compliance with Davis Bacon wage requirements.

Sources:

• HUD Multifamily Construction Financing
• HUD Multifamily Loan Guide

HUD 221(d)(4) financing is available for a broad spectrum of developments, including the construction or substantial rehabilitation of detached, semi-detached, walkup, row, and elevator-type multifamily properties. This includes market-rate, low-to-moderate income, and subsidized multifamily, cooperative housing, and affordable housing properties with at least five units. For more information, please see HUD 221(d)(4) Construction & Rehab Loans and What type of properties are eligible for construction or rehabilitation through HUD 221(d)(4)?

HUD 221(d)(4) loans offer an incredible opportunity for multifamily investors and developers to access 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), these loans are also non-recourse, fully assumable, and offer high leverage.

In general, it’s extremely 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. This is especially the case since Fannie Mae and Freddie Mac do not provide financing for the construction of multifamily properties, only for property rehab, acquisition, and refinancing (and certain combinations thereof).

In most cases, multifamily investors and developers will have to take out an more 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.

The benefits of HUD 221(d)(4) financing include:

• Long-term fixed-rate financing
• Non-recourse
• Fully assumable
• High leverage
• One loan for both construction and post-construction period

The eligibility requirements for HUD 221(d)(4) financing 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 and the loan must undergo an annual review. The loan must also be in compliance with Davis Bacon wage requirements and require a full scope of third party reports such as an environmental assessment, market study, and appraisal.

The maximum loan amount for HUD 221(d)(4) financing is not limited. According to HUD 221(d)(4) Loans, "while there is technically no financial ceiling for the program, particularly large loans are typically subject to stricter requirements". Additionally, HUD 221(d)(4) Loans states that "there is no maximum loan amount".