Does my project qualify for HUD 221(d)(4) financing? 

Before beginning the actual loan process, you should make sure your project qualifies for the loan. Eligible projects must:

• Have a loan amount of more than $2 million (average loan is $15 million+)

• Have 5+ units

• Have a potential LTV of no more than:

  • 85% for market rate properties

  • 87% for affordable properties

  • 90% for properties with 90% or more low-income units

• Fill a market need and have an excellent chance of creating positive income

How do I get pre-approved for a HUD 221(d)(4) loan? 

If you think your project fits within the general guidelines for HUD multifamily construction loans, you should begin working with your lender and other professional advisors to prepare a concept summary, and submit it to HUD. If HUD believes your project has potential, they will invite you to begin the pre-application process. At this point, you'll need to: 

• Hire third party contractors to complete:

  • A limited appraisal

  • A market study

  • Environmental reports

• Complete HUD questionnaires

• Work with your lender to help them complete the underwriting process

At this point, usually about 3 months into the process, you and your lender will submit a pre-application to HUD, and you will need to pay a 0.15% approval fee. 

Stage 2: The Firm Application Process 

If your pre-application is approved (which may take some time), HUD will typically issue an Invitation Letter to Proceed With Firm Application about 5.5 months into the process. At this point, you'll need to: 



• Have an architectural and engineering report completed (around the 6 month mark)

• Address any architectural or engineering issues that have arisen

• Work with a licensed appraiser to create a draft full appraisal

• Work with your lender to complete Firm Application underwriting (should be complete around the 7 month mark)

• Pay 0.15% of loan amount as a Firm Application submission fee (usually around month 8.5)

Assuming you and your lender have done everything correctly, HUD will likely issue a firm commitment. 

Stage 3: Rate Lock and Closing 

The final stages of the HUD 221(d)(4) process involve locking everything into place, including your interest rate. Usually, this involves: 

• Working with your lender to receive a Lender's Funding Commitment

• Locking your interest rate (typically requires 0.50% of the loan amount as a good faith deposit)

• Working with your attorney to request title documentation and property surveys

• Work with your lender to draft closing documents

• Work with your lender and HUD (and your respective attorneys) to schedule a closing date

• Close your loan (typically around the 11 to 12 month mark)

What happens after HUD 221(d)(4) closing? 

After closing, the construction or rehabilitation process begins. Remember, for the duration of your loan, you'll need to: 

• Prepare for annual financial reviews

• Keep 4% of the loan amount in escrow for replacement reserves

• Place monthly insurance and tax costs into an escrow account

• Continue to pay HUD MIP

To learn more about the HUD 221(d)(4) process, fill out the form below and an expert HUD loan advisor will get in touch.

In this article:
1. HUD 221(d)(4) Loan Process 
2. Stage 1: Initial Research to Pre-Approval
3. Does my project qualify for HUD 221(d)(4) financing? 
4. How do I get pre-approved for a HUD 221(d)(4) loan? 
5. Stage 2: The Firm Application Process 
6. Stage 3: Rate Lock and Closing 
7. What happens after HUD 221(d)(4) closing? 
8. To learn more about the HUD 221(d)(4) process, fill out the form below and an expert HUD loan advisor will get in touch.
9. Get Financing