Commercial Real Estate Division
Commercial Real Estate - HUD FHA 223(f)
HUD FHA 223(f) Multifamily Loan Program Guidelines:
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Eligible Properties:
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5+ residential unit properties, including, detached, semidetached, row, walk-up, or elevator-type rental or cooperative housing.
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Properties must have complete kitchens and baths and have been completed or substantially rehabilitated for at least 3 years prior to the date of the application for mortgage insurance.
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The program is available for market rate rental housing or for properties accepting rental assistance, either tenant based or project based.
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Commercial area is permissible, but cannot exceed 20% of the net rental area, or 25% of the gross revenues.
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Student housing properties that offer rents per room, not per unit, are ineligible.
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30 day minimum lease term required.
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The property must meet a minimum three-year stabilization requirement (property must have been built and stabilized for three or more years before receiving a HUD insured mortgage). Properties with a project based affordability component (HAP Contract or other regulatory agreement) may apply for a waiver.
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The loan may include repair costs not to exceed 15% of its value after repairs or no more than $6,500 per unit (except in high cost areas) - whichever is greatest. Repairs may not include replacing more than one major building system such as plumbing or electric.
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Loan Term:
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The lesser of 35 years or a maximum term not to exceed 75% of remaining economic useful life of the property.
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Eligible Locations:
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All 50 states, Puerto Rico, U.S. Virgin Islands, and Guam. No market - economic or population restrictions.
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Loan Size:
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$1,000,000 with no maximum.
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Maximum Loan-to-Value:
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83.3% for market rate properties.
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87% for affordable properties.
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Maximum CLTV:
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100% is possible with Joint Venture
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Minimum DSCR:
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1.17. 1.15 for affordable properties
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Minimum Occupancy:
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Property must demonstrate a pattern of stable occupancy for 6-Months prior to application and maintained until closing.
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Interest Only:
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N/A.
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Prepayment Penalty:
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Negotiable - typically a two-year lock out followed by a step down premium (e.g. 8,7,6,5,4,3,2,1).
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Guarantee:
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Non-recourse subject to standard carve-outs.
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Assumable:
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Yes, subject to lender approval.
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Rate Lock:
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At commitment.
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Escrows:
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Tax and Insurance Impounds: Required.
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Replacement Reserves: Required - Monthly deposit required and amount depends on property condition.
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Initial Deposit to Reserve Fund: Required - One time deposit may be required depending on property condition.
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Critical and Non-Critical Repair Escrow: May be required for properties with life, safety, health or code related repair and/or maintenance concerns.
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Third Party Reports:
Appraisal, Market Study, Phase I Environmental, Engineering Report and Seismic where applicable.
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Sponsor Requirements:
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Experienced owner operators preferred.
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Minimum credit and financial capacity requirements.
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HUD experience preferred.