The HUD 223(f) program is designed for the refinance or acquisition of existing multifamily properties that have 5 or more units and are at least 3 years old.
Similar to other HUD loans, this program offers high loan to volume, low debt coverage ratio, and low interest rates, in relation to other financing options available.
This is a 35 year fully amortizing non-recourse loan, that is eligible for commercial space up to 20% of total square footage and 20% of EGI.
HUD Overview: 223(f)
Existing multifamily (minimum 5 units) structures at least 3 years old.
Commercial space: Eligible for up to 20% of total square footage and 20% of EGI
Single asset and single purpose entity, either for-profit or non-profit
< $50 million (For loans greater than $50 million, inquire about the 223(f) Large Program
Maximum Mortgage Limits
For a purchase transaction the lesser of:
100% transaction costs (refinance); 85% transaction costs (purchase)
1.176 DSCR (property must have average physical occupancy of 85% for six months prior to submission of application to HUD)
HUD Statutory Limits
80% LTV cash out refinance available (50% cash out funded at cash out; remainder funded at completion of non-critical repairs)
Amortization & Term
A maximum of 35 years fully amortizing
Fixed rate determined by market conditions at the time of rate lock
Mortgage Insurance Premium
1% payable at closing, 0.60% (0.25% for affordable) annually, escrowed monthly. Subject to change by HUD
Escrows for taxes, insurance and mortgage insurance premium are required.
Initial and monthly deposits required based on long term physical needs.
Cash or a letter of credit for up to 20% of the estimated cost of repairs.
Negotiable. Best rates typically have a 1-2 year lockout with declining prepayment penalty for the remainder of the first 10 years.
Third Party Reports
Other reports as needed
Fees and Deposits
Inspection fee: Greater of 1% of the cost of repairs or $30 per unit ($1,500 max if repairs are less than $100,000)
HUD Application Fee: $3 per $1,000 of requested mortgage
Rate lock deposit: Typically 0.5% of mortgage amount, refunded at closing