In the middle of November 2022, the Department of Housing and Urban Development put out a notice: Its queue of applications for FHA insurance for multifamily loans was fully cleared. That may sound like a very technical, wonkish report, but the implications of it could be a real game changer for many potential borrowers.

Why Did HUD Have Such a Large Queue?

HUD, or FHA multifamily loans are far and away some of the most competitive financing options for apartment investors. A quick glance at HUD’s most popular multifamily option — the FHA 223(f) loan — reveals why.

HUD-Insured Multifamily Loans Have Strikingly Competitive Terms

HUD 223(f) loans, typically used for apartment refinancing or acquisitions, can be used for nearly any multifamily property — affordable housing is not a requirement. They offer 35-year, fully amortizing terms. And it gets better: Interest rates are fixed for the life of the loan, and they’re generally lower than what Freddie Mac or Fannie Mae offer. They’re also non-recourse and fully assumable. Need more? Financing is available at loan-to-value ratios of up to 87%. 

And these competitive terms are similar across all HUD multifamily loans, from HUD 221(d)(4) construction loans to FHA 232/223(f) financing for senior living facilities.

So, it’s no surprise that investors have been flocking to HUD financing. But, as a result of increased demand for HUD financing, the system has been bogged down. As a result, approval times for FHA multifamily loans have become longer and longer in recent years, with some financing taking the better part of a year to originate. While there are some ways around it — say, with a bridge-to-HUD loan — this does create additional expenses in the short term.

How Long Will New HUD Loans Take to Close?

With the backlog now cleared, our multifamily loan advisors anticipate timelines ought to speed up by at least a couple of months, provided there aren’t any hiccups along the way. 

Many HUD multifamily loans should be able to close in four to six months. That’s significantly faster than the standard six to eight months our team had generally been conservatively expecting.

Will I Get My HUD Loan Fast Enough?

But wait, you say. Am I suggesting that four to six months is fast? Well, no. HUD loans, even with a clear queue, still can take a while. That four-month countdown also only starts once you’ve signed an application letter with your HUD-approved lender.

However, the improved speed will make a difference to many multifamily investors. It’s still not as fast as a Fannie or Freddie loan, which generally takes up to two to three months. But if you can afford to wait just a little bit longer than that, you can benefit from significantly more advantageous loan terms — and an improved bottom line.

Can I Use a HUD Loan for a Multifamily Acquisition?

In the past, HUD loans have broadly been trickier for acquisition financing. Waiting well over half a year for a refinance is one thing, but for an acquisition loan it was a pretty unrealistic ask for most multifamily investors. Shave two months off of that, however, and it becomes a much more viable option for many investors.

Again, I still wouldn’t call these fast loans. But considering the wide range of best-in-class financing terms, they don’t necessarily have to be. Just being faster may make the difference. Of course, it all depends on you, as a borrower, and your individual situation and acquisition timeline.

Curious to see if a HUD multifamily loan could level up your multifamily investment strategy? Complete the form below, and we’ll be in touch.