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Last updated on Jan 3, 2023
3 min read

Freddie Mac HUD Section 8 Financing

Freddie Mac's HUD Section 8 financing program offers non-recourse loans with 10-30 year terms for LIHTC properties, and 5-15 year terms for non-LIHTC properties, LTVs up to 90%, DSCRs as low as 1.15x, and amortizations up to 35 years.

Better Financing Starts with More Options Start Your Application and Unlock the Power of Choice. Click Here to Get Quotes →$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
In this article:
  1. Freddie Mac-Insured Loans for Section 8 Properties
  2. Sample Freddie Mac Terms For HUD Section 8 Loans in 2023
  3. Advantages
  4. Disadvantages
  5. Get Financing

Freddie Mac-Insured Loans for Section 8 Properties

Housing Assistance Program Project-Based Contract or Tenant-Based Voucher Properties 

Owning and operating Section 8 properties can be both challenging and incredibly financially rewarding — and, if you're an investor or developer who's ready to expand your portfolio of affordable properties, a Freddie Mac HUD Section 8 Loan could be the perfect solution. Freddie Mac's HUD Section 8 financing program offers 10- to 30-year loan terms for LIHTC properties, and five- to 15-year loan terms for non-LIHTC properties. Plus, these loans have maximum LTV allowances of up to 90% and minimum DSCR requirements of as low as 1.15x (for LIHTC properties), and up to 80% maximum LTV allowances and as low as 1.20x DSCR (for non-LIHTC properties.) Freddie Mac HUD Section 8 Loans are also non-recourse and are available for eligible mixed-use properties. 

To learn more, check out Freddie Mac’s official HUD Section 8 Financing Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac HUD Section 8 Loan program.

Sample Freddie Mac Terms For HUD Section 8 Loans in 2023

Size: Varies

Terms: 

  • For cash loans: Five-year minimum, 15-year maximum
  • For tax-exempt financing: 10-year minimum, 30-year maximum

Amortization: Up to 30 years for cash loans, up to 35 years for tax-exempt financing

Maximum LTV: 80% for non-Low-Income Housing Tax Credit (LIHTC) properties, 90% for LIHTC properties

Minimum DSCR: 

  • Properties with Section 8 Housing Assistance Program (HAP) contracts in above average markets, with physical vacancies of 5% or less: 1.20x

  • Properties with new LIHTC credits: 1.15x

  • Some excess rent may be underwritten for above market long-term LIHTC contracts

Prepayment Options: Defeasance for non-LIHTC properties, yield maintenance for LIHTC properties

Eligible Borrowers: Need previous Section 8 ownership/management experience 

Eligible Properties: High-rise properties, mid-rise properties, and garden apartment properties. Must have a Section 8 project-based contract or voucher. 

Sellers/Servicers: 

  • Cash loans with Section 8 project-based contracts: Targeted Affordable Housing (TAH) and Freddie Mac Multifamily Approved Conventional Sellers

  • Cash loans with Section 8 tenant based vouchers: Freddie Mac Multifamily Approved Conventional Sellers

  • Tax-exempt financing: TAH sellers only

Section 8 Subsidies: 

Eligible Section 8 subsidies include: 

  • Project-based subsidies: Rental assistance tied to a specific property. Properties get cash payments determined by the number of tenants living in eligible units.

  • Tenant-based subsidies: Rental assistance tied to a specific tenant, not a specific property. Properties get cash payments determined by the number of qualifying occupants-- i.e. those with vouchers. Vouchers include:

    • Regular vouchers: Most vouchers are regular vouchers, which limit payments to HUD's fair market rent in the particular area where the property is located.

    • Enhanced vouchers: Enhanced Section 8 vouchers are provided to tenants living in properties that used to receive project-based subsidies, including properties where the owner has either determined to leave the Section 8 program, or has prepaid their government-insured mortgage. For tenants living in these properties, enhanced vouchers help them pay for rent increases — which means these vouchers are typically based on the actual rent of the property.

Subordinate Financing: Permitted with additional requirements and analysis

Advantages

  • Very competitive interest rates

  • Loans are non-recourse

  • Certain mixed-use properties are eligible

Disadvantages

  • Typically requires third-party reports, including appraisal, Phase I Environmental Assessment, and physical condition assessment

  • Requires application fees, commitment fees, and other fees

In this article:
  1. Freddie Mac-Insured Loans for Section 8 Properties
  2. Sample Freddie Mac Terms For HUD Section 8 Loans in 2023
  3. Advantages
  4. Disadvantages
  5. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

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Multifamily Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

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