HUD 223(f) Loans
HUD 223(f) loans are long-term, non-recourse, fixed-rate loans for the acquisition or refinancing of multifamily properties.Better Financing Starts with More Options$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
HUD 223(f) Loan Program
If you're looking to purchase or refinance an apartment building or multifamily property with five or more units, a HUD 223(f) loan could be your best option. Insured by the U.S. Department of Housing and Urban Development (HUD), these loans are non-recourse, fully assumable (with FHA approval), and offer fixed-rate financing at incredibly competitive interest rates. If that weren't enough to interest you, HUD 223(f) loans also offer some of the longest loan terms in the multifamily industry, with a maximum term of 35 years.
Keep reading below to learn more, or click here to download our easy-to-understand HUD 223(f) loan term sheet.
Sample Terms for HUD 223(f) Loans in 2023
Minimum $1 million (some exceptions allowed on an individual basis)
Minimum term of 10 years, maximum of 35 years, or 75% of the property's remaining economic life, whichever is less
Up to 35 years
83.3% for market-rate properties, 85% for affordable properties, 87% for rental assistance properties
1.17x for market-rate properties, 1.15x for affordable properties
HUD/FHA mortgage insurance premiums include a one time fee of 1% of the loan amount, due at closing, and an annual MIP fee of 0.60% of the loan amount (for market-rate properties), or 0.45% of the loan amount (for affordable properties). HUD 223(f) properties can also qualify for a green MIP reduction to 0.25%, provided they score at least 75 on the Energy Star SEDI (Statement of Design Intent) examination. In order to maintain the reduction, the property must be re-certified every 12 months.
Low Income Housing Tax Credits (LIHTCs):
Like its cousin, the HUD 221(d)(4) loan, HUD 223(f) loans allow developers to qualify for low income housing tax credits (LIHTCs), almost $8 billion of which are available from state and local government organizations. LIHTCs function as a 4% tax credit (a 30% subsidy) or a 9% credit (a 70% subsidy), which are roughly equivalent to 4% or 9% of a project's construction costs. HUD 223(f) borrowers are typically only eligible for the 4% credit, as the 9% credit is designed for new construction or substantial rehabilitation projects.
Long terms, up to 35 years
Highly competitive interest rates
Fully assumable (with FHA approval)
Loans are non-recourse
HUD 223(f) loans permit supplemental financing
Somewhat longer closing times than comparable loans (i.e. Freddie Mac® or Fannie Mae® multifamily loans)
Can require a lot of documentation, including appraisals, market studies, and environmental reports
Requires the payment of a mortgage insurance premium (MIP), as a one-time fee at closing and on a monthly basis
Like most other HUD multifamily loans, HUD 223(f) loans require replacement reserves and annual operational audits
Owner distributions are limited to 2x a year