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Last updated on Jan 3, 2023
3 min read

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 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. HUD 223(f) Loan Program
  2. Sample Terms for HUD 223(f) Loans in 2023
  3. Low Income Housing Tax Credits (LIHTCs):  
  4. Advantages
  5. Disadvantages
  6. Get Financing

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

Size

Minimum $1 million (some exceptions allowed on an individual basis)

Term

Minimum term of 10 years, maximum of 35 years, or 75% of the property's remaining economic life, whichever is less

Amortization

Up to 35 years

Maximum LTV

83.3% for market-rate properties, 85% for affordable properties, 87% for rental assistance properties

Minimum DSCR

1.17x for market-rate properties, 1.15x for affordable properties

MIP

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. 

Advantages

  • 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

Disadvantages

  • 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

In this article:
  1. HUD 223(f) Loan Program
  2. Sample Terms for HUD 223(f) Loans in 2023
  3. Low Income Housing Tax Credits (LIHTCs):  
  4. Advantages
  5. Disadvantages
  6. Get Financing

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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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