HUD-Insured Multifamily Loans
HUD Loans for Purchasing, Building, Renovating and Refinancing Multifamily and Healthcare Properties
When it comes to building, acquiring, or refinancing multifamily properties, the U.S. Department of Housing and Urban Development (HUD) offers some of the best financing options on the market today. HUD-insured multifamily loans offer competitive interest rates, long terms, high leverage allowances, and are fully amortizing and non-recourse. In addition, HUD multifamily loans are fully assumable (with HUD/FHA approval). That makes these loans highly effective for borrowers who want to maximize their profits and reduce their financial risk. While HUD loans are excellent for all kinds of properties, including market-rate apartment buildings, they offer additional benefits for affordable properties, and are a great candidate for Low-Income Housing Tax Credits (LIHTCs), as well as housing located within Opportunity Zones. They can also work well with the Rental Assistance Demonstration (RAD) program, which allows certain properties under HUD legacy programs for affordable properties to convert their housing to the HUD Section 8 program.
However, despite their benefits, HUD multifamily loans do require a significant amount of paperwork and documentation-- which is why it's essential to have a trusted advisory team that can guide you through each step of the HUD multifamily application, approval, and closing process.
HUD 221(d)(4) Loans for New Construction and Substantial Rehabilitation
The HUD 221(d)(4) loan is perhaps the industry's best and most affordable loan option for developers who want to build or substantially rehabilitate a multifamily property. These loans begin at $4 million and can go up to $100 million or more, and are available for market-rate, affordable, and rental-assistance developments. Plus, HUD 221(d)(4) loans have 40-year fixed-rate terms, plus a 3-year interest-only construction period. For properties with a significant amount of affordable housing units, developers may be able to take advantage of low income housing tax credits (LIHTCs). In addition, these loans can take advantage of a builder sponsor profit and risk allowance (BSPRA), which allows the general contractor to take a small amount of equity in the project, which can significantly reduce the amount of cash needed at closing.
HUD 223(f) Loans for the Acquisition and Refinancing of Multifamily Properties
The HUD 223(f) loan is a highly effective option for borrowers who want to acquire or refinance multifamily properties. HUD 223(f) loans begin at $1 million (though exceptions are sometimes made), and have no maximum loan amount. These loans typically have a 35-year fixed-rate term, though the term can be as short as 10 years, as long as the loan remains fully amortizing. Like HUD 221(d)(4) loans, HUD 223(f) properties with a certain number of affordable or low-income housing units may quality for low income housing tax credits (LIHTCs).
HUD 223(a)(7) Refinancing Loans for Existing HUD Multifamily Borrowers
HUD 223(a)(7) loans provide an efficient and streamlined way for current HUD multifamily borrowers to refinance their loans-- reducing their interest rates, increasing their amortizations, and improving overall project cash flow. Unlike many other types of HUD multifamily financing, which often require multiple third party reports and may take several months to close, HUD 223(a)(7) loans typically only require one report, a project capital needs assessment (PNCA), and can close in as little as 60 days.
HUD 241(a) Supplemental Loans for Current HUD Multifamily Borrowers
HUD 241(a) loans provide borrowers with existing HUD multifamily debt an opportunity to acquire the funds to make improvements to their properties. Common uses include making safety updates, adding upgrades to increase a property's energy efficiency, or expanding the footprint of current buildings on the property.
HUD 232 Loans for Building or Substantially Rehabilitating Healthcare Properties
HUD 232 loans provide developers with one of the industry's lowest cost financing options for the new construction or substantial rehabilitation of senior housing, assisted living, or skilled nursing facilities. Intended for the financing of healthcare properties with 20+ residents, HUD 232 loans now use HUD LEAN processing, which helps cut down on duplicate paperwork and streamlines the entire loan application and approval process.
HUD 232/223(f) Loans for Acquiring or Refinancing Healthcare Properties
Much like the traditional HUD 232 loan, the HUD 232/223(f) loan is designed for financing senior housing, assisted living, or skilled nursing facilities. However, the HUD 232/223(f) loan is specifically intended for as-is acquisitions and the refinancing of borrower-owned properties. Just like HUD 232 loans, HUD 232/223(f) loans use HUD LEAN processing and are intended for healthcare properties with 20 or more residents.
HUD LEAN Loan Processing for HUD 232 and HUD 232/223(f) Financing
In the last decade, the HUD 232 loan program has fully transitioned to using HUD 232 LEAN processing, a new type of loan processing that reduces the need for duplicated forms and is intended to significantly shorten the time from initial application to loan closing. As part of this program, borrowers do not directly apply for HUD 232 or HUD 232/223(f) loans; instead, their lender applies directly to the Office of Residential Care Facilities (OCRF), the HUD department that is responsible for much of the HUD 232 loan approval process.
HUD 232/223(a)(7) Refinancing Loans for HUD 232 and HUD 232/223(f) Borrowers
For borrowers who currently own a HUD 232 or HUD 232/223(f) financed healthcare property, but are looking to potentially reduce their interest rate, increase their loan's amortization, and improve their property's cash flow, the HUD 232/223(a)(7) refinance could be an effective fit. Just like other kinds of HUD 223(a)(7) refinances, the HUD 232/223(a)(7) refinancing process is incredibly streamlined, only requires one third-party report, and can close in as little as 60 days.