Market Rate Multifamily Housing

PDF Version Refinance or Acquisition
HUD Section 223(f)

Loan Program Highlights

Fixed Interest Rate
Fully Amortizing
Assumable Permanent Financing
Cash-Out Permitted

Eligible Properties

Any multifamily property that is at least three years old and does not require substantial rehabilitation.

Projects with additions completed less than 3 years before the application are eligible for refinancing as long as the size and number of units in the addition are not larger than the size and number of units in the original project.

Maximum Term

35 years or 75% of the remaining economic useful life, fully amortizing.

Maximum Mortgage

Determined by the lesser of:

  • DSCR of 1.176 on an underwritten vacancy of at least 7%, or
  • 85% Loan to Market Value, or
  • For Acquisition Transactions: 85% of Eligible Acquisition Cost
  • For Refinance Transactions: The greater of 100% of Cost to Refinance or 80% of Market Value

Personal Liability

FHA loan is non-recourse with standard carve outs


Yes, subject to FHA approval

Fees and Expenses

0.3% application fee due at application. Financing and permanent placement fees of up to 3.5% are based on final loan amount, due upon commitment and payable at closing. HUD inspection fees vary based on the total cost of critical and non-critical repairs.

Mortgage Insurance Premium

1.0% of loan amount for the first year and 0.60% of the outstanding principal balance calculated annually thereafter.

Other FHA Requirements

  • The client must pay for all third party reports, which include a Phase I Environmental Site Assessment, Appraisal and a Capital Needs Assessment (CNA).
  • Commercial space is limited 25% of total net rentable area and commercial income to 20% of effective gross income.
  • HUD allows secondary financing on Section 223(f) loans up to total debt of 92.5% Loan-to-Value, repaid with surplus cash.
  • All Critical Repairs must be completed prior to closing.
  • Non- Critical Repairs may be completed after endorsement with complete bids on work items greater than $25,000, and a financial escrow equal to 120% of the non-critical repair costs must be established at closing.
  • Fifty percent of any cash out proceeds after funding mortgageable transaction costs and the assurance of completion requirements must be held in an escrow by the Lender until the required non-critical repairs are completed and HUD approves the release.
  • An Initial Deposit and Annual Deposits must be made to the Reserve for Replacements in accordance with the PCNA and underwriting conclusions.
  • Escrows for property taxes, insurance and MIP are required and held by the Lender.
  • Borrowers and management agents must comply with HUD Fair Housing and Equal Opportunity requirements.
  • A new CNA report is required every 10 years.
  • An annual audit is required