Borrowers seeking financing for multifamily properties, or properties with five or more units, may be eligible for a loan through HUD. HUD supports all types of multifamily financing, from acquisition, to refinance, to sub rehab and new construction. Here we break down a few of the financing options you have:
Do you have your eye on purchasing a multifamily property? Good news! You can use the FHA 223(f) loan program to acquire the property. This non-recourse, assumable loan can be used to purchase market-rate or affordable multifamily projects. To qualify for this loan program, properties must have an average physical occupancy rate of at least 85% and at least three years must have transpired from the date of the final certificate of occupancy prior to submitting an application to HUD. Mortgage insurance is required for these loans, regardless of leverage, and can range from 0.25-1.00% at closing and 0.25-0.60% annually thereafter.
REFINANCE/INTEREST RATE REDUCTION
Already have a multifamily loan? If your rate seems a little high, talk to one of our experts to see if a refinance or an interest rate reduction might be the right option for you. As a borrower, you have a couple options when it comes to lowering the interest rate of your current multifamily loan. FHA 223(a)(7) and an interest rate reduction are two common options. While their goals remain the same, there are key differences between them like varying loan amounts, term extensions and fees. Our side-by-side comparison will give you a closer look at the ins and outs of these two programs.
HUD loans are not limited to purchases and refinances; you can also use a HUD loan to remodel a property. This program provides non-recourse, assumable permanent financing for substantial rehabilitation of existing apartments. In order to qualify for a sub rehab loan from HUD, the cost of repairs or improvements must exceed $15,000 per unit multiplied by the area high cost factor, or two or more major building components need to be replaced regardless of cost. Are you interested in pursuing this loan? Our skilled team will walk you through the process from start to finish.
HUD has your financing needs covered if you are considering building a new multifamily property from the ground up. Don’t be discouraged if you have tried to pursue new construction financing from a bank; you could still qualify for a loan through HUD. Our own Ken Charbauski sat down with Southeast Real Estate Business to give his perspective on the new construction marketplace. In “Big Jump for HUD Multifamily,” an article by John Nelson, Ken highlighted the benefits of selecting a HUD loan over a bank loan for your new construction project.
“Some banks are either passing on loans or willing to lend only at historically low loan-to-cost (LTC) ratios, as low as 50 percent LTC, which would make many projects financially unfeasible.” -Ken Charbauski.
New construction loans can be used to build market-rate or affordable multifamily properties.