HUD 221D4
Multifamily IO Construction Loan
FHA HUD Section 221(d)(4) Apartment Loans from Multi-housing IO Loans in Dallas Fort Worth for Multifamily New Property Construction and Unit Rehabilitation.
HUD Apartment Loan Amount:
$15,000 per unit*
FHA HUD Multifamily Construction and Rehabilitation Loans in DFW North Texas
Eligible Properties
Market rate, low-to-moderate income and subsidized multifamily properties
Commercial Space Limitation
Limited to 25% of net rentable area and 15% of underwritten effective gross income (up to 30% of underwritten EGI permitted in Urban Renewal and Opportunity Zones).
Minimum Scope of Work
All new construction plus renovation of existing buildings that meet one of the following conditions.
a) Renovation costs more than $15,000 per unit times a local cost factor (typically 190%-270%).
b) Renovation will replace more than 50% of two or more building systems: electrical, plumbing, mechanical, building envelope, structural.
Davis Bacon Wages
Payment of prevailing wages, as determined by the Department of Labor, is required for all contractors and subcontractors.
Borrower
Single-asset, special-purpose entity, either for profit or nonprofit
Recourse
Non-recourse
Interest Rate
Single fixed rate for both the construction I-O period and the permanent loan term, determined by market conditions at time of rate lock. Rate lock deposit is 0.5%, refunded at closing.
Loan Parameters
Loan amounts up to $75 Million
|
Property Type |
Maximum Loan to Eligible Cost³ |
Maximum Debt Service Coverage |
|
Subsidized¹ |
90% |
1.11x |
|
Affordable² |
87% |
1.15x |
|
Market Rate |
85% |
1.18x |
Loan amounts $75 million and above, though HUD may impose more restrictive limits on loan amounts above $100 million
|
Property Type |
Maximum Loan to Eligible Cost³ |
Minimum Debt Service Coverage |
|
Subsidized¹ and Affordable² |
80% |
1.25x |
|
Market Rate |
75% |
1.30x |
¹At least 90% of the units covered by a project-based Section 8 contract.
²Regulatory Agreement in place with minimum set-aside (e.g., 40% of units at 60% AMI, or 20 % of units at 50% AMI) in effect for at least 15 years after the new loan close.
³Eligible cost includes hard costs and most soft costs plus the as-is value of project or land. Examples of ineligible costs include refundable reserves, preliminary marketing costs, and offsite improvements.
Additional Terms
Term and Amortization
Interest-only term during construction period and cost certification followed by 40 years fully amortizing.
Prepayment and Assumption
Negotiable, with best pricing for 10 years of call protection (can be a combination of lockout and/or penalty); loan is fully assumable subject to HUD approval.
Escrows
Prior to construction, reserves for interest, taxes, insurance, working capital (2%-4% of the loan), and initial operating deficit; balances will be released to the borrower after 6 consecutive months of break-even operations.
Post construction, taxes, insurance and mortgage insurance premium will be escrowed monthly and a capital needs reserve maintained with monthly deposits in accordance with HUD guidelines on a property-specific basis (minimum $250/unit/year).
Mortgage Insurance Premium
0.65% annually (0.70% for urban renewal projects under Section 220, 0.25%-0.35% for affordable and subsidized properties, and 0.25% for Energy Star-certified properties); amount due during construction term paid up front at closing.
HUD Application Fee
0.15% of estimated loan amount due with submission of initial application, plus 0.15% due with final application (entire 0.30% due with final application for affordable and subsidized properties). HUD Application Fees are reduced for properties in Opportunity Zones.
Third Party Reports
Appraisal, Market Study, Environmental, and future Capital Needs Assessment, plus a review of the final construction and architectural documents by a HUD-approved third party contractor.
Timing
Varies by transaction, but typically 12 months from due diligence to closing.
For current HUD apartment Construction IO loan mortgage rates, contact our multifamily lenders in Dallas.
Call For a Quote:
(214) 679-9673
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FANNIE GREEN
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