FHA 221D3 Multifamily Construction Loans

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FHA 221d3 Multifamily Construction Loan For Non-Profit Borrowers

FHA Approved Lender SealThe FHA 221d3 Multifamily Loan Program is for the construction of multifamily projects exclusively for non-profit borrowers. For profit borrowers should refer to the FHA 221d4 Multifamily Construction Loan, a nearly identical multifamily construction loan program, except it is for for-profit borrowers. Click here for complete information about the 221d4 loan program. It and the 221d3 Multifamily Construction Loan are the only non-recourse, 40-year, fully amortizing, fixed-rate construction loans available in the marketplace.

Because security for 221d3 Multifamily Construction Loans is wholly asset-based, underwriting is cautious and driven by market econometrics. Recently HUD has adjusted its underwriting to more carefully review the borrower and the volatility of the borrower’s other assets. Underwriting and processing of 221d3 Multifamily Construction Loans can take a great deal of time, frequently causing frustration to would be borrowers. Do not try this at home, folks. FHA 221d3 Multifamily Construction Loans are the very best multifamily construction loans available in the world, but they are not for the uninitiated. You need an expert, and the mortgage bankers at Darach Advisors successfully guided more than 30 FHA 221d3 Multifamily Construction Loans totaling almost $400 million through the process, in the last two years.

Maximum Loan Amount (lesser of)

  • The amount supported by 83.3%, 87%, or 90% of the NOI for market rate, affordable, or rental assisted properties, respectively.
  • 83.3%, 85% 87% of appraised value for market rate, affordable, or rental assisted properties, respectively.
  • 83.3%, 85%,or 90% of total allowed development costs for market rate, affordable, or rental assisted properties, respectively*
  • FHA Statutory mortgage limits (FHA statutory loan limits are subject to adjustment based on the location of the project.
  • Contact Us for a determination of the loan limits that would apply to your project.
  • BSPRA (Builder Sponsor Profit Risk Allowance) replaces the developers fee

Loan Process Timeline

  1. All loan requests require a Concept Meeting with HUD staff to assess the transaction and make recommendations
  2. Pre-application stage requires a Market Study, basic loan underwriting, construction budget, and examination of borrower
  3. The Market Study and the Appraisal must have separate authors (no combined studies)
  4. An independent architect’s review is required
  5. If “invited to apply for a commitment,” a complete underwriting package is submitted by the mortgage banker
  6. HUD issues a Firm Commitment for Insurance
  7. Closing documents are circulated and the Initial Endorsement occurs
  8. Construction commences – escrows are held by the mortgage banker and dispersed normally
  9. When construction is complete and property has “broken even” (1.00 to 1.00 DSC), an accounting is made and  the Final Endorsement occurs
  10. The loan now begins its amortized schedule of payments

Maximum Loan Term

Fully amortizing loan term up to 40 years, not to exceed 75% of remaining economic life and after a construction period of 16-24 months.

Interest Rate

Market interest rates change daily. Note that the permanent interest rate is fixed at closing prior to construction commencement.

Commercial Space

Commercial component allowable up to 10% net rentable area and 15% of effective gross income.

Personal Liability

Non-recourse for monetary default with typical carve-outs.

Eligible Borrowers

For-profit individuals and entities and not-for-profit single asset entities.

FHA Inspection Fee

One-half of 1% of the loan amount due and payable at closing.

Replacement Reserve Account

At Initial Endorsement the funding of a replacement reserve account will occur and periodic payments will be paid to it after Final Endorsement.

Prepayment

Typically prohibited for 3 years, then pre-payable year 4 at 107% of par, declining 1% per year. Shorter lock-outs obtainable at higher note interest rate.

FHA Application Fee

0.3% of the loan amount due at application (1/2 due at Pre-application and 1/2 due at Firm Application)

Origination Fee

Minimum 1.00% thereafter negotiable based on complexity.

Mortgage Insurance Premium

The first year 1% MIP fee due at closing, subsequently, .45% per annum.

Additional Loan Features

Need A Loan For A Multifamily Project?
Contact Darach Advisors for the best terms and pricing on Apartment Loans

Ralph Daruns
Senior Managing Director
(972) 741-4006
4943 Stony Ford Drive
Dallas, TX 75287-7236
rdaruns@darachadvisors.com
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Kathryn Thompson
Senior Managing Director
(214) 662-9012
10455 North Central Expressway, Suite 109-332
Dallas, TX 75231
kgthompson@darachadvisors.com
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