- Compare FHA Loan Programs
- FHA Multifamily Loan 223F Acquisition Or Refinance
- FHA 223A7 Streamlined Refinance
- FHA 221D3 Multifamily Construction Loans
- FHA Multifamily Loan 221d4 New Construction For-Profit Borrowers
- FHA 232 Assisted Living|Nursing Home Acquisition or Refinance
- FHA 242 Loans Critical Access Acute Care Hospital Construction
- FHA 241(a) Supplemental Loans to Existing FHA Mortgages
- FHA 207 Manufactured Home Park – Construction, Acquisition, or Refinance
- FHA 223F Loans Multifamily Acquisition
FHA 221d3 Multifamily Construction Loan For Non-Profit Borrowers
The 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
- All loan requests require a Concept Meeting with HUD staff to assess the transaction and make recommendations
- Pre-application stage requires a Market Study, basic loan underwriting, construction budget, and examination of borrower
- The Market Study and the Appraisal must have separate authors (no combined studies)
- An independent architect’s review is required
- If “invited to apply for a commitment,” a complete underwriting package is submitted by the mortgage banker
- HUD issues a Firm Commitment for Insurance
- Closing documents are circulated and the Initial Endorsement occurs
- Construction commences – escrows are held by the mortgage banker and dispersed normally
- When construction is complete and property has “broken even” (1.00 to 1.00 DSC), an accounting is made and the Final Endorsement occurs
- 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.
Market interest rates change daily. Note that the permanent interest rate is fixed at closing prior to construction commencement.
Commercial component allowable up to 10% net rentable area and 15% of effective gross income.
Non-recourse for monetary default with typical carve-outs.
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.
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)
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
- Maximum physical occupancy used for underwriting is 93% for market rate and 95% for rental assistance
- Pre-review is required by HUD
- Davis Bacon prevailing wage requirement do apply
- Cost certified audit required at Final Endorsement
- A replacement reserve will be funded at closing
- Bonded general contractor is required
- Escrows for property taxes, insurance, and replacement reserves are required
- Annual audit of operations is required
- Hard second mortgages are not allowed.
- Soft second mortgages and stock pledge financing are allowed if properly structured.
Need A Loan For A Multifamily Project?
Contact Darach Advisors for the best terms and pricing on Apartment Loans
Senior Managing Director
4943 Stony Ford Drive
Dallas, TX 75287-7236
Senior Managing Director
10455 North Central Expressway, Suite 109-332
Dallas, TX 75231