FHA HUD 221(D)(4) & 220
HUD PROGRAM 221(D)(4) & 220 Eligible properties containing five or more rental units with no more than 25% of the net rentable area dedicated to commercial use and income not more than 15%-30% of EGI.
MAXIMUM LOAN IS THE LESSOR OF:
REPLACEMENT COST MULTIPLIED BY
90% for projects with 90% or greater rental assistance
87% for affordable housing transactions
85% for market rate projects
Land value (new construction) or “as is” value of the property (sub rehab) are included in replacement costs
DEBT SERVICE COVERAGE
1.11 or 90% of NOI for projects with 90% or greater rental assistance
1.15 or 87% of NOI for affordable housing transactions
1.1765x or 85% of NOI for market rate projects FHA per Unit Statutory Limit as adjusted by local high cost factor
Operating deficit escrow (LOC or cash) • Demolition, offsite or unusual site development cost (LOC or cash) • 4% working capital escrow (LOC or cash), half of which is a construction contingency to cover cost overruns and approved change orders
HUD APPLICATION FEES
$3 per thousand of requested mortgage amount (1/2 due at pre-application; the balance at firm submission)
HUD INSPECTION FEES
$5 per thousand of mortgage amount for new construction and $5 per thousand of improvement costs for sub-rehab
MORTGAGE INSURANCE PREMIUM
HUD construction and annual MIP are based on a percentage of the mortgage amount (0.25% – 0.70%).
The initial MIP is payable in advance at initial endorsement/loan closing, MIP is paid annually thereafter escrowed monthly (0.25% – 0.70%) of unpaid principal mortgage balance.
TYPICAL PROCESSING STEPS
Concept meeting with HUD
Pre-application submitted – will include, but not limited to:
- Appraisal (land value established) and market study
- Preliminary sketch plans
- Phase I
Firm Application submitted – will include, but not limited to:
- CNA, A&E and Cost reports
- Final appraisal
- Full set of plans and specs
- Contractors construction cost (wage requirements under the Davis-Bacon Act)
- Financials/credit information on sponsor and contractor
- Verified working capital sufficient to meet all closing requirements
- Verification of utility availability and zoning
- Management documents
- Site control
Project must comply with the specified HUD, state and local standards; Age Restricted Properties not allowed under 220.
Cost certification may be required prior to final endorsement.
Loans in excess of $75 million will be subject to additional underwriting criteria.
Energy Audit and Utility Consumption data.
THIRD PARTY COSTS
Lender collects initial deposit of $40,000 – $50,000; includes 3rd party deposit and lender engagement fees.
Borrower responsible for any additional third party costs