FHA HUD 221(D)(4) & 220

HUD Loans

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

NON-MORTGAGEABLE COSTS

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

ADDITIONAL REQUIREMENTS

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