Go to: Eligible Projects Loan Highlights Loan Structure Requirements Application Process Fees and Assurances

FHA 221(d)(4) Information Sheet

Eligible Projects
This Program provides construction and permanent loan funding sources for proposed multifamily rental housing. Lenders provide funding and credit enhancement for the development of proposed apartments and major rehabilitation of existing facilities. Mortgage rates are fixed for the construction and the 40 year permanent loan term before the start of construction. (A sister program, FHA 223(f), provides funding for acquisition, refinancing and minor rehabilitation of apartments and retirement service centers.)

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Loan Highlights

Loan determined as the lesser of 90% of the project's replacement cost and the amount that 90% of net operating income can debt service utilizing up to a maximum 95% stabilized occupancy rate. The loan is non-recourse with respect to the Mortgagor's personal liability. The loan is assumable by qualified buyer approved by the lender. Assumption fee of 1% of the loan balance. Property must remain rental for five years from the date of the loan. Monthly mortgage payments include principal and interest payments, monthly deposits to escrow for real estate tax, special assessments, hazard insurance, replacement reserves, and 1/2% of principal balance for MIP.

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Loan Structure Requirements

Other Income includes market supported laundry/washer-dryer income, unit premiums, parking income. Replacement reserves calculated as .6% of total improvement costs. Builder & sponsor profit and risk of 10% included in loan for affiliated contractor/mortgagor transactions. Otherwise 4% sponsor profit & risk included in the loan. Off-site and demolition costs not included in loan. Mortgagor entity must be capitalized at 125% of the cash required to close the transaction, including financial guarantees. Commercial space limited to 10% of total gross square footage and 15% of total gross income.

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Application Procedure
Multifamily Accelerated Processing (MAP) applies to this program. MAP is a two-staged process requiring a pre-application submission that allows HUD/FHA to review the key components of the proposal. The pre-application submission includes the following:

Resumes of mortgagor principals Preliminary architectural sketch plans Market study Appraiser's determination of income and expenses Evidence of site control Phase I environmental report Form HUD - 4128 - Environmental Assessment Estimate of construction costs and scope of work for substantial rehabilitation FHA will invite to the Firm Commitment stage those projects which are approved following review of the pre-application submission. A Firm Commitment application requires a detailed review of completed working drawings and full specifications and cost detail, along with a detailed review of management and marketing plans. Firm costs for the project will be established and final economic and feasibility information will be confirmed.

All information, instructions and forms for the formal applications package will be supplied by First Housing. Closing can take place within two months from issuance of the Firm Commitment.

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Fees and Assurances
Lender Processing Fee: Up to $2,500. Nonrefundable.

HUD Application Fee: 0.3% (three/tenths of a percent) of the mortgage to be submitted with the firm application. May be financed in the mortgage.

HUD Inspection Fee: 0.5% (five/tenths of a percent) which may be included in the mortgage.

Financing Fee: Up to 5.5% which may be included in the mortgage. Applicable to lender's fee, GNMA placement fee, bond costs of issuance.

Financial Guarantees: First Housing will estimate the amounts of financial guarantees (typically Letters of Credit) you and/or your General Contractor must make at the time of closing. These may include payment and performance guarantee, initial operating deficit, working capital, GNMA placement, and construction guarantee.

Working Capital: 2% of loan amount. Not included in mortgage.

Initial Operating Deficit: Determined at firm application. Based on lease-up projection. Not included in mortgage.

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