HUD 221(d)(4)/(d)(3) Program - Construction or Rehabilitation of Multifamily Housing

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Property Types

Market Rate, Affordable, and Subsidized Multifamily

Eligible Borrowers

For profit and non-profit entities

Loan Amount

No Minimum/No Maximum (subject to statutory mortgage limits)



Term & Amortization

New Construction:
• Construction term, plus
• 40 year fully amortizing loan

• Rehabilitation term, plus
• 40 year fully amortizing loan

General Loan Terms

New Construction: The maximum loan is the lesser of

  • 83.3% (87% for Affordable) of HUD’s estimate of replacement cost (Rehabilitation - plus “As-Is” value of property)
  • 1.20x Debt Service Coverage, (1.15x for Affordable)
Interest Rate

Fixed rate, subject to market conditions at the time of rate lock


None, except standard carve-outs


Yes, subject to HUD approval


Typically loans are prohibited from prepayment for the 1st year, then have a 9% penalty declining 1% each year thereafter until 0%.  Alternative lockout and prepayment structures are available.

Mortgage Insurance Premium

0.65% at closing
0.65% annually

Professional Liability Insurance

HUD requires a minimum coverage of $1 million per occurrence and $3 million aggregate.  Waivers may be granted in cases where premiums are high and claim history is clean.

  • Davis Bacon prevailing wages are required
  • Builders and Sponsors Profit and Risk Allowance of 10% of all construction costs can be used for sponsors with an identity of interest general contractor
  • Escrows required for repairs, mortgage insurance premium, taxes, insurance, and replacement reserves
  • Third party reports include appraisal, market study, Plans and Specs review, and Phase I
  • Secondary financing is allowed, subject to HUD approval