HUD 221(d)(4) Loan -  New Construction or Rehabilitation of Multifamily Properties

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Eligible Properties

Market rate, affordable, and subsidized multifamily properties.

Eligible Borrowers

Single-asset, special purpose entities, either for-profit or non-profit.



Loan Amount

No minimum/no maximum (subject to General Loan Parameters).

General Loan Parameters

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)
For loan amounts up to $75 million:
Property TypeMin DSCMax LTCIf Cash Out
Subsidized 1.11 90% 80% LTV
Affordable 1.15 87%
Market Rate 1.18 85%
(Subject to statutory mortgage limits)
Interest Rate

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

Term & Amortization

Interest-only term equal to actual construction period, plus 40 years fully amortizing.



Mortgage Insurance Premium

Depending on property type:
.25% to .65% at Closing
.25% to .65% Annually


Fully assumable, 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.

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 claims history is clean.

Davis-Bacon Wages

Payment of prevailing wages is required by HUD for all contractors and subcontractors.

  • 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, Phase I, and future Capital Needs Assessment, plus a review of the final construction and architectural documents by a HUD-approved third party contractor.
  • Secondary financing is allowed, subject to HUD guidelines and approval.