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

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Eligible Properties

Market Rate, Affordable, and Subsidized Multifamily

Eligible Borrowers

Single-Asset, Special Purpose Entities (For-Profit or Non-Profit)

Loan Amount

No Minimum/No Maximum (subject to General Loan Parameters)



Term & Amortization

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

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 TypeMax LTVMin DSCAcq LTCIf Cash Out
Subsidized 90% 1.11 90% 80% LTV
Affordable 87% 1.15 87%
Market Rate 85% 1.18 85%
(Subject to statutory mortgage limits)
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

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