Utilizing the HUD221(d)(4) Loan

A solid option for multifamily construction or renovation.

If you want to build or substantially renovate an apartment building or multifamily property with five or more units, a HUD 221(d)(4) loan might be the perfect solution. HUD 221(d)(4) loans are insured by the U.S. Department of Housing and Urban Development (HUD) and offer some of the industry's best terms. In fact, it's pretty hard to beat their 40-year, fixed-rate, fully amortizing loans, which also offer a 3-year interest-only construction period, bringing the maximum term of this loan to an incredible 43 years. In addition, these loans are fully assumable (with FHA/HUD approval), and are non-recourse.

HUD 221 (d)(4) loans begin at $4 million and can go up to $100 million or more, and are available for market-rate, affordable, and rental-assistance developments. Plus, HUD 221(d)(4) loans have 40-year fixed-rate terms, with a 3-year interest-only construction period. 

Sample Terms For HUD 221(d)(4) Loans 

  • Size:  Minimum $4 million (however, typical loans are $15 million+)

  • Term: 40-year, fixed-rate term, plus 3-year interest-only construction period (bringing total loan term to 43 years)                             

  • Amortization: Up to 40 years, fully amortizing 

  • Maximum LTV: 85% for market-rate properties, 87% for affordable properties, 90% for properties with more than 90% low-income units                               

  • Minimum DSCR: 1.17 for market-rate properties, 1.15 for affordable properties

  • Rate Locks: After initial underwriting, 30 to 180-day rate locks are available for a fee of 1% of the loan amount, which is refunded at closing. 

  • Commercial Development Limits:  HUD 221(d)(4) properties can have some commercial space, however, this is limited to 25% of the net rentable area and 15% of the underwritten effective gross income of the property (up to 30% of underwritten EGI permitted in urban renewal areas under Section 220).