Benefits Of A HUD 221(d)(4) Loan

The HUD 221(d)(4) program provides high leverage, non-recourse construction and permanent financing for apartments nationwide. Many developers assume that an affordable component or rent restriction is required to qualify with HUD, but this is not true. We have financed many luxury, 100% market rate apartment projects with amenities equivalent to or better than other developments in the local market with HUD. In addition to ground up construction, HUD can be used for renovations including mill conversions or full gut rehabs. 221(d)(4) loan highlights include:

  • The loan is non-recourse from day one.
  • Construction interest is capitalized in the mortgage amount.
  • The interest rate (for the construction period and permanent loan term) is locked prior to closing which mitigates all rate risk. 
  • The loan term is 40 years.
  • There is no rate reset at any period after rate lock.
  • The loan is fully amortizing.
  • Virtually all soft costs are mortgageable, and most monies spent during underwriting on due diligence or other costs can be credited or reimbursed at closing.
  • 1.176x DCR and 85%+ LTC
  • Interest rates below conventional financing.
  • The loan is assumable.
  • Can be used for affordable housing or market rate housing (or a blend).

Virtually any property configuration and layout, from traditional garden style to four-plexes can be financed with HUD, and sites designed for multiple phases are also eligible. Funding is available nationwide and the HUD leverage does not vary by market. HUD also provides flexibility in terms of individuals or types of entities that can secure ownership in a project, which can be especially beneficial for assets placed in a trust or with syndicated equity. Please feel free to reach out to us any time at 603-637-4684 for a loan sizing or more information.