What HUD Clearing Its Backlog Means for Multifamily Investing

Multifamily Loans Blog · Published Nov 30, 2022

HUD multifamily loans, some of the most competitive financing options on the market are now able to do more, faster.

In the middle of November 2022, the Department of Housing and Urban Development put out a notice: Its queue of applications for FHA insurance for multifamily loans was fully cleared. That may sound like a very technical, wonkish report, but the implications of it could be a real game changer for many potential borrowers.

Why Did HUD Have Such a Large Queue?

HUD, or FHA multifamily loans are far and away some of the most competitive financing options for apartment investors. A quick glance at HUD’s most popular multifamily option, the FHA 223(f) loan, reveals why.

HUD-Insured Multifamily Loans Have Strikingly Competitive Terms

HUD 223(f) loans, typically used for apartment refinancing or acquisitions, can be used for nearly any multifamily property, affordable housing is not a requirement. They offer 35-year, fully amortizing terms. And it gets better: Interest rates are fixed for the life of the loan, and they’re generally lower than what Freddie Mac or Fannie Mae offer. They’re also non-recourse and fully assumable. Need more? Financing is available at loan-to-value ratios of up to 87%.

And these competitive terms are similar across all HUD multifamily loans, from HUD 221(d)(4) construction loans to FHA 232/223(f) financing for senior living facilities.

So, it’s no surprise that investors have been flocking to HUD financing. But, as a result of increased demand for HUD financing, the system has been bogged down. As a result, approval times for FHA multifamily loans have become longer and longer in recent years, with some financing taking the better part of a year to originate. While there are some ways around it, say, with a bridge-to-HUD loan, this does create additional expenses in the short term.

How Long Will New HUD Loans Take to Close?

With the backlog now cleared, our multifamily loan advisors anticipate timelines ought to speed up by at least a couple of months, provided there aren’t any hiccups along the way.

Many HUD multifamily loans should be able to close in four to six months. That’s significantly faster than the standard six to eight months our team had generally been conservatively expecting.

Key takeaways

HUD multifamily loans can now close in as little as four months.
HUD's multifamily financing offers some of the best loan terms in the industry.
Due to shortened closing timelines, HUD loans are more viable for multifamily acquisitions.

Will I Get My HUD Loan Fast Enough?

But wait, you say. Am I suggesting that four to six months is fast? Well, no. HUD loans, even with a clear queue, still can take a while. That four-month countdown also only starts once you’ve signed an application letter with your HUD-approved lender.

However, the improved speed will make a difference to many multifamily investors. It’s still not as fast as a Fannie or Freddie loan, which generally takes up to two to three months. But if you can afford to wait just a little bit longer than that, you can benefit from significantly more advantageous loan terms, and an improved bottom line.

Can I Use a HUD Loan for a Multifamily Acquisition?

In the past, HUD loans have broadly been trickier for acquisition financing. Waiting well over half a year for a refinance is one thing, but for an acquisition loan it was a pretty unrealistic ask for most multifamily investors. Shave two months off of that, however, and it becomes a much more viable option for many investors.

Again, I still wouldn’t call these fast loans. But considering the wide range of best-in-class financing terms, they don’t necessarily have to be. Just being faster may make the difference. Of course, it all depends on you, as a borrower, and your individual situation and acquisition timeline.

Curious to see if a HUD multifamily loan could level up your multifamily investment strategy? Complete the form below, and we’ll be in touch.

Frequently Asked Questions

What is the HUD backlog and why is it important for multifamily investing?

The HUD backlog is a queue of applications for HUD-insured multifamily loans. HUD-insured multifamily loans are attractive to investors because they offer competitive terms, such as 35-year, fully amortizing terms, fixed interest rates, non-recourse and fully assumable financing, and loan-to-value ratios of up to 87%.

However, due to increased demand for HUD financing, the system has been bogged down, resulting in longer approval times for FHA multifamily loans. This can create additional expenses in the short term, such as with a bridge-to-HUD loan.

It is important for multifamily investing because it can affect the cost and timeline of financing a multifamily property.

How has the HUD backlog impacted multifamily investing in the past?

The HUD backlog has caused delays in the approval process for FHA multifamily loans, resulting in longer wait times for investors. This has created additional expenses in the short term, such as the need for bridge-to-HUD loans. For more information, see What HUD Clearing Its Backlog Means for Multifamily Investing and What is Bridge to HUD Financing?.

What changes have been made to the HUD backlog to improve multifamily investing?

HUD has cleared its backlog, which should speed up the timeline for HUD multifamily loans. Our multifamily loan advisors anticipate timelines ought to speed up by at least a couple of months, provided there aren’t any hiccups along the way. Many HUD multifamily loans should be able to close in four to six months, which is significantly faster than the standard six to eight months our team had generally been conservatively expecting.

For more information, please see What HUD Clearing Its Backlog Means for Multifamily Investing.

What are the benefits of HUD clearing its backlog for multifamily investors?

HUD multifamily loans are some of the most competitive financing options for apartment investors. With the backlog now cleared, our multifamily loan advisors anticipate timelines ought to speed up by at least a couple of months, provided there aren’t any hiccups along the way. Many HUD multifamily loans should be able to close in four to six months, which is significantly faster than the standard six to eight months our team had generally been conservatively expecting.

The benefits of HUD clearing its backlog for multifamily investors include faster loan processing times and access to competitive financing options. HUD loans offer low interest rates, long amortization periods, and low down payment requirements, making them attractive to multifamily investors.

What challenges remain for multifamily investors despite HUD clearing its backlog?

Despite HUD clearing its backlog, multifamily investors still face a few challenges. For example, HUD multifamily loans can still take four to six months to close, which is significantly faster than the standard six to eight months our team had generally been conservatively expecting. Additionally, HUD loans are still subject to the same underwriting standards, which can be difficult to meet for some investors. Finally, HUD loans are still subject to the same fees and costs associated with other loan products, such as origination fees, closing costs, and other fees.

For more information on HUD loans, please visit this article.

What strategies can multifamily investors use to take advantage of HUD clearing its backlog?

Multifamily investors can take advantage of HUD clearing its backlog by taking advantage of the faster loan timelines. HUD multifamily loans should now be able to close in four to six months, which is significantly faster than the six to eight months that was generally expected. This means that investors can now move more quickly on their investments, allowing them to take advantage of opportunities that may have been missed before. Additionally, HUD loans are some of the most competitive financing options for apartment investors, so taking advantage of the faster timelines can help investors secure the best financing terms for their investments.

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