HUD 223(f) Loans

HUD 223(f) Loan Program

If you're looking to purchase or refinance an apartment building or multifamily property with five or more units, a HUD 223(f) loan could be your best option.

Insured by the U.S. Department of Housing and Urban Development (HUD), these loans are non-recourse, fully assumable (with FHA approval), and offer fixed-rate financing at incredibly competitive interest rates. If that weren't enough to interest you, HUD 223(f) loans also offer some of the longest loan terms in the multifamily industry, with a maximum term of 35 years.

There is a slight catch, though: Getting a HUD 223(f) loan can take a while longer than most other financing types. Expect to wait up to nine to 12 months for your loan to close.

Sample Terms for HUD 223(f) Loans in 2024

Size	Minimum $1 million (some exceptions allowed on an individual basis)
Term	Minimum term of 10 years, maximum of 35 years, or 75% of the property's remaining economic life, whichever is less
Amortization	Up to 35 years
Maximum LTV	87% for market-rate properties, 90% for affordable or rental assistance properties
Minimum DSCR	1.15x for market-rate properties, 1.11x for affordable properties
MIP	HUD/FHA For applications submitted or amended on or after October 1, 2025, the mortgage insurance premium is a flat 0.25% of the loan amount due at closing and 0.25% annually thereafter, for all property types; the prior tiered MIP rate categories (including the Green MIP reduction) were eliminated (90 FR 45789).45% of the loan amount (for affordable properties). HUD 223(f) properties can also qualify for a green MIP reduction to 0.25%, provided they score at least 75 on the Energy Star SEDI (Statement of Design Intent) examination. In order to maintain the reduction, the property must be re-certified every 12 months.

Statutory Limits for HUD 223(f) Loans

Each year, HUD releases new statutory limits to determine the maximum amount of HUD-backed financing a property can be eligible for. Reviewing these limits can be a great way to understand any limitations this financing may have for you.

Low Income Housing Tax Credits (LIHTCs)

Like its cousin, the HUD 221(d)(4) loan, HUD 223(f) loans allow developers to qualify for low income housing tax credits (LIHTCs), almost $8 billion of which are available from state and local government organizations.

LIHTCs function as a 4% tax credit (a 30% subsidy) or a 9% credit (a 70% subsidy), which are roughly equivalent to 4% or 9% of a project's construction costs. HUD 223(f) borrowers are typically only eligible for the 4% credit, as the 9% credit is designed for new construction or substantial rehabilitation projects. 

Advantages

• Long terms, up to 35 years

• Highly competitive interest rates

• Fully assumable (with FHA approval)

• Loans are non-recourse

• HUD 223(f) loans permit supplemental financing

Disadvantages

• Longer closing times than comparable loans (i.e. Freddie Mac or Fannie Mae multifamily loans)

• Can require a lot of documentation, including appraisals, market studies, and environmental reports

• Requires the payment of a mortgage insurance premium (MIP), as a one-time fee at closing and on a monthly basis

• Like most other HUD multifamily loans, HUD 223(f) loans require replacement reserves and annual operational audits