FHA HUD 241(a) Multifamily Loan Program

The FHA HUD 241(a) Multifamily Loan program is designed to provide supplemental financing for current HUD borrowers. The purpose of this program is to keep existing multifamily properties competitive in the market. If you are an owner of a HUD-insured multifamily property looking for extra financing to enhance your property with significant improvements, the HUD 241(a) multifamily loan program could be a great option for you. These loans can also be used to add energy-efficient infrastructure to a property, to purchase additional land or to finance construction costs needed to expand a current property. In 2015, the FHA 241(a) multifamily loan program financed a total of $25 million over 974 units. To qualify for this loan program, the borrower must provide at least 10 percent of the total loan cost.

FHA HUD 241(a) Multifamily Loan Program Loan Program Terms and Guidelines

Eligible Properties and Borrowers
Property must be currently insured by a HUD loan

Loan Amount
Maximum loan amount is the lesser of

• 90% of a new construction project for for-profit entities and 95% for not-for-profit entities
• Up to 90% of the property’s net operating income (including the first mortgage payments)
• The cost level that will not exceed HUD’s maximum insurable amount for the project

In addition, the DSCR of the property should hit at least 1.11x

Term and Amortization
Length of term is generally commensurate with the first mortgage.

Interest Rate
Fixed at closing

Prepayment penalty
Various different options.

Loan Assumption
Loans are assumable subject to HUD approval and a fee of .05% of initial HUD note

Recourse
Loan is non-recourse with standard “bad-boy” carveouts

Mortgage Insurance Premium
MIP is generally .95 percent of the loan amount. Some properties may qualify for between .25-.35 percent.

Timing
Loans typically take about 20 weeks from start to finish.