HUD FHA 223(f)

9 Replies

I'm interesting in purchasing an apartment community using this program. I have a property I'm watching that fits it perfectly. I know the government is insuring the loan, but am I using a tradition bank, like a traditional sba loan or am I dealing directly with the government.

Also I know the process is really long so am I using a traditional or bridge lender and using this program as a refi? Is the traditional loans subject to the project qualify with HUD?

I would like to talk to anyone who has done these.

Thanks

Ron,

Hopefully the following helps.

You are using an entity, whether that's a bank or private lender who has funds committed from HUD for the financing. You cannot just go to HUD and ask them for financing.

The process can be long: so sometimes these lenders, like some of the ones we use, will actually utilize an in-house bridge program to acquire the property, and then "refinance" into the HUD program. If it's within the same lender, usually that process is very streamlined.

Even though there are upsides to using the 223f (very high leverage, long loan terms), there are also costs and reserves that will need to be taken into account.

The brokerage I work for has done these loans, and if you are interested in talking more, message me offsite. I'd be interested to see what you've got going on.

Thanks,

Jared

Thanks for the response. Quick question. I saw that it is a limited loan amount of 1 million.

I have a property I'm looking at around 1.25-1.4 milion, but I didnt know if the provided financing on this small amount?

Thanks

*It usually is $1MM and above because it's the same amount of work on the 'small' ones, as it is on the larger ones. It also usually comes down to borrower expectations and wants. Sometimes when looking at loans in this range, borrowers also realize it may just make sense to go a different route that still meets their needs/wants and gets them where they need, without all the cost and wait time.

*They will, but it's not the norm. I'd be interested in finding out exactly why you want to purchase using the 223(f) and depending on what those reasons, maybe it might make sense to look at other options that would still produce the same outcome, and might be less expensive, faster, and easier to close.

Ron, feel free to contact me offsite.

Thanks,

Jared

How do I contact you?

Non recourse

High LTV

30-35 year amortizations are a few reasons.

Ron,

Just wanted to cover my bases.

I colleague requested you.

Check it when you can.

Thanks,

Jared

@Ron Steele  

@Jared Rine  

I would be interested in hearing what came of this, and what you two discussed. Ultimately, I would like to do some deals like this too. If you could give some brief breakdowns that would be great.

Clay,

Nothing as of yet.  @Ron Steele and I have been back and forth, but we've been just been in conversation about the best type of financing to utilize when purchasing smaller multifamily. While there are pros to using HUD financing or other agency financing (FNMA or other), these positives are reserved for larger loans.

Not to divulge everything, but it's been my advice that at this price range ($1-1.5MM) that HUD financing is not the best program to utilize, nor are you going to find it. There is nothing in the guidelines that say these loan amounts cannot be done, it's just good luck finding a lender who will. That itself is searching for a needle in a haystack and one that is likely to not be found. The commercial real estate financing community when all said and done is very small and no one does these loans at the smaller loan amounts.

They are reserved for banks or private non bank entities who are willing to entertain these loan amounts and still be competitive - Up to 75 LTV, non recourse, 30 year amortizations, 10 year terms, competitive rates, and not only NOT require the reserves HUD and other agency financing does, but also less headache and faster closing times.

I'd be happy to help any way I can in what you're looking to do.  Feel free to colleague request and/or send me an email offsite (in my sig).

Thanks,

Jared

Hey Ron, just reading post and wondering what or why a HUD loan would appeal to you in this range of transaction.

Is it the LTV? The expected low rate? The amortization period? All that to be considered against getting into the loan? I speaking about costs, timeline, loan amount. I think revising options would be best.

Chris Cambridge

Great discussion... Yes Jarod was very helpful in educating me on the process.  

My main appeal was the non recourse, high ltv's, and 35 year amortization. Also with competitive rates.

The rates I'm getting is 80% Ltv, 20 year amortization with 5/7 year balloon. Not bad with how I buy but I would feel more comfortable locking in a long term rate and getting it to be non recourse. The fees are extremely high and the 3-6 month time loan is not ideal. You would probably need some sort of bridge loan before.

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