HUD 223(f) vs Fannie Mae for Apartment Refinances

Short answer

HUD 223(f) allows up to 87% LTV and a 1.15x minimum DSCR on market-rate apartments, and 90% and 1.11x on affordable or heavily rent-assisted properties, plus 0.25% upfront and annual mortgage insurance. Fannie Mae Small Loans allow 80% and 1.25x up to $9 million. HUD usually lends more; Fannie usually closes sooner.

The short version

HUD 223(f) is FHA mortgage insurance for refinancing or buying existing apartment buildings. It allows more leverage and lower coverage than any agency small-loan program. Fannie Mae Small Loans allow less leverage, but close on a delegated process with streamlined reports and fewer conditions.

Choose HUD when the extra proceeds or the longer loan matter more than time, and when you can live with HUD's ongoing requirements. Choose Fannie Mae when you need to close on a schedule, want fewer post-closing rules, or the building fits comfortably at 80% LTV and 1.25x.

The limits, from the primary sources

HUD changed its 223(f) sizing limits in Mortgagee Letter 2025-03, dated January 8, 2025, for any application that had not reached initial endorsement. Figures quoted elsewhere at 85% and 1.176x for market-rate deals are the limits from before that letter.

Program and property	Max LTV	Min DSCR	Underwritten vacancy
HUD 223(f), market rate (or LIHTC without rent advantage)	87%	1.15x	7%
HUD 223(f), affordable (LIHTC with rent advantage to market)	90%	1.11x	5%
HUD 223(f), 90% or more of units with rental assistance	90%	1.11x	3%
Fannie Mae Small Loans (up to $9 million)	80%	1.25x	Set by lender underwriting

Two notes on the HUD rows. The letter did not change HUD's separate limit for cash-out refinances: under Criterion 10 of HUD's MAP Guide, a 223(f) loan that takes cash out is capped at the greater of 80% of value or the cost to refinance. HUD's printed MAP Guide still shows the pre-2025 ratios in Section 3.7.11, which is why some sources disagree. And HUD sizes to the lowest of several tests, including statutory limits, so the ratios are ceilings, not targets.

For mortgage insurance, HUD's September 2025 notice set the 223(f) premium at 0.25% upfront, capitalized into the loan, and 0.25% a year, for applications submitted or amended on or after October 1, 2025. Before that, the premium was 1.00% upfront and 0.60% a year. Some older comparisons still use those figures.

Side by side

Term	HUD 223(f)	Fannie Mae Small Loan
What it is	FHA mortgage insurance on a loan from a HUD-approved MAP lender	A loan from a Fannie Mae Small Loan lender to Fannie's standards
Leverage and coverage	Up to 87% and 1.15x market-rate; 90% and 1.11x affordable	Up to 80% and 1.25x
Loan size	Set by HUD's sizing tests and statutory limits	Up to $9 million
Term	Up to 35 years or 75% of remaining economic life, if less; fully amortizing	5 to 30 years, up to 30-year amortization
Cash-out limit	Greater of 80% of value or the cost to refinance	Set by lender underwriting
Prepayment	Barred for 5 years after endorsement, with narrow statutory exceptions	Yield maintenance or declining premium
Mortgage insurance	0.25% upfront and 0.25% annual	None
Processing	Lender underwrites, HUD reviews and issues a commitment	Delegated to the lender, streamlined reports
Recourse	Non-recourse, with carve-outs	Non-recourse available, with carve-outs
After closing	HUD regulatory agreement and annual financial reporting to HUD	Reporting to the servicer under the loan documents

The same building under both

Say a 60-unit market-rate building appraises at $9,000,000. Fannie Mae's lender underwrites NOI of $600,000; HUD's lender, applying HUD's 7% vacancy factor, underwrites $585,000. These NOI figures are hypothetical.

Test	HUD 223(f), market rate	Fannie Mae Small Loan
Loan cap from LTV	$7,830,000 (87%)	$7,200,000 (80%)
Max annual debt service from DSCR	$508,696 ($585,000 / 1.15)	$480,000 ($600,000 / 1.25)

HUD allows about 6% more annual debt service and an LTV cap $630,000 higher. Which test binds depends on the rate and amortization each lender offers, which you get from live quotes. HUD's amortization of up to 35 years, against Fannie's 30, also lowers the payment per dollar borrowed, which usually lets the DSCR test support a larger loan. Against that, HUD's annual 0.25% premium adds roughly $19,000 a year on a $7.5 million balance, and the process takes longer. Put both quotes through the term sheet comparison and the program sizing worksheet.

When HUD 223(f) wins

You need the extra proceeds to pay off the current loan or fund repairs.
The property is affordable or heavily rent-assisted, where HUD allows 90% and 1.11x.
You plan to hold for a long time and want to remove refinance risk.
Your current loan has an extension or open window that gives you time.

When Fannie Mae wins

Your maturity is close and you cannot wait for HUD processing.
The building sizes fine at 80% and 1.25x, so HUD's extra room adds little.
You want to avoid HUD's regulatory agreement and reporting.
You may sell or refinance within five years. The National Housing Act bars prepaying a 223(f) loan for five years after endorsement, except in narrow cases such as agreeing with HUD to keep the property as rental housing for the rest of that period.
The loan is under $9 million and you want a streamlined, delegated execution.

Going deeper on HUD

This page compares the two for a 5+ unit owner deciding today. For HUD 223(f) program rules, eligibility, the application process and repairs, see hud223f.loans, or our summary of HUD 223(f) loans. HUD publishes its list of approved MAP lenders, and only those lenders can originate 223(f) loans under MAP.

Frequently asked questions

What is the max LTV on a HUD 223(f) loan?

Under HUD Mortgagee Letter 2025-03 (January 8, 2025), 223(f) loans on market-rate properties, or LIHTC properties without a rent advantage, may go to 87% of value. Affordable properties with a rent advantage and properties with 90% or more rent-assisted units may go to 90%. Cash-out refinances are held to the greater of 80% of value or the cost to refinance, a limit the letter did not change.

What is the minimum DSCR for HUD 223(f)?

HUD Mortgagee Letter 2025-03 sets 1.15x for market-rate 223(f) loans and 1.11x for affordable properties with a rent advantage and for properties with 90% or more units under rental assistance. The earlier market-rate minimum was 1.176x. HUD also applies an underwriting vacancy factor of 7%, 5% or 3% depending on the category.

How much is HUD mortgage insurance on a 223(f) loan?

HUD's notice published September 23, 2025 set the 223(f) mortgage insurance premium at 0.25% upfront, capitalized into the loan, and 0.25% annually. It applies to applications submitted or amended on or after October 1, 2025 that have not been initially endorsed. The previous 223(f) premium was 1.00% upfront and 0.60% annually.

Is HUD 223(f) better than Fannie Mae?

It depends on what you need. HUD 223(f) usually allows more proceeds through higher LTV and lower DSCR limits and a long fixed term, but adds mortgage insurance, HUD review and a regulatory agreement, and takes longer. Fannie Mae Small Loans close on a delegated, streamlined process up to $9 million. If time or simplicity matters most, Fannie usually wins.

Can a small apartment building get a HUD 223(f) loan?

HUD 223(f) covers existing multifamily rental properties, but small loans can be hard to place because HUD processing and third-party costs are similar whatever the loan size, and some MAP lenders set minimum loan amounts. Ask lenders on HUD's approved MAP list for their minimum before ordering reports, and compare against Fannie Mae and Freddie Mac small-loan programs.