HUD 223(f) Financing

Loans for the Acquisition and Refinancing of Multifamily Properties insured by HUD/FHA

For investors who want to acquire or refinance multifamily properties, the HUD 223(f) Loan program is a highly effective option. Insured by the U.S. Department of Housing and Urban Development (HUD), HUD 223(f) loans begin at $1 million (though exceptions are sometimes made) and have no maximum loan amount. These loans offer some of the longest loan terms in the multifamily industry with a maximum term of 35 years, are non-recourse, fully assumable (with FHA approval), and offer fixed-rate financing at incredibly competitive interest rates with LTVs up to 85% for market-rate properties, and up to 90% for certain subsidized housing properties.

Sample Terms For HUD 223(f) Loans

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

MaximumLTV: 83.3% for market-rate properties, 85% for affordable properties, 87% for rental assistance properties

MinimumDSCR: 1.17x for market-rate properties, 1.15x for affordable properties

MIP: HUD/FHA mortgage insurance premiums include a one-time fee of 1% of the loan amount, due at closing, and an annual MIP fee of 0.60% of the loan amount (for market rate properties), or 0.45% 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.

Low Income Housing Tax Credits (LIHTCs):

Like 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.


  • 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


  • Somewhat 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
  • Owner distributions are limited to 2x a year

Commercial Space Limitations for HUD 223(f) Financing

While FHA 223(f) loans are mostly intended to offer financing for multifamily apartment properties, the 223(f) program does allow for up to 20% of a property’s total net rentable area to consist of commercial space, or, alternately, up to 20% of a property’s effective gross income (EGI), to be derived from commercial tenants. While parking fees for residents do not count towards a property’s commercial income limits, parking fees paid for by non-residents do.

HUD’s commercial space limitations may be waived, but only under certain conditions. For example, if the property is supporting specific goals of HUD, such as transit-oriented or sustainable community development, or, if the commercial aspect of the property has a long-term lease with a credit-worthy tenant, the limitations may be waived. In general, waivers will only be issued if the property has ample cash flow and the local market supports the need for commercial development.

In order to qualify for a waiver, however, borrowers must ensure that both the appraisal and the market study are prepared by experts with significant experience in the type of commercial space that the project will contain. These must include estimates of commercial rental income, as well as detailed reports on local commercial vacancy rates, tenant roll-over risk, lease-up costs, and other variables that may impact the risk of the project. Furthermore, any commercial tenant that exceeds 5% of a property’s effective gross income (EGI) will need to undergo a separate credit analysis. Unfortunately, even borrowers in which the sponsor operates under a “master lease” structure must typically follow these rules.