Construction loan plus up to 40-year permanent loan
Amortization
Up to 40 Years
Maximum Loan Amount
Determined by the lowest of:
1. 90% of total eligible development costs (100% for non-profit)
2. 1.11 debt service coverage
(1.05 for non-profit)
3. HUD’s statutory mortgage limits
4. For rehab add 90% of the "as is" value (100% for non-profit) plus 90% of the total development cost (100% for non-profit)
Fixed Rate
Yes – Construction and Permanent
Eligible Property
Multifamily projects to be built of projects undergoing substantial rehabilitation. Detached structures and row houses eligible.
Eligible Borrower
Single Asset Entity (for profit or non-profit)
Occupancy Requirement
Underwritten at a maximum 95% occupancy
Tax and Insurance Escrows
Monthly deposits required
Recourse
Non-recourse – Construction and Permanent
Commercial Space
Maximum 10% of gross floor area and maximum 15% of potential gross income
Required Reports
Market Study, Appraisal, Architect/Cost Review and Phase I
Pre-Pay Penalty
Negotiable. Generally three year lockout with declining percentage of principal thereafter up to 10 years (7-6-5-4-3-2-1).
Assumable
Subject to HUD approval and payment of assumption fee.
Good Faith Deposit
Negotiable based on project type
Expense Escrow
Yes – sufficient to cover expenses and third-party report costs
Origination Free
Negotiable
HUD Application Fee
Non-refundable fee of $3 per $1,000 (0.3%) of the mortgage amount due to HUD with the firm commitment submission package.
HUD Inspection Fee
0.5% of the mortgage amount for new construction. 0.5% of the cost of the repairs for substantial rehab.
Legal / Closing Fee
Borrower pays counsel fee and miscellaneous closing costs
Rehabilitation Qualifications
Repairs must exceed $6,500 per unit (adjusted for local high cost factor), 15% of the “as rehabbed” appraised value of replacement of 2 or more major building systems.
Davis Bacon
Davis Bacon labor standards and wage requirements apply to construction and rehab work.
HUD Mortgage Insurance Premium (MIP)
HUD sets the cost of the FHA Insurance. The MIP is paid in advance for the construction period and is escrowed monthly after amortization commences.