MULTIFAMILY | FHA/HUD Section 221(d)(4)

New Construction or Substantial Rehabilitation Loan

Our HUD Section 221(d)(4) program provides long-term, low fixed-rate, non-recourse, assumable financing for the construction and permanent financing of new apartment projects or substantial rehabilitation of existing apartment projects.

Multifamily Housing

Eligible Properties

Market rate, affordable, or subsidized multifamily properties.

Eligible Borrowers

Single asset, special-purpose entity, either for profit or not-for-profit.


Maximum of 40 years, fully amortizing (plus interest only period during construction).

Interest Rate

Locked before closing and fixed for the duration of the construction period and full 40-year term. (Subject to market conditions.)


Non-recourse for the construction period and duration of the term.


Customizable, typically a 10-year step down, based on market conditions and borrower preferences.


Subject to FHA/HUD and lender approval.

Loan Parameters

Market Rate 85% 1.176
Affordable 87% 1.15
Subsidized 90% 1.11

HUD Fees and Expenses

  • The annual Mortgage Insurance Premium (MIP) is 0.65% of the outstanding loan amount for market rate transactions. Reduced MIP rates for affordable projects or projects that qualify for Green/Energy Efficient Housing.
  • FHA Application Fee of 0.30% of loan amount.
  • FHA Inspection Fee of 0.50% of loan amount (new construction) and 0.50% of costs associated with construction (substantial rehabilitation).
  • Replacement Reserves determined by a 20-year capital needs analysis, minimum of $250 per unit per annum.

Commercial Space

Limited to 25% of net rentable space and 15% of gross income.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Construction Wages

Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.


Approximately 8 – 12 months for engagement, submission, FHA/HUD review, and closing.


Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
  • A Builder’s and Sponsor’s Profit and Risk Allowance (BSPRA) equal to 10% of all costs other than land can be utilized for sponsors with an identity of interest general contractor. For affordable and rental assisted transactions, a mortgageable developer Fee in lieu of BSPRA is permitted.
  • Value of land already owned is included in eligible costs.