HUD 223(a)(7)
The Fast, Affordable & Easy FHA Multifamily Loan
The FHA 223(a)(7) loan is exclusively for the refinancing of existing HUD debt on multifamily and healthcare properties. This can reduce the interest rate, increase the amortization, and subsequently improve property cash flow while reducing the cost of debt service. In the eyes of HUD, this will significantly reduce the chance of a loan default. Incredibly, the new loan can even absorb the costs of a prepayment penalty. As a result, you don't have to wait 10 years to refinance if there is substantial downward pressure on treasury yields (as there has been over the last several years).
Furthermore, the streamlined and affordable nature of the product produces fewer hoops to jump through than a residential mortgage on a single family home. There is no appraisal, market study, or environmental report required. The only new third-party report required is a project capital needs assessment (PCNA).
The notable out-of-pocket cost? The HUD application fee, which is 0.3% of the loan amount due at application. Half of this is refunded after closing. 223(a)(7) loans typically close about 60 days from application. This really is the fastest, easiest, and most affordable multifamily loan that one can get. However, it exists only for the exclusive club of people who already have existing loans like the 223(f), 221(d)(4), and other FHA-insured multifamily and healthcare loans.
HUD 223(a)(7) Highlights
Eligible Properties
Multifamily and healthcare properties with existing HUD-insured debt.
Maximum Loan Amount
No cash out is permitted. Loans are limited to 100% of the eligible transaction costs, including the principal amount of existing debt, prepayment penalties, repairs, fees, third-party reports, and initial reserves deposit. The loan is subject to a maximum DSCR of x1.11 for for-profit entities and x1.05 for nonprofit entities. Expenses are underwritten based on the last three years of actual operating data and FHA field office estimates.
TERM & AMORTIZATION
The term of the loan may be extended by up to 12 years, as long as the new term does not exceed the initial loan term (40 years in the case of 221(d)(4) and 35 years in the case of 223(f)).
RECOURSE
All loans are non-recourse to key principals both during construction and permanent financing, subject to standard carve-outs.
ASSUMABILITY
All loans are fully assumable subject to FHA approval and a fee of 0.05% of the original FHA-insured loan amount.
PREPAYMENT
Generally, for best pricing, 10 years of call protection with a two-year lockout, followed by a step down from 8%. There is no prepayment penalty if the loan is assumed.
Timing
HUD 223(a)(7) loans typically close 60 days from application.
Third-Party Reports
Third-party reports are limited to a project capital needs assessment (PCNA), which is further required every 10 years.
Fees
HUD charges an application fee equal to 0.30% of the loan amount due at the time of application, half of which is refunded after closing. The balance of fees and costs are typically capped at 2.0%.
Start Your 223(a)(7) Loan Today
Call Now: (877) 585-8645
Speak with a HUD-Insured Multifamily & Health Care Finance Specialist