The Fast, Affordable, Easy FHA Multifamily Loan

The HUD 223(a)(7) loan is exclusively for refinancing existing debt on multifamily and healthcare properties backed by the Department of Housing and Urban Development. Refinancing through a 223(a)(7) loan can reduce interest rates, increase amortization, and subsequently improve property cash flows while reducing the cost of debt service. In the eyes of HUD, this significantly reduces the chance of a loan default.

A new HUD 223(a)(7) loan can even absorb prepayment penalties associated with existing debt. As a result, you don't have to wait 10 years to refinance if, for example, there is substantial downward pressure on treasury yields.

Furthermore, the streamlined and affordable nature of the product produces fewer hoops to jump through than even 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, or 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 those investors with existing loans like the 223(f), 221(d)(4), and other HUD-insured multifamily and health care loans. 

Learn more by reading below, or check out our HUD 223(a)(7) loan term sheet.

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 1.11x for for-profit entities and 1.05x for nonprofit entities. Expenses are underwritten based on the last three years of actual operating data and FHA field office estimates. 

Term and 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 a 221(d)(4) loan and 35 years for 223(f) financing. 

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 HUD approval and a fee of 0.05% of the original HUD-insured loan amount. 

Prepayment Penalties

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 required every 10 years. 

Fees

HUD charges an application fee equal to 0.3% 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%.