In general, the HUD 223(f) program is misunderstood. Although FHA 223(f) loans are thought by some people to be only for low-income housing, nonprofits, and affordable housing projects, they aren’t. Consequently, many market-rate borrowers miss out on one of the multifamily industry's most affordable, highest-leverage financing tools.
Some multifamily developers and investors shy away from HUD loans. Many feel there is a stigma attached to them. Others misunderstand the products, believing they are only for low-income and affordable housing projects. However, these things are not true. In comparison, HUD multifamily loans have several benefits which make them some of the best products in the business:
Many people aren’t aware that FHA-insured financing offers some of the industry’s longest terms. For example, the HUD 221(d)(4) program is a fixed-rate construction loan. This product is fixed for 40 years plus up to 3 years for construction (43 years total). And HUD 223(f) loans are fully amortizing for as long as 35 years (as long as the term and amortization isn’t more than 75% of the property's remaining economic life).
Although HUD (the US Department of Housing and Urban Development) and the FHA (the Federal Housing Administration) were founded separately, they share many things. For example, HUD oversees residential and multifamily insurance programs. In contrast, the FHA primarily deals with residential lending for primary residences.
One of the most common misconceptions about HUD is that it focuses only on low-income, Section 8, and affordable housing. In reality, the HUD 223(f) program is available for all types of market-rate multifamily properties.