Multifamily Construction Loans – FHA

Multifamily Construction Loan - FHA Mortgages

ICS provides FHA-insured, long-term, fixed-rate financing for new construction apartments or substantial rehabilitation of multifamily projects nationwide. Commercial Loan Direct uses the two-stage Multifamily Accelerated Processing Program (MAP) to expedite underwriting and approval.

FHA Multifamily Construction Loans
Maximum Loan Amount:

No Maximum

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 or 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%
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
Prepayment: 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 Lender and HUD approval and payment of assumption fee.
Good Faith Deposit: Negotiable based on project type.
Expense Escrow: Yes - sufficient to cover Lender’s expenses and third-party report costs.
Origination Fee: Yes
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.
Legal/Closing Fee: Borrower pays Lender ’s legal 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 or 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.