FAQs

  • Are the FHA Mortgage Insurance Programs Limited to Subsidized Housing? Do they restrict a property to low income tenants or control rents?
    • FHA mortgage insurance programs are not restricted to low income tenants nor do they control rents charged. These programs are part of the National Housing Act and were designed to provide financing for new construction or substantial rehabilitation of multifamily projects
      regarding 221(d)(4) and 231 insurance. In Section 231 programs, all residents can be limited to 62 years and above. Section 223(f) was created to enable the ability of financing mortgage capital for the acquisition and/or refinance of existing multifamily properties. These programs take into
      consideration market rate when underwriting, unless they are restricted by requirements associated with other funding sources.
  • Are FHA insured loans assumable?
    • These loans are assumable through a Transfer of Physical Assets (TPA) with HUD, provided that the new owner and principals are acceptable to HUD (0.05% of the original loan amount due at application submittal).
  • Maturities available in these commercial mortgage programs?
    • Section 223(f) maturities are of 35 years or less. Section 221(d) maturities are of 40 years or less and are permissible, however, all debts
      must be amortized within the term of the loan. Shorter amortization periods increase annual debt requirements, which causes a decrease in the
      amount that can be borrowed by property based on debt service coverage.
  • What is the typical debt coverage for approved transactions?
    • Commerical refinance on apartment loans and/or acquisition transactions will require a minimum debt service coverage, which will include a deposit to the replacement
      reserve, ranging from 1.11x to 1.1765x. Substantial rehabilitation and new construction transactions will also require minimum debt service
      coverage, and include a deposit to replacement reserve, ranging from 1.11x to 1.1765x.
  • Are there income limitations for commercial mortgages?
    • These programs (FHA mortgage insurance) don’t dictate income limitations. Borrower MUST certify to abide by FHA/HUD practices.
  • How long does processing take?
  • Environmental investigations required?
    • Phase I environmental review is required by HUD for multifamily financing. This includes lead based paint and asbestos reports if property was constructed prior to 1978.
      New properties cannot be within a 100 year flood plain (Multifamily), in airport landing paths, and near chemical or oil holding tanks, etc.

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