FHA multifamily mortgages are being rediscovered in California as the state continues to be one of the most vibrant rental housing markets in the nation. Class A multifamily housing in desirable communities always has been a popular alternative for many middle-income individuals and families priced out of the ownership market.
The cutbacks or outright shutdowns of multifamily construction lending by commercial banks, insurance companies, FNMA and FHLMC have blocked the flow of capital for development and refinance of multifamily housing. California multifamily developers have been forced to sit on their hands during a time of historically low interest rates when their contribution to the nation’s economic recovery could be significant.
Historically, FHA multifamily mortgages have played little role as a conduit for multifamily mortgages in California. Statutory mortgage limits that worked fine in Texas and the Southeast simply didn’t cover the high cost of land in desirable California markets.
But recently, HUD has made significant changes to its programs to help open up capital access to high cost markets. HUD has also waived Davis-Bacon prevailing wage requirements for previously completed multifamily projects which have been unable to refinance existing construction loans.
It is time for California multifamily developers to reacquaint themselves with FHA multifamily mortgages, construction perm loan and refinance programs.
FHA Multifamily Mortgages For New Construction
- Term: Construction period plus 40 years fixed-rate fully amortizing.
- Rates: In the current market, note rates are averaging about 4.25 percent.
- Personal guarantees: None.
- Loan to cost: Currently 90 percent, but HUD is indicating it may soon lower this to 83.3 percent.
- Debt service coverage ratio: 1.11, but HUD is indicating it may soon raise this to 1.20.
- Learn more about FHA multifamily mortgages for new construction
FHA Multifamily Mortgages For Refinance
- Term: 35 years fixed-rate fully amortizing
- Rates: In the current market, note rates are averaging about 3.25 percent.
- Personal guarantees: None.
- Loan to value: Currently 85 percent, but HUD is indicating it may soon lower this slightly.
- Debt service coverage ratio: 1.17, but HUD is indicating it may soon raise this slightly.
- Learn more about FHA multifamily mortgages for refinance
Kathryn Thompson is the founder and managing director for Apartment Financing America and has more than 40 years of experience in all phases of real estate and mortgage banking. She is a builder and developer of more than 25,000 homes. Kathryn Thompson can be reached at kathryn@apartmentfinancingamerica
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