Multifamily Construction Loans
The Only 40 Year, Fixed Rate Multifamily Construction Loans In The World
Having the ability to offer multifamily construction loans that convert into permanent loans at the end of construction sets us apart. It’s also one of the reasons we focus on GSE lending. They are also the reason we are advocates of FHA multifamily construction loans. With very few exceptions, FHA 221d4 multifamily construction loans are the only multifamily construction loans we place.
The typical financing structure for multifamily construction loans includes multiple loans and multiple closings. It also means means multiple sets of fees. First, you would have a multifamily construction loan and closing for the interim construction loan. During the next 18-24 months you’ll arrange a permanent mortgage. It will take a great deal of time and money. When construction is finished, you’ll have another closing and another set of fees to close your permanent mortgage. It’s very possible that your permanent loan had a 30 year amortization period, but a 5 year term to force a slightly lower interest rate. So, five years from now, you’ll be repeating the process all over again.
That’s three closings, three origination fees, three appraisal fees, three title policies plus incidental fees and expenses and a great deal of time and aggravation in seven years.
Compare the typical multifamily construction financing structure to an FHA multifamily construction loan. The first closing is nearly identical. That’s it. No more fees. The first closing created a 40 year, non-recourse, fixed-rate, multifamily construction loan that converts automatically at the end of the construction period to a 40 year fixed rate apartment loan. The 40 year term starts at the end of construction. You avoid multiple loan closings and duplicative fees with FHA multifamily construction loan.
Additionally, the FHA multifamily construction loans we place will likely allow for slightly more leverage and FHA multifamily construction loans almost certainly offer mortgage rates that are half to a full point lower than other alternatives.
Request a confidential loan quote today and we’ll arrange multifamily construction financing that will make your deal more successful.
FHA Multifamily Construction Loans Terms Sheet
Minimum loan amount substantial rehab $5 million.
- Percentage of eligible development cost, including as-is value of land for new construction or as-is value of property in the case of substantial rehabilitation:
- 83.33% for market rate apartments.
- 87% for affordable apartments.
- 90% for apartments with 90% or greater rental assistance.
- An amount that achieves minimum Debt Service Coverage Ratio:
- 1.20×1 DSCR for market rate apartments.
- 1.15×1 DSCR for affordable apartments.
- 1.11×1 DSCR for apartments with 90% or greater rental assistance.
- FHA statutory per unit limits adjusted for local high cost factor;
- Cost of offsite improvements, FF&E, marketing, construction contingency and operating deficit reserve are excluded from loan amount.
- 83.33% for market rate apartments.
- 87% for affordable apartments.
- 90% for apartments with 90% or greater rental assistance.
- 1.20×1 for market rate apartments.
- 1.15×1 for affordable apartments.
- 1.11×1 for project based rental assistance apartments.
- Replacement reserves required in accordance with HUD guidelines;
- Taxes and Insurance escrowed monthly (post construction);
- Working Capital Reserve equal to 4% of loan amount (post in cash or LOC);
- Operating Reserve 3% of loan amount or greater as determined by HUD at commitment.
- Appraisal
- Phase One Environmental Assessment (ESA)
- Market Study
- Construction Cost Review
- Plans and Specs Review
- Maximum underwritten occupancy 93% for market rate, 95% for rental assistance
- Pre-review is required by HUD
- Davis Bacon prevailing wage requirements apply
- Cost certified audit required at Final Endorsement
- Bonded general contractor is required
- A replacement reserve will be funded at closing
- Annual audit of operations is required
- Hard second liens not allowed, soft seconds & stock pledge financing allowed with proper structure
Multifamily Loan Case Studies
Fannie Mae Multifamily Affordable Housing Loan
Provided $9,300,000 Fannie Mae multifamily affordable housing loan for Class C apartments in Houston Texas.
Fannie Mae Apartment Loan Texas Case Study
Originated $13,000,000 Fannie Mae apartment loan Texas for Concord at Little York apartments Houston Texas.
FHA Apartment Loan Arizona Starrview at Starr Pass Tuscon
Refinanced FHA apartment loan in Arizona with FHA 223a7 for Starrview at Starr Pass in Tuscon Arizona
FNMA Affordable Housing Loan LIHTC Tax Credits Houston TX
Combined LIHTC tax credits with $3,600,000 FNMA affordable housing loan for Houston multifamily project.