FHA® 221(d)(4)

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Arbor provides FHA-insured, long-term, fixed-rate financing for new construction or substantial rehabilitation of
multifamily projects nationwide. Applications typically processed as a 2-stage application (Preliminary Application
followed by Firm Application). HUD-experienced development teams may request “straight to Firm” application, saving
significant time by eliminating the Preliminary Application stage.

Loan Term and Amortization Actual construction period plus 40 years (fully amortizing with interest only payable during construction period).
Maximum Loan Amount Will be the lesser of

  1. 85% of total eligible development costs (87% for affordable) (90% for
    90% project-based rental assistance), replacement cost includes value of
    land for new construction and as-is value of property for substantial
    rehabilitation.
  2. FHA mortgage statutory per unit limits adjusted for local high cost factor,
    or
  3. An amount that achieves a minimum debt service coverage, as follows:
    a) 1.176x DSC for market rate properties b)1.15x DSC for affordable
    transactions; and c) 1.11x DSC for projects with 90% or greater rental
    assistance.
Eligible Property New construction or substantial rehabilitation of apartment properties.
Eligible Borrower Single Asset Entity (for profit or non-profit)
Occupancy Requirement Maximum economic occupancy of:

  • 93% for market rate properties
  • 95% for LIHTC properties having at least 80% LIHTC set aside, and rents at least 10% below markets
  • 97% for properties with at least 90% rental assistance contracts (or 90% LIHTC set aside) with rents at least 10% below market
Tax and Insurance Escrows Monthly deposits required
Recourse Non-recourse – Construction and Permanent
Commercial Space Maximum 25% of gross floor area and maximum 15% of effective gross income
Required Reports Market Study, Appraisal, Architect/Cost Review and Phase I. CPA reviewed
financial or last fiscal year – sub rehab.
Prepayment Negotiable. Generally two-year lockout with a 10% to 1% declining pre-payment
penalty. Other pre-payment options available
Assumable Subject to Arbor and HUD approval and payment of assumption fee
Good Faith Deposit Negotiable based on project type
Expense Escrow Yes – sufficient to cover Arbor’s expenses and third-party report costs
Origination Fee Negotiable
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. For market rate pre-applications, V72016 a non-refundable review fee of 15 bps (50% of the firm commitment application fee) is due to HUD with the submission of the pre-application package.
HUD Inspection Fee 0.5% of the mortgage amount for new construction. 0.5% of the cost of the repairs for substantial rehab
Legal/Closing Fee Borrower pays Arbor’s counsel fee and miscellaneous closing costs.
Rehabilitation Qualifications Repairs must exceed $15,000 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 Annual MIP Rates:

  • Market Rate Properties: 0.65%
  • Affordable Properties: 0.35%
  • Broadly Affordable or Energy Efficient Properties: 0.25%
Arbor Commercial Mortgage | arbor.com | 800.ARBOR.10

V72016