FHA®221(d)(4):
NEW CONSTRUCTION AND SUBSTANTIAL REHAB
Arbor provides FHA-insured, long-term, fixed-rate financing for new construction or substantial rehabilitation of multifamily projects nationwide. Applications are typically processed as a two-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 & Amortization | Construction loan period (interest-only), followed by 40-year permanent (fully amortizing) |
Maximum Loan Amount | The lesser of:
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Eligible Properties | New construction or substantial rehabilitation of apartment properties |
Eligible Borrower | Single asset entity (for profit or nonprofit) |
Underwriting Occupancy | Maximum economic underwriting occupancy of:
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Tax & Insurance Escrows | Monthly deposits required |
Recourse | Nonrecourse – construction and permanent |
Commercial Space | Maximum 25% of gross floor area and maximum 20% of effective gross income; 20% vacancy rate applied |
Required Reports | Market Study, Appraisal, Architect/Cost Review and Phase I Environmental; CPA reviewed borrower financial or last fiscal year – sub rehab |
Prepayment | Typically 10% year one, declining 1% per year; other prepayment options available subject to market conditions |
Assumable | Subject to Arbor and HUD approval and payment of assumption fee |
Good Faith Deposit | Negotiable based on property type and loan size |
Expense Escrow | Yes – sufficient to cover Arbor’s expenses and third-party report costs |
Origination Fee | Negotiable |
HUD Application Fee | Nonrefundable – 0.3% of the loan amount: 0.15% of the loan amount due to HUD at pre-application submission; 0.15% at firm application |
HUD Inspection Fee | 0.5% of the mortgage amount for new construction; 0.5% of the cost of 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) or replacement of two 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) | Annual MIP Rates
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