FHA® 231

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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 Actual construction period plus 40 years (fully amortizing with interest only payable during construction period). Term not to exceed 75% of economic life
Maximum Loan Amount

The lessor 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 Properties New construction or substantial rehabilitation for age-restricted properties (tenants limited to 62 years and over)
Eligible Borrowers 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 10% of gross floor area and maximum 15% of potential 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, a non-refundable review fee of 15 bps (50% of the firm commitment application V72016 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) 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 0.70%
  • Affordable Properties: 0.35%
  • Broadly Affordable or Energy Efficient Properties: 0.25%
Arbor Commercial Mortgage | arbor.com | 800.ARBOR.10

V72016