FHA/HUD Construction

Strong Communities, Stronger Partnerships

For over a decade, Berkadia FHA/HUD has guided clients through the intimidating, yet rewarding, world of FHA financing. We continue to fortify our position as industry trailblazers through our enhanced FHA/HUD Construction Loan platform.

Why Choose Berkadia?

CLIENT EXPERIENCE

Berkadia FHA/HUD Construction manages all 221(d)(4) and 223(f) projects including heavy repairs. Our automated processes and industry-leading technology allow our construction loan experts to prioritize your project and proactively monitor all aspects of the HUD process.

TECHNOLOGY

Berkadia is committed to long-term investments in people and technology. Our partnership with Rabbet, the leading provider of construction finance software, allows us to more efficiently manage and oversee FHA construction loans. Rabbet’s HUD construction platform is the first and only HUD-focused solution of its kind. With Rabbet, Berkadia FHA/HUD has improved processing times and developed insights to better advise customers.

ENHANCED PORTFOLIO MANAGEMENT

At Berkadia, our goal is to maintain a healthy portfolio of construction loans by monitoring and resolving construction risk. We deliver expedited reviews, processing, and approvals for 221(d)(4) and 223(f) projects utilizing a HUD-approved delegated authority lender for 221(d)(4) and 223(f) projects.

Our 221(d)(4) Platform is Best in the Industry

Top HUD Multifamily New Construction/Sub-Rehab Lender by Volume, 2018-2023

$3.1B

Track record

Transaction
Volume
$1.2B
in HUD loans financed in 2023 across 49 transactions
Construction
Portfolio
54
active 221(d)(4) HUD Construction projects  in 2023
FHA-Insured
Lender
#1
HUD Lender
nationwide in 2023
New Construction
Lender
#1
HUD New Construction Lender in 2023

Recent Transactions

2131 Graf Phase II

Bozeman, MT

$72.8 million
HUD 221(d)(4)

Carson Gardens

Carson, CA

$32.37 million
HUD 223(f) Heavy

Wakefield Terrace

Waldorf, MD

$30.3 million
HUD 221(d)(4)

TALENT

Our specialists have extensive knowledge and expertise in commercial construction, architecture, multifamily development, affordable housing, inspections, and HUD programs with a presence in all five HUD regions.

Ryan Duff

VP, FHA Construction & Closing

Rene Coronado

AVP, FHA Construction

Oge Ekeh

Senior Closer, Construction

Chris Ferguson

Senior Construction
Loan Specialist

Michael Finley

Senior Construction
Loan Specialist

Toni Burrow

Construction Loan Specialist

Hunt Lucas

Construction Loan Specialist

Arber Selimaj

Construction Loan Specialist

Kristen Cook

Senior Closer, Construction

Emilie Gelsky

Construction Loan Specialist

RESEARCH, INSIGHTS and News

Access the latest market-driven insights, research and news from Berkadia.

News

Englewood Senior, Atlanta, GA | Financed by Berkadia 2024

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Insights

Takeaways From the 2024 ELA Conference

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Insights

Berkadia Ranks #1 HUD Lender Nationwide in 2023

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News

19th & Graf Apartment Homes, Bozeman, MT | Financed by Berkadia 2023

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FHA/HUD cONSTRUCTION Programs

Berkadia FHA/HUD 221(d)(4) and 220 Loan Program

Download Program Details | Connect with a Mortgage Banker

NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION

  • High leverage construction/permanent financing
  • Permanent interest rate locked prior to construction
  • Interest rate modification program available post completion

Market Rate Properties

  • Maximum 85% loan-to-cost
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

  • Maximum 87% loan-to-cost
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

  • Maximum 90% loan-to-cost
  • 1.11x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate and Term

  • Fixed interest, same rate for construction and permanent phases
  • Construction phase +40-year permanent amortization
  • Interest only during construction
  • Fully amortizing
  • Conversion to permanent phase at construction completion (no DSCR test for conversion)

Prepayment

  • Flexible 10 year prepayment structure

Additional Requirements

  • Davis-Bacon Act prevailing wages apply
  • New Construction Escrows
    (1) Working Capital: 4% of loan amount
    (2) Operating Deficit Escrow: 3% of loan amount
  • Substantial Rehab Escrows:
    (1) Working Capital: 2% of loan amount
    Waivable for certain Rent Assisted or LIHTC properties
  • Cost certification required for market rate properties
  • Limits on commercial income and space apply; 20% minimum vacancy

APPLICATION TIMELINE

Market Rate (Two-Stage Processing)

  • 30 days | Concept submission and meeting with HUD
  • 45-60 days | Pre-application underwriting by Berkadia (app, mkt study, phase I)
  • 45-60 days | HUD pre-application review
  • 45-60 days | Firm application underwriting by Berkadia (100% plans/specs)
  • 45-60 days | HUD firm application review
  • 45-60 days | Rate lock and closing

Affordable/Rent Assisted (Single-Stage Processing)

  • 45-60 days | Firm application underwriting by Berkadia
  • 45-60 days | HUD firm application review
  • 45-60 days | Rate lock and closing
Berkadia FHA/HUD 221(d)(4) Loan Program

Download Program Details | Connect with Mortgage Banker

HUD 221(D)(4) NEW CONSTRUCTION LOAN
PRODUCT OVERVIEW

The HUD 221(d)(4) New Construction program provides a non-recourse, fully amortizing, fixed-rate assumable mortgage. The loan is structured as interest-only during the construction period linitial endorsement) where upon completion of construction and up to two months for cost certification (final endorsement), amortization will begin for a 40-year term. This program also allows for the substantial rehabilitation of existing properties to included adaptive reuse.

Loan Amount:

The HUD loan amount will be limited to the lowest of the following criterion:

  • 85% of: HUD approved mortgageable hard and soft construction costs plus the land value
  • Amount based on Limitations per Family Unit
  • Amount based on Debt Service Coverage (1.176x)

Interest Rate:

The interest rate can be locked upon HUD’s issuance of a Firm Commitment. The lender will work with Government National Mortgage Association (GNMA) investors to provide the borrower with the current market interest rate. A refundable rate lock deposit is required from the borrower that is to be credited at initial endorsement. The interest rate is locked for the entire term of both the construction period (plus two months for cost certification) and the 40-year permanent mortgage.

The construction and permanent interest are typically locked at the same rate. In certain circumstances, the GNMA investor may consider a split-rate where the construction interest rate is higher than the market rate allowing for a permanent rate to be below market. The availability of this option is dependent on the market conditions at the time of rate lock and whether this structure will be beneficial to the borrower.

Pre-Payment Period

The standard pre-payment penalty typically offered by GNMA investors is set for the initial ten years of the permanent mortgage. The most common structure declines 1% per year beginning at 10% in the first year. Alterations to this pre-payment structure can be negotiated with the GNMA investor based on the borrower’s needs. Any approved pre-payment penalty changes may have an impact on the market interest rate.

Rate Reset

Post Final Endorsement, if interest rates lower, there are options that allow the borrower to lower the interest rate of the 221(d)

(4) loan. This can be accomplished through an Interest Rate Reduction (IRR), or via the HUD 223(a)(7) program. Based upon the interest rate at the time and what the current pre-payment penalty is for the loan, the lender will present both options to the borrower and discuss if either is a viable and/or recommendable option at that time as well as if there are any other options that the borrower is trying to accomplish for the property.

Berkadia FHA/HUD 223(f) Loan Program

Download Program Details | Connect with Mortgage Banker

REFINANCE OR ACQUISITION

  • 35-year, fixed-rate financing
  • Ability to modify interest rate during term
  • High-leverage permanent financing

Market Rate Properties

  • 85% loan-to-value (80% if cash-out)
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

  • 87% loan-to-value (80% if cash-out)
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

  • 90% loan-to-value (80% if cash-out)
  • 1.11x DSCR with 3% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate & Term

  • 35-year rate (fully amortizing) subject to market conditions at time of rate lock

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Initial deposit to replacement reserve
  • Annual deposit to replacement reserve
  • Annual audited financial statements
  • Surplus cash distributions monthly

Heavy 223(f)

  • Non-critical repairs up to $40,000 per unit
  • Project architect required
  • Lender Needs Assessor reviews planned scope of work
  • Detailed plans of scope of work and cost estimate required
  • Davis-Bacon Act does not apply to Heavy 223(f)
  • General Contractor could be required

APPLICATION TIMELINE

Preliminary Loan Analysis

  • Initial loan sizing
  • Based on information provided by sponsor

Concept Submission and Meeting | 30 days Optional

  • Limited review of property information and sponsor
  • No third-party reports required

Berkadia Firm Application Underwriting | 45-60 days

  • Third-party due diligence
  • Collect required forms, certifications, and documents
  • CPA review of property operating statement for prior fiscal year
  • Obtain green certification, if applicable

HUD Firm Application Review | 45-60 days

  • HUD property inspection
  • National/regional loan committee review (depending on loan size)
  • HUD firm commitment

Closing (Final Endorsement) | 45-60 days

  • Interest rate lock
  • Closing and loan documents review
  • Completion of critical repairs
Berkadia FHA/HUD 241(a) Loan Program

Download Program Details | Connect with Mortgage Banker

FINANCE IMPROVEMENTS, ADDITIONS OR REPAIRS TO EXISTING FHA-INSURED PROPERTIES

  • Davis-Bacon Act not required when first mortgage is a 223(f)
  • Allows additional units to be built on contiguous sites

Market-Rate Properties

  • 90% loan-to-cost
  • 1.11x Debt Service Coverage
  • Statutory mortgage limitation (per unit)

Interest Rate and Term

  • Fixed rate (fully amortizing) subject to market conditions at rate lock
  • Coterminous with underlying first mortgage

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Davis-Bacon Act prevailing wages apply
  • New Construction Escrows:
    (1) Working Capital: 4% of loan amount
    (2) Operating Deficit Escrow: 3% of loan amount
  • Substantial Rehab Escrows:
    (1) Working Capital: 2% of loan amount
    Waivable for certain Rent Assisted or LIHTC properties
  • Cost certification required for market-rate properties
  • Limits on commercial income and space apply; 20% minimum vacancy

Other

  • Davis-Bacon Act requirements apply to the cost of improvements, additions or repairs only if the underlying first mortgage was subject to Davis-Bacon
  • A cross-default provision will be placed in the loan documents
  • If different lenders will service the first and supplemental loan, an agreement must be executed designating a single firm to hold and manage the reserve account

APPLICATION TIMELINE

Market Rate (Two-Stage Processing)

  • 30 days | Concept submission and meeting with HUD
  • 45 – 60 days | Pre-application underwriting by Berkadia (app, mkt study, phase I)
  • 45 – 60 days | HUD pre-application review
  • 45 – 60 days | Firm application underwriting by Berkadia (100% plans/specs)
  • 45 – 60 days | HUD firm application review
  • 45 – 60 days | Rate lock and closing

Affordable/Rent Assisted (Single-Stage Processing)

  • 45 – 60 days | Firm application underwriting by Berkadia
  • 45 – 60 days | HUD firm application review
  • 45 – 60 days | Rate lock and closing
Berkadia FHA/HUD 231 Loan Program

Download Program Details | Connect with Mortgage Banker

High Leverage Construction/Permanent Loan Program for Age Restricted Properties

  • For independent living projects reserved for tenants 62 and over
  • Also for tenants with physical or mental impairment that substantially limits major life activities
  • No mandatory services or meal program allowed
  • Units must be designed for and marketed to the elderly and/or disabled

Market Rate Properties

  • 85% loan-to-value (80% if cash-out)
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

  • Maximum 87% loan-to-cost
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

  • Maximum 90% loan-to-cost
  • 1.11x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate & Term

  • Fixed interest, same rate for construction and permanent phases
  • Construction phase + 40-year permanent amortization
  • Interest only during construction
  • Fully amortizing
  • Conversion to permanent phase at construction completion
    (no DSCR test for conversion)
  • Interest rate modification program available post completion35-year rate (fully amortizing) subject to market conditions at time of rate lock

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Davis-Bacon Act prevailing wages apply
  • New Construction Escrows:
    (1) Working Capital: 4% of loan amount
    (2) Operating Deficit Escrow: 16-20 months of Debt Service
  • Substantial Rehab Escrows:
    (1) Working Capital: 2% of loan amount
    Waivable for certain Rent Assisted or LIHTC properties.
  • Cost certification required for market rate properties
  • Limits on commercial income and space apply; 20% minimum vacancy

APPLICATION TIMELINE

Market Rate (Two-Stage Processing)

  • 30 days: Concept submission and meeting with HUD
  • 45 – 60 days: Pre-application underwriting by Berkadia
    (app, mkt study, phase I)
  • 45 – 60 days: HUD pre-application review
  • 45 – 60 days: Firm application underwriting by Berkadia
    (100% plans/specs)
  • 45 – 60 days: HUD firm application review
  • 45 – 60 days: Rate lock and closing

Affordable/Rent Assisted (Single-Stage Processing)

  • 45 – 60 days: Firm application underwriting by Berkadia
  • 45 – 60 days: HUD firm application review
  • 45 – 60 days: Rate lock and closing
Berkadia FHA/HUD 232 Loan Program

Download Program Details | Connect with Mortgage Banker

Non-recourse, fully assumable financing for construction or substantial rehabilitation
of skilled nursing, assisted living, and memory care communities.

Eligible Properties

  • Licensed skilled nursing, assisted living, and memory care communities, including independent living up to 25% of total bed count

Loan Features

  • Low, fixed interest rates
  • Up to 40-year term, fully amortizing (interest-only during construction period)
  • Non-recourse and fully assumable
  • Combined construction and permanent loan

Mortgage Loan Amount

The mortgage is limited to the lesser of:

  • 75% stabilized LTV assisted living (80% for non-profit borrowers) or 80% LTV for skilled nursing (85% for non-profit borrowers)
  • 90% of certifiable transaction costs
  • 1.45x underwritten debt service coverage ratio

Prepayment

  • Standard prepayment schedule is 10% in year one, stepping down 1% annually, however, alternative prepayment structures are available subject to market conditions

Escrow

  • Working capital escrow of 4% of loan amount, unused portion will be returned to borrower
  • Initial operating deficit calculated by HUD and available upon issuance of certificate of occupancy
  • Minor movable equipment
  • Monthly escrows for real estate taxes, property insurance, and replacement reserves are required

Transaction Costs

  • Purchase price of land/buildings or existing debt
  • Certified construction costs, bond premium, builder’s profit allowance, and other fees
  • Architectural fees for design and supervision
  • Appraisal, engineering, and environmental inspection reports
  • MIP during construction
  • Interest, insurance, and real estate taxes during construction
  • Legal, organizational, audit, title & recording, and survey fees
  • HUD application fee of 0.30% & HUD inspection fee of 0.50%
  • FF&E – major fixed and movable items

Download Program Details | Connect with Mortgage Banker

REFINANCE OR ACQUISITION

  • 35-year, fixed-rate financing
  • Ability to modify interest rate during term
  • High-leverage permanent financing

Market Rate Properties

  • 85% loan-to-value (80% if cash-out)
  • 1.176x DSCR with 7% vacancy
  • Statutory mortgage limitation (per unit)

Affordable Properties
(LIHTC Minimums)

  • 87% loan-to-value (80% if cash-out)
  • 1.15x DSCR with 5% vacancy
  • Statutory mortgage limitation (per unit)

Rent Assisted Properties
(Section 8)

  • 90% loan-to-value (80% if cash-out)
  • 1.11x DSCR with 3% vacancy
  • Statutory mortgage limitation (per unit)

Interest Rate & Term

  • 35-year rate (fully amortizing) subject to market conditions at time of rate lock

Prepayment

  • Flexible 10-year prepayment structure

Additional Requirements

  • Initial deposit to replacement reserve
  • Annual deposit to replacement reserve
  • Annual audited financial statements
  • Surplus cash distributions monthly

Heavy 223(f)

  • Non-critical repairs up to $40,000 per unit
  • Project architect required
  • Lender Needs Assessor reviews planned scope of work
  • Detailed plans of scope of work and cost estimate required
  • Davis-Bacon Act does not apply to Heavy 223(f)
  • General Contractor could be required

APPLICATION TIMELINE

Preliminary Loan Analysis

  • Initial loan sizing
  • Based on information provided by sponsor

Concept Submission and Meeting | 30 days Optional

  • Limited review of property information and sponsor
  • No third-party reports required

Berkadia Firm Application Underwriting | 45-60 days

  • Third-party due diligence
  • Collect required forms, certifications, and documents
  • CPA review of property operating statement for prior fiscal year
  • Obtain green certification, if applicable

HUD Firm Application Review | 45-60 days

  • HUD property inspection
  • National/regional loan committee review (depending on loan size)
  • HUD firm commitment

Closing (Final Endorsement) | 45-60 days

  • Interest rate lock
  • Closing and loan documents review
  • Completion of critical repairs

BERKADIA FHA/HUD CONSTRUCTION

Berkadia FHA/HUD Construction manages all 221(d)(4) and 223(f) projects, including heavy repairs. We have consistently been ranked as the Top HUD Multifamily New Construction/Sub-Rehab Lender by volume from 2018-2022. Our automated processes and industry-leading technology allow our construction experts to prioritize your project and proactively monitor all aspects of the HUD process.

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Integrated Solutions

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