HUD 223(f) Loans – 2022 Guide


There is a multitude of financing options for multifamily properties.

But which one is the best?

While some may seem appealing, you want to make sure that you select an option that checks all the boxes.

Don’t compromise with an option that doesn’t give you the best financing possible!

HUD 223(f) loans can be a great option for financing a multifamily property.

While many think that these loans are only for nonprofits or low-income housing, this isn’t the case! There’s a reason why they’re called the industry’s most affordable financing tool.

In this article, we’ll explain how HUD 223(f) loans work, how you can qualify and apply for them, how to use them, and more!

HUD 223(f) Loans: How they work

The HUD, or Department of Housing and Urban Development, is in charge of overseeing these loan insurance programs.

The loans are available to people seeking to buy or refinance a multifamily property.

The HUD isn’t the one that actually provides you with the loan. Instead, they guarantee a loan from an approved lender, like a bank, in the event of mortgage default.

The HUD 223(f) loan is one type of loan guaranteed by the HUD.

These loans are on a max 35-year term and amortize over that time period.

They offer competitive interest rates, but lenders will set a MIP of around 1% at closing.

HUD 223(f) loans also come with an annual audit to ensure financing is obtained by borrowers who are actually eligible.

Most lenders will offer a minimum of $1M for these loans. There are exceptions on a case-by-case basis.

How to qualify for a HUD 223(f) Loan

As mentioned, many believe that HUD 223(f) loans are only eligible for non-profit financing.

In reality, eligibility conditions are much more wide-reaching. Here are qualities that you need to consider for HUD 223(f) eligibility.

Property Conditions

Properties need to have at least 5 residential units with kitchens and baths in each unit. Commercial space on the property cannot represent more than 20% of the rentable space.

Rehabilitations cannot have happened in the last 3 years. This doesn’t include non-critical repairs.

You cannot use this loan on properties that need large rehabilitations.

The property can either be for-profit or non-profit.

The HUD doesn’t discriminate in this area.


Prior to the loan application, the property needs to have had an average of 85% occupancy for at least 6 months.

Borrower eligibility

Borrowers that are eligible for HUD 223(f) loans should be single-asset, bankruptcy-remote property owners.

How to use a HUD 223(f) Loan

HUD 223(f) loans can be used to purchase or refinance a variety of multifamily properties. They need to fit the property conditions described in the previous section.

Some of these properties include detached, semi-detached, row, walk-up, or elevator/apartment properties.

It’s important to consider loan amounts, leverage, and debt-service coverage ratios (DSCR).

These will change depending on a few factors.

  • Market-rate properties – 83.3% LTV / 83.3% amount of debt that can be serviced by net income
  • Affordable housing properties – 85% LTV / 87% amount of debt that can be serviced by net income
  • Rental Assistance Properties – 87% LTV / 90% amount of debt that can be serviced by net income
  • Refinancing – Whichever is higher between 80% LTV or 100% cost of refinancing
  • Purchasing – 100% of mortgageable costs, not including grants or tax credits

How to apply for a HUD 223(f) Loan

For a complete overview of the application process, check out this form

The application process for HUD 223(f) loans can be broken down into 5 major sections, with some smaller processes at the end.


This is where the lender presents documents highlighting the value of the loan. They will also assess any risk that the borrower may present.

The lender will inquire about your financial projects and history here.

Third-Party Reports

The HUD will require some third-party forms to be completed by the borrower. You’re going to need:

  • Full property appraisal forms – used to assess the value of the property according to market
  • Environmental Assessment – examines the property to make sure there are no dangerous materials
  • Market study – Examines changes in property value through analyzing market trends
  • Project capital needs assessment – Looks at how much it will cost to maintain a property
  • HUD Seismic report (if the property is located in certain seismic zones) – Report to dictate if a property is safe in the event of an earthquake

Management agent

This is where you will select a party to manage the property on your behalf. This will be an individual or a firm that specializes in property management.

You will submit their resume, management plans, and conflict resolution plans.

Documentation (legal, property, financial)

During this stage, borrowers will need to get documents that the HUD and the lending party will assess.


Legal documentation refers to – IDs, certifications of outstanding obligations, and HUD letters.


Property documents outline aspects of the property the borrower wishes to finance.

This includes zoning and building codes, code violations, utility documents, and repairs.


The lender will analyze financial documents here.

These are any existing lease agreements, tax forms, and tax statements.

Operations and closing

Finally, the lending party and HUD will ask about your property management plans.

To assess this, they will look at your operating budget. Make sure you draw up a plan for your operating budget.

They will also look at your occupancy rates for the last 3 years.

Once everything has been submitted, it could take anywhere from 100-150 days to close.

How to pay back your HUD 223(f) Loan

HUD 223(f) loans are fully amortizing, paid according to a schedule set by the lender.

These loans have a minimum term of 10 years and a maximum term of 35 years.

Interest rates for these loans are competitive and fixed through the entire term. More often than not, HUD 223(f) loan interest rates are lower than competitors as well!

As mentioned though, borrowers will have to pay a MIP of 1% at closing. Lenders will often also need an annual rate of 0.25% – 0.6% depending on the property type.

There are prepayment penalties, but these stop after 10 years. There’s also a 1 to 2-year lockout, followed by a 10% to 1% declining penalty following the lockout.

Sample HUD 223(f) Loan Terms

Maximum Amount $3 000 000
Guarantee % 85% LTV
Guarantee Fee 3.5%
Term/Timeline 35 years
Amortization 35 years
Interest Rates 4.1% (fixed)
Additional Fees Application Fee – $25, 000

FHA application – 0.3% loan 

FHA inspection fee – $3000

Good faith deposit – 1% loan

Use of Proceeds  Purchasing multifamily (apartment) property – 7 rooms
Recourse Non-recourse
Assumability Fully assumable 

HUD 223(f) Loan vs HUD 221(d)(4) Loans

Check out this table for a quick overview of the differences between HUD 223(f) loans and HUD 221(d)(4) loans.

HUD 223(f) HUD 221(d)(4)
Loan Size $1 Million Minimum $4 Million Minimum
Interest Rate 4.10% to 4.75% Fixed (and MIP)

MIP of 1% at close and up to 0.65% annually 

3.10 to 4.10% Fixed               (no MIP)

MIP of 1% at close and up to 0.65% annually 

Terms Fixed and fully amortizing (up to 35 years)  Fixed and fully amortizing (up to 40 years) 

Additional 3 years for construction at fixed rate

Closing Timeline 4.5 to 6 months 5 to 11 months 


Pros and Cons of HUD 223(f) Loans

As with most loan options out there, there are pros and cons to choosing a HUD 223(f) loan:

Pros of HUD 223(f) Loans

  • Long terms
  • Competitive interest rates
  • Fully assumable
  • Non-recourse

Cons of HUD 223(f) Loans

  • Longer closing times than many other options (on average, takes about 60 days longer than a Freddie Mac or Fannie Mae multifamily loan to close)
  • The application process requires a lot of time and documentation
  • MIP at closing (1% of loan value)


Is it hard to get a HUD 223(f) loan?

While it isn’t hard, the application process can definitely feel tedious and drawn out. There are five “stages” of the application that each needs A LOT of documents to complete.

On top of that, closing times can be over 100 days long, whereas many competitors close in around 40-60 days.

Should I take out a HUD 223(f) loan?

A: These loans are the industry’s most affordable financing tool. They have long terms, competitive interest rates, and assumable and non-recourse.

If you plan on financing a multifamily home purchase or plan to refinance a multifamily home property, the HUD 223(f) loan will be one of, if not your best option.

Are HUD 223(f) loans expensive?

Yes, HUD 223(f) loans can be quite expensive compared to other loans.

There are a handful of fees that you’ll be responsible for.

There’s an application fee of around $25,000, an FHA application fee of 0.30%, an inspection fee, and even more.

Final Thoughts

HUD 223(f) loans are a great tool for soon-to-be multifamily property

It’s clear why these loans are so praised, with their exceptional terms eligibility.

Interested in applying for a HUD 223(f) loan? Check out Loanbase!

We created our platform to enable a streamlined process matching commercial borrowers and lenders.

By matching you with a lender that caters to your needs and financial situation, we’ve created the best way to navigate the loan market.

We’d love to help you along your journey.

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