The HUD 221(d)(4) loan program is for new construction or substantial rehabilitation of multifamily rental or cooperative housing. It is a complex process that often involves specialized consultants and Multifamily Accelerated Processing (MAP) approved lenders, and there are many documents and requirements that must be met to receive a firm commitment and qualify for the loan.
Here is a general checklist of items that should be considered for the HUD 221(d)(4) loan application process:
- Property Information
- Address of the property
- Type of property (e.g., multifamily, senior housing, student housing)
- Number of units
- Property description and history
- Zoning and land use requirements
- Borrower Information
- Name of borrower
- Legal entity type (e.g., corporation, LLC)
- Ownership structure
- Financial history and stability
- Creditworthiness
- Financial Information
- Project budget
- Sources and uses of funds
- Pro forma financial statements
- Operating budget and rent roll
- Market analysis and rent comparables
- Cash flow projections
- Construction Information
- Architectural plans and specifications
- Engineering reports
- Environmental assessments
- Contractor information
- Construction timeline and milestones
- Project management plan
- Legal Information
- Title report and insurance
- Appraisals and valuations
- Survey
- Loan agreements and documents
- Insurance requirements
- Other Requirements
- HUD application fee
- HUD processing fee
- Lender application fee
- Environmental reviews and approvals
- Compliance with Fair Housing Act and Americans with Disabilities Act requirements
Some of the key underwriting criteria for the HUD 221(d)(4) loan program include:
- Creditworthiness: The borrower must have a good credit history and be able to demonstrate financial stability.
- Equity contribution: The borrower must provide a minimum equity contribution of 10% of the total project cost, which can be in the form of cash, land, or other assets.
- Debt service coverage ratio (DSCR): The DSCR measures the project’s ability to generate enough cash flow to cover its debt obligations. HUD requires a minimum DSCR of 1.20x for the first year of operation.
- Loan-to-cost (LTC) ratio: The LTC ratio is the ratio of the loan amount to the total cost of the project. HUD requires a maximum LTC ratio of 85% for market rate properties and 90% for affordable properties.
- Loan-to-value (LTV) ratio: The LTV ratio is the ratio of the loan amount to the appraised value of the property. HUD requires a maximum LTV ratio of 83.3%.
- Market analysis: The borrower must provide a market analysis that demonstrates the demand for the proposed project and the ability to achieve market rents.
- Construction experience: The borrower must have experience in the construction or rehabilitation of similar projects.
- Property management experience: The borrower must have experience in the management of similar properties.
- Environmental and engineering reports: The borrower must provide environmental and engineering reports that demonstrate the safety and soundness of the proposed project.
- Compliance with HUD regulations: The borrower must comply with all HUD regulations, including fair housing and accessibility requirements.
It’s important to note that these underwriting lists and criteria are not exhaustive, and each lender may have additional requirements. Additionally, the underwriting criteria for the HUD 221(d)(4) loan program are subject to change, so it’s important to consult with a HUD-approved lender for the most up-to-date information and requirements.
