HUD/FHA
The HUD/FHA insured financing programs are very similar to conventional financing. The main difference is that you are applying to the U.S. Department of Housing and Urban Development (HUD) for Federal Housing Administration (FHA) mortgage insurance. With the government insuring your loan, MFC as lender, is able to supply our clients with dramatically better financing terms than a conventional loan, simply because the FHA insurance alleviates default risk. FHA insures mortgages for new construction, substantial rehabilitation, purchase, or refinance of apartment properties and health care related facilities. In order to qualify for FHA insurance, an application to HUD must be submitted through an FHA approved mortgagee in order obtain a commitment. MFC is a nationally approved HUD/FHA MAP (Multifamily Accelerated Processing) lender.
MAP Processing
MULTIFAMILY ACCELERATED PROCESSING (MAP) is a process that enables HUD-approved lenders to prepare, process, and submit loan applications for Federal Housing Administration (FHA) multifamily mortgage insurance. MAP has replaced all prior processing procedures with a single, national, streamlined process that provides greater lender responsibility and control to insure more timely and consistent results. The MAP program provides borrowers/developers with expedited decisions on loan applications. The lender’s responsibility is to underwrite the transaction, while HUD reviews. This results in better predictability and faster closing times.
Why choose FHA? Because the terms available today cannot be matched by any other conventional financing source. Terms include:
- Fully amortizing loan terms between 35 and 40 years with no call or balloon provisions.
- Non-recourse with no personal guarantees required.
- High loan-to-value limitation of 85% on refinances, 90% on new construction.
- Low debt service coverage of 1.17x on refinances/acquisitions and 1.11x on new construction loans.
- Assumability with HUD consent. Assumption of an existing FHA loan can translate into a higher sales price to an owner at a later date.
- Repairs, rehabilitation and other closing costs can be paid from mortgage proceeds.
- Lowest interest rates based upon a spread over the 10 year U.S. Treasury.
- Establishing an initial deposit to a replacement reserve account (can be funded out of closing proceeds) to ensure that capital improvement items can be completed as needed
Common HUD myths:
- FHA requires low-income units. FHA insures properties covering the entire range of the spectrum, from low-income to upscale urban/suburban properties. Low-income set-asides are essential ONLY if a borrower brings the requirement to HUD through tax credits, a bond issue, or other local municipal restriction.
- FHA controls an owner's rents and profits. This has not been true since 1983. Initial underwriting is based on current market rents, and an owner is expected to raise or lower rents in response to that particular sub-market.
- FHA provides the loan money. MFC is the lender. FHA provides the mortgage insurance that guarantees principal and interest payments to investors in the event of a default. MFC obtains a loan commitment insured by FHA and funds the loan through the secondary mortgage market.
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- Apartments
Refinance / Purchase |
- Apartments
New Construction / Substantial Rehabilitation |
- Healthcare
New Construction / Substantial Rehabilitation |
- Healthcare
Refinance / Purchase |
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