FHA Loan Changes Boost Access to Affordable and Market-Rate Multifamily Financing
The U.S. Department of Housing and Urban Development (HUD) recently announced that new Federal Housing Administration (FHA) rules designed to boost housing production are now in effect. The new rules bring more favorable debt service coverage ratios (DSCRs), loan-to-cost ratios (LTC), and loan-to-value (LTV) ratios on certain types of FHA multifamily loans, unlocking more proceeds to borrowers.
Market Rate, Affordable, and Middle-Income FHA Loans Eligible
As of January 8, 2025, developers and lenders have more flexibility when obtaining multifamily loans. The FHA loan changes apply to all FHA-insured projects that have not yet reached initial endorsement as of the updated rules’ effective date. Specifically, the changes impact the following products:
Market Rate: FHA 221(d)(4) and FHA 223(f)
- DSCR reduced from 1.176x to 1.15x
- LTC/LTV increased from 85% to 87%
Affordable Housing: FHA 221(d)(4) and FHA 223(f)
- DSCR reduced from 1.15x to 1.11x
- LTC/LTV increased from 87% to 90%
Middle Income Housing*: FHA 221(d)(4)
- DSCR reduced from 1.176x to 1.11x
- LTC increased from 85% to 90%
*Properties with 50% of units at 60%-120% Area Median Income (AMI) are defined as those with a use restriction period of 10 years (or a waiver for less) and monitored by a state or local governmental entity.
With the changes, the FHA also aims to make its loans more competitive by decreasing the cash needed to close a transaction with the agency.
Your Financing Partner
As a Top 20 FHA Multifamily Lender, Arbor is licensed by HUD to administer FHA mortgage insurance programs for long-term, non-recourse financing for market-rate and affordable apartments and cooperatives, assisted living facilities, skilled nursing facilities, and seniors housing. First-class customer service is our priority, and Arbor is an FHA Multifamily Accelerated Processing (MAP) Lender providing access to flexible FHA multifamily loan programs on an expedited basis and financing for acquisitions, refinancing, moderate rehabilitation, substantial rehabilitation, or new construction.
Contact us today to learn how Arbor can help you achieve your investment goals.
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