| Apartment New Construction FHA 221(d)(4) Loans Nationally Kendall Realty Advisors LLC Chicago, IL |
HUD - 221(d)(4) - New Construction or Substantial Rehabilitation of
Apartment Properties
ELIGIBLE PROPERTIES: Proposed new construction or substantial rehabilitation apartment properties.
Market Rate Rents and Affordable Rents.
In order to qualify as a substantial rehabilitation project either (1) the cost of repairs, replacements and
improvements exceeds the greater of 15% of the estimated replacement cost after completion of all
repairs, or (2) $6,500 per unit adjusted by the local HUD high cost percentage; or two or more building
systems are being replaced.
LOAN TYPE: Construction and permanent loan.
MAXIMUM LOAN:
New Construction: Amount equal to the lesser of:
1. Statutory unit mortgage limits adjusted by cost not attributable to dwelling use; or
2. 90% of the HUD estimated replacement cost; or
3. 1.11 debt service coverage.
Substantial Rehabilitation Projects: Amount equal to the lesser of the three criteria above; or
1. 90% of the sum of the HUD estimated cost of repair and rehabilitation and the “as is” value of the
property.
INTEREST RATES: Fixed rate determined by market rates at the time of rate lock.
AMORTIZATION: Construction loan which converts into a 40-year, fully amortizing loan.
PERSONAL RECOURSE: Non-recourse.
ASSUMABILITY: Assumable, subject to approval.
SUBORDINATE FINANCING: Generally not permitted, special requirements apply.
PREPAYMENT: Negotiable.
WAGE REQUIREMENTS: Adherence to Davis-Bacon prevailing wage laws is required.
ANNUAL MORTGAGE INSURANCE PREMIUM: During the construction period, the MIP is paid annually in
advance, based on a rate established by HUD. The rate is fixed at initial endorsement. After
commencement of amortization, the MIP is escrowed monthly based on the average principal balance.
ESCROWS: Monthly escrows for real estate taxes, property insurance, reserves for replacement (as
determined by HUD) and mortgage insurance premiums.
COMMERCIAL SPACE: Up to 10% of the gross floor area of the project. Commercial income cannot
exceed 15% of gross project income.
ENVIRONMENTAL ISSUES: Special rules apply for properties that are located in Flood Hazard Zones as
designated by FEMA. Phase I site assessment required.
APPLICATION FEE: A non-refundable fee of 0.3% of the requested mortgage amount is payable to HUD at
the time of application, plus estimated underwriting costs for market study, appraisal, architectural report,
cost analysis, environmental assessment and other loan processing costs.
INSPECTION FEE: For New Construction projects, 0.5% of the mortgage amount is payable to HUD at
Initial Endorsement. For Sub-Rehabilitation Projects, 0.5% of the cost of improvements is paid to HUD at
Initial Endorsement.
FINANCING AND PLACEMENT FEES: Negotiable.
LIHTC: Program can be used in conjunction with Low Income Housing Tax Credits.
BOND ENHANCEMENT: Program can be used to provide a AAA rating of tax exempt bonds.
CLOSING EXPENSES: Standard transaction costs, including legal fees, title insurance and survey.
BSPRA: Program permits the use of a Builders and Sponsors Profit and Risk Allowance for the partial
fulfillment of the equity requirement of the loan.
OTHER HUD REQUIREMENTS: Cash escrows or letters of credit are required for the following:
1. Fore casted operating deficits, to be released one year after final endorsement if break even
operations have been achieved.
2. 2% of the mortgage amount for working capital, to be released one year after project completion if
loan is not in default.
3. 100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending
on structure type) of the construction contract.
4. If not covered by performance and payment bond, 2.5% of the construction contract amount as
latent defects guarantee.
5. 100% of off-site construction costs.
HUD PROCESSING TIME: One or two stages for HUD Multifamily Accelerated Processing (MAP)
procedures:
1. Per-application Stage: 45 days for review.
2. Firm Commitment Stage: 45 days for review.
3. One stage combining items 1 and 2 above: 60 days.
PRELIMINARY SUBMISSION PACKAGE: Include the following in your request for a loan quote:
1. Property description and location map.
2. Number of units with breakdown of proposed rents by unit type.
3. Pro forma operating budget, including breakdown of other income.
4. Development cost estimate.
5. Acquisition cost of land.
6. Sponsor resume.
Scott Kendall 847-903-7578 kendallrealty@gmail.com
Charles Kendall 773-259-7074 kendallrealtyadv@gmail.com
Apartment Properties
ELIGIBLE PROPERTIES: Proposed new construction or substantial rehabilitation apartment properties.
Market Rate Rents and Affordable Rents.
In order to qualify as a substantial rehabilitation project either (1) the cost of repairs, replacements and
improvements exceeds the greater of 15% of the estimated replacement cost after completion of all
repairs, or (2) $6,500 per unit adjusted by the local HUD high cost percentage; or two or more building
systems are being replaced.
LOAN TYPE: Construction and permanent loan.
MAXIMUM LOAN:
New Construction: Amount equal to the lesser of:
1. Statutory unit mortgage limits adjusted by cost not attributable to dwelling use; or
2. 90% of the HUD estimated replacement cost; or
3. 1.11 debt service coverage.
Substantial Rehabilitation Projects: Amount equal to the lesser of the three criteria above; or
1. 90% of the sum of the HUD estimated cost of repair and rehabilitation and the “as is” value of the
property.
INTEREST RATES: Fixed rate determined by market rates at the time of rate lock.
AMORTIZATION: Construction loan which converts into a 40-year, fully amortizing loan.
PERSONAL RECOURSE: Non-recourse.
ASSUMABILITY: Assumable, subject to approval.
SUBORDINATE FINANCING: Generally not permitted, special requirements apply.
PREPAYMENT: Negotiable.
WAGE REQUIREMENTS: Adherence to Davis-Bacon prevailing wage laws is required.
ANNUAL MORTGAGE INSURANCE PREMIUM: During the construction period, the MIP is paid annually in
advance, based on a rate established by HUD. The rate is fixed at initial endorsement. After
commencement of amortization, the MIP is escrowed monthly based on the average principal balance.
ESCROWS: Monthly escrows for real estate taxes, property insurance, reserves for replacement (as
determined by HUD) and mortgage insurance premiums.
COMMERCIAL SPACE: Up to 10% of the gross floor area of the project. Commercial income cannot
exceed 15% of gross project income.
ENVIRONMENTAL ISSUES: Special rules apply for properties that are located in Flood Hazard Zones as
designated by FEMA. Phase I site assessment required.
APPLICATION FEE: A non-refundable fee of 0.3% of the requested mortgage amount is payable to HUD at
the time of application, plus estimated underwriting costs for market study, appraisal, architectural report,
cost analysis, environmental assessment and other loan processing costs.
INSPECTION FEE: For New Construction projects, 0.5% of the mortgage amount is payable to HUD at
Initial Endorsement. For Sub-Rehabilitation Projects, 0.5% of the cost of improvements is paid to HUD at
Initial Endorsement.
FINANCING AND PLACEMENT FEES: Negotiable.
LIHTC: Program can be used in conjunction with Low Income Housing Tax Credits.
BOND ENHANCEMENT: Program can be used to provide a AAA rating of tax exempt bonds.
CLOSING EXPENSES: Standard transaction costs, including legal fees, title insurance and survey.
BSPRA: Program permits the use of a Builders and Sponsors Profit and Risk Allowance for the partial
fulfillment of the equity requirement of the loan.
OTHER HUD REQUIREMENTS: Cash escrows or letters of credit are required for the following:
1. Fore casted operating deficits, to be released one year after final endorsement if break even
operations have been achieved.
2. 2% of the mortgage amount for working capital, to be released one year after project completion if
loan is not in default.
3. 100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending
on structure type) of the construction contract.
4. If not covered by performance and payment bond, 2.5% of the construction contract amount as
latent defects guarantee.
5. 100% of off-site construction costs.
HUD PROCESSING TIME: One or two stages for HUD Multifamily Accelerated Processing (MAP)
procedures:
1. Per-application Stage: 45 days for review.
2. Firm Commitment Stage: 45 days for review.
3. One stage combining items 1 and 2 above: 60 days.
PRELIMINARY SUBMISSION PACKAGE: Include the following in your request for a loan quote:
1. Property description and location map.
2. Number of units with breakdown of proposed rents by unit type.
3. Pro forma operating budget, including breakdown of other income.
4. Development cost estimate.
5. Acquisition cost of land.
6. Sponsor resume.
Scott Kendall 847-903-7578 kendallrealty@gmail.com
Charles Kendall 773-259-7074 kendallrealtyadv@gmail.com
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