HUD 223(a)7 Loan

Investing in a healthcare property can be a wise business decision, but getting financing for the project can be complex. During the loan phase, it is critical to have an expert help guide you. Whether you need to secure a loan for a purchase, acquisition, new construction, refinance or rehabilitation, LSG Lending Advisors has the industry knowledge and experience to ensure a successful transaction. We take the time to get to know our clients and create custom fit finance solutions that address their specific business needs.      

  • Over 7 years multifamily property loan underwriting experience.
  • Expert knowledge of financial terms and principles.
  • Highly experienced at guiding clients through complex transactions.
  • In depth analysis of current operating statements and projected financials.
  • Specialists in evaluating third party reports, including appraisals, environmental documents, market studies and project capital needs assessments.
  • Loan review documentation.
  • Tailor fit financing solutions for every client.

We are experts at helping our clients adhere to all FHA/HUD LEAN lending guidelines and can also access the best FHA/HUD LEAN approved lenders in the business. Give us a call today to discuss your unique  lending needs and how we can put our years of knowledge and experience to work for you. 

Refinance of Existing HUD Apartment Loan or Healthcare Loan

This program provides streamlined refinancing for currently insured multifamily and healthcare loans. This program allows borrowers to refinance their current mortgage with a new lender at a reduced rate, opportunity to extend their term up to 12 years and lower their debt service, in a quick efficient manner. The process can be completed in as little as two to four months.
 

Maximum HUD 223(a)(7) Loan Amount

  • HUD may approve a term up to 12 years beyond the remaining term of the existing mortgage, but not to exceed the original term.
  • Term not to exceed 75% of remaining economic life.
  • Loan proceeds can include the payoff of existing FHA-recognized indebtedness, the cost of refinancing, cost of critical and non-critical repairs (not to exceed $1,500 per unit), and deposits to reserve for replacement accounts.

Overview & Key Requirements of HUD 223(a)(7) Loan

Eligible Properties

  • Multifamily apartments or healthcare facilities currently insured under Sections 221(d), 223(f), 232, 241, 242, and 220.

Eligible Borrowers

  • Borrowers that currently have an existing HUD-insured multifamily loan.

Minimum Debt Service Coverage Ratio

  • 1.11% for market rate.
  • 1.05% for over 90% affordable.

Interest Rate

  • Fixed, subject to market conditions.

Rate Lock Deposit

  • 0.50% of mortgage amount collected at the time of the client’s acceptance of the Firm Commitment. The deposit will be held until the close of the transaction and refunded at the close.

Cash Out

  • Not allowed for this program.

Repairs/Replacements

  • Up to $1,500 per unit plus required life-safety and accessibility repairs.

Replacement Reserves

  • Annual deposits of a minimum of $250 per unit per year or higher as identified by the Physical Capital Needs Assessment (PCNA).  
  • Full replacement reserve balance on the current loan will be transferred at closing.

Prepayment

  • 2-year lockout followed by 8 years of declining pre-pay of 8%, 7%, 6%, 5%, 4%, 3%, 2%, and 1% (other terms may be negotiated)

Assumable Mortgage

  • Fully assumable, subject to HUD approval.

Critical Repairs 

  • Must be completed prior to closing.

Non-Critical Repairs

  • Must be completed within 12 months after closing.

HUD Fees for 223(a)(7) Loan

The borrower is responsible for HUD application fees.

HUD Fees for 223(a)(7) Loan

Lender Ordered Third-Party Reports for HUD 223(a)(7) Loan

PCNA is required if the last one was not completed in the last 5 years.

HUD Lender Fees for 223(a)(7) Loan

After the loan sizing, the processing fee (approximately $5,000) along with the required third-party reports are collected at the time of engagement with the lender.
 
The borrower is responsible for the costs listed below. These costs are mortgageable, and the costs vary based on the size and complexity of the transaction.
 
  • lender financing and placement fees (up to 3.5% of the final loan amount, and payable from mortgage proceeds at closing),
  • lender legal fees,
  • recording fees,
  • survey,
  • title insurance, and
  • borrower’s legal expenses.
 
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Estimated Timeline for HUD 223(a)(7) Loan

Once the lender inputs the information in the system, and the deal looks feasible, they will issue an Engagement Letter providing detailed information of the transaction. The timeline of the entire process should be completed in 2 to 3 months.
 
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Basic Checklist for HUD 223(a)(7) Loan Sizing

The information listed is required for the most accurate estimate for both the loan eligibility amount and costs for the loan. 
 
 
Checklist for HUD 223(a)(7) Loan Sizing

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