Proposed new construction or substantial rehabilitation of apartment properties. 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 $6,500 per unit adjusted by the local FHA high cost percentage; or (2) two or more building systems are being replaced.
The borrower must be chartered under Chapter 501(c)(3) of the Internal Revenue Code.
Construction and permanent loans.
Amount equal to the lesser of:
Statutory unit mortgage limits adjusted by cost not attributable to dwelling use; or
100% of the FHA estimated replacement cost; or
1.05 debt service coverage.
Substantial Rehabilitation Projects:
Amount equal to the lesser of the three criteria above; or
100% of the sum of the FHA estimated cost of repair and rehabilitation and the “as is” value of the property.
Fixed rate determined by market rates at the time of rate lock.
Construction loan which converts into a 40-year, fully amortizing loan.
Assumable, subject to Walker Dunlop approval.
Generally not permitted, special requirements apply.
Negotiable, but cannot be prepaid in full without prior FHA approval.
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 FHA. The rate is fixed at initial endorsement. After commencement of amortization, the MIP is escrowed monthly based on the average principal balance.
Monthly escrows for real estate taxes, property insurance, reserves for replacement (as determined by FHA) and mortgage insurance premiums.
Up to 10% of the gross floor area of the project.
Commercial income cannot exceed 15% of gross project income.
Special rules apply for properties which are located in Flood Hazard Zones as designated by FEMA.
A non-refundable fee of 0.3% of the requested mortgage amount is payable to FHA at the time of application, plus estimated underwriting costs for market study, appraisal, architectural/engineering report, cost analysis, environmental assessment and other loan processing costs.
For New Construction projects, 0.5% of the mortgage amount is payable to FHA at Initial Endorsement. For Sub-Rehabilitation Projects, 0.5% of the cost of improvements is paid to FHA at Initial Endorsement.
FINANCING AND PLACEMENT FEES:
Standard transaction costs, including legal fees, title insurance and survey.
Based on a sliding scale, 8% of the mortgage with a minimum of $40,000 and a maximum of $400,000.
Program can be used to provide a AAA rating of tax exempt bonds.
OTHER FHA REQUIREMENTS:
Cash escrows or letters of credit are required for the following:
Forecasted operating deficits, to be released one year after final endorsement if breakeven operations have been achieved.
2% of the mortgage amount for working capital, to be released one year after project completion if loan is not in default.
100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending on structure type) of the construction contract.
If not covered by performance and payment bond, 2.5% of the construction contract amount as latent defects guarantee.
100% of off-site construction costs.
FHA PROCESSING TIME:
One or two stages for FHA Multifamily Accelerated Processing (MAP) Procedures:
Pre-Application Stage: 45 days for review.
Firm Commitment Stage: 45 days for review.
One stage combining items 1 and 2 above: 60 days.
PRELIMINARY SUBMISSION PACKAGE:
Include the following in your request for a loan quote:
- Property description and location map.
- Number of units with breakdown of proposed rents by unit type.
- Pro forma operating budget, including breakdown of other income.
- Development cost estimate.
- Acquisition cost of land.
- Sponsor resume.
This is a summary of general program terms, which are subject to change. This is not a commitment to lend.