Apartment Loans

How Does HUD Define Multifamily?

By Terry Painter/Mortgage Banker, Author of The Encyclopedia of Commercial Real Estate Advice – Wiley Publishers, Member of the By Terry Painter/Mortgage Forbes Business Council

 

HUD Defines Multifamily as a property that has a least 5 residential units occupied by one or more individuals. Each Unit must have a complete kitchen and a full bath. Multiple contiguous fourplexes on one or individual tax lots are considered multifamily.  Apartment Buildings, Senior Housing (62 and older): Independent Living, Intermediate Care, and Assisted Living Facilities are considered multifamily.

 

HUD’s Requirements for Property Condition

Buildings must be in good physical condition with all critical repairs completed within 12 months of HUD Multifamily loan closing. An extensive Property Condition Needs Assessment (PCNA) report is required by HUD to inspect the Structure, Plumbing, Electrical, and HVAC systems. Multifamily properties to be newly constructed, or rehabbed, must be in compliance with the Americans with Disability Act (ADA). Click on this link for HUD Multifamily Loan Requirements.

 

Click on this link to see today’s HUD Multifamily Loan Rates

 

Does HUD Define Multifamily as Affordable Rent Properties?

It is a misconception HUD mandates that multifamily properties have only affordable or low-income rents. Market rent, affordable rent and subsidized rent buildings are all acceptable multifamily properties. Click on this link to learn just about everything you might want to know about HUD Multifamily Loans, and on these links to learn more about Fannie Mae Multifamily Loans, and Freddie Mac Multifamily Loans.

 

And here’s a HUD Multifamily Loan Glossary with 74 terms defined for a fast look up.

 

How Does HUD Define Multifamily Building Styles? 

  • Garden Style 1 – 3 floors
  • Low-Rise Apartment Buildings 1 – 5 floors
  • Mid-Rise Apartment Buildings 6 – 12 floors.
  • High-Rise Apartment Building 13 floors or more

 

Does HUD Multifamily Allow Commercial Space?                                                           

HUD does allow multifamily properties to have commercial space. Mixed-Use Buildings must have most of the square footage and income derived from residential units.  Commercial space cannot occupy more than 25% of rentable square footage or generate more than 20% of the property’s effective gross income.

 

Click on this link if you would like to know What is the Difference Between FHA and HUD

 

Does HUD Consider 5 or More Contiguous Homes Multifamily?

Buying Multiple Houses with a HUD/FHA Loan can get complicated. HUD does not consider Multiple Single-Family buildings multifamily. This is the case even if there are 5 or more homes on one tax lot. I have a client who recently wanted to refinance 48 contiguous single-family homes on one tax lot and this was not considered multifamily to HUD, where as almost every other commercial loan program would view it as multifamily. 

 

Does HUD Consider a Duplex, Triplex or Fourplex Multifamily?

Although many real estate professionals consider buildings with 2 – 4 units multifamily and call them that in their offering memorandums, HUD does not consider Duplexes, Triplexes multifamily even if there are enough of them to equal 5 units or more. However, multiple fourplexes on one or individual tax lots is considered multifamily and acceptable.  

 

Get Pre-Approved for Financing

Call one of our friendly loan officers to learn more about HUD Multifamily Financing and are other loan programs.

 

 

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