HUD 223(f) Loan Rates
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 223(f) Loan Rates for the acquisition and refinance of Multifamily properties change daily. They are tied to the 10-year treasury yield called the index, plus a spread that is determined by HUD. For example, if the treasury yield is 3.50% and the spread is 2.00%, the all-in rate is 5.50%. HUD tends to raise the spread when treasury yields rise and lower it when yields decline. Interest rates are .35% lower for buildings built green. Rates cannot be locked until Loan Approval.
Today's HUD 223(f) Multifamily Loan Rates 07/22/2022
| Green | Standard | Year Fixed | |
| HUD 223(f) for Purchase or Refinance | 5.62% | 6.02% | 35 Years |
How Long are HUD 223(f) Loan Rates Fixed For?
HUD 223(f) loan rates can be fixed for up to 35 years which also matches the term and amortization of the loan. But the actual number of years fixed is determined by what the appraiser states is the useful life of the property. For properties more than 25 years old with deferred maintenance, the fixed rate term might be determined to be 25 to 30 years. This can be mitigated by doing upgrades to the property to put it in very good condition.
Click on these links to learn about the Advantages of HUD Multifamily Loans and the
Disadvantages of HUD Multifamily Loans
And here’s a HUD Multifamily Loan Glossary with 74 terms defined for a fast look up.
How Do HUD 223(f) Loan Rates Compare to Fannie Mae and Freddie Mac?
HUD 223(f) loan rates are usually lower than Fannie Mae Multifamily Loan Rates and Freddie Mac Multifamily Loan Rates. In fact, HUD’s 35-year fixed rate is often lower than Fannie Mae, Freddie Mac’s and most banks 10-year fixed rate. Both Fannie and Freddie raise the rate the longer the rate is fixed for. Both raise the rate based on LTV and Debt Service Coverage Ratio (DSCR) and Freddie raises it based on the size of the market. HUD has the same rate for all DSCRs, and markets. Click on this link to review today’s Multifamily Loan Rates, for 12 popular apartment building loan programs.
What is the Rate Lock on the HUD 223(f) Loan?
The 223(f) loan cannot be rate locked until a day or two after HUD approves the loan. The process starts with the lender getting a real time quote from a Gennie Mae bond trader on Wall Street. Rates can often be lowered by shopping many bond shops competitively. To lock the rate the borrower needs to put down a .50% rate lock deposit. This is refunded at loan closing.
How Does the Mortgage Insurance Premium Effect Rates?
Because these loans are usually high leverage, mortgage insurance is required. This also enables HUD to guarantee the loan with the full faith and credit of the United States Government. Loan funds are actually raised from the sale of the Gennie Mae bonds which have the same high credit rating as the United States since HUD is guaranteeing them.
As the mortgage insurance premiums (MIP) are paid with the mortgage based on a percentage of the principal balance monthly, they are added into the rate. For green buildings this is .25% and for standard buildings .60%.
Do Interest Rates Stay the Same if the Loan is Assumed?
HUD 223(f) loans are assumable at the same rate as the original mortgage for the remaining term of the loan. This is a huge benefit for both buyer and seller when rates are high since the HUD loan likely has a much lower fixed rate with many years remaining on the loan. HUD loans are generally easier to assume than most other commercial loan types.