FHA-insured loans offer several benefits to borrowers. These include lower down payments, lower closing costs, and more flexible credit requirements. Additionally, FHA-insured loans are backed by the Federal Housing Administration, which provides lenders with additional protection against loan defaults. This encourages lenders to lend to borrowers that they might ordinarily see as too risky. For more information, please see the following sources:

• 203(b) Loan Program
• HUD 221(d)(4) Loan Program
• HUD 223(f) Loan Program
• HUD 232 Loan Program

FHA-insured loans require mortgage insurance premiums (MIPs), an FHA application fee of 0.30% of the entire loan amount, an FHA inspection fee of 0.50% of the loan amount, and developers are required to pay for a variety of third-party reports, including environmental assessments.

For more information, please see the following sources:

• FHA-Insured Loans Definition
• Insurance Requirements
• HUD 241(a) Loans

Eligible Properties for FHA-insured Loans:

In general, to be eligible for FHA-insured loans, a property must:

• Have 5+ residential units
• Have complete kitchens and bathrooms for each unit
• Be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
• Be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
• Be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
• Not be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
• Have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process

In addition, FHA-insured multifamily and healthcare properties with existing HUD mortgages of all types are eligible - market-rate, mixed-income, subsidized, and affordable properties.

FHA-insured loans offer several advantages over conventional loans. First, they are backed by the Federal Housing Administration, which provides lenders with additional security and protection against loan defaults. This encourages lenders to lend to borrowers that they might ordinarily see as too risky. Additionally, FHA-insured loans often have lower down payment requirements than conventional loans, making them more accessible to borrowers with limited funds. Finally, FHA-insured loans are fully assumable, meaning that a buyer of an apartment community can take advantage of an existing loan's lower, fixed interest rates, even if rates are otherwise climbing. For more information, see 5 Myths About FHA-Insured Multifamily Loans.

The disadvantages of FHA-insured loans include:

• Requires a variety of third-party reports, including environmental assessments, architectural and engineering reports, and full HUD/FHA appraisals
• Requires an FHA application fee of 0.30% of the loan amount and a 0.50% FHA inspection fee
• Requires a one-time mortgage insurance premium (MIP) at closing, and payment of monthly MIPs throughout the duration of the loan
• Requires that borrower/owner makes regular contributions to a replacement reserve fund
• Requires annual audited financial statements from owners