Do HUD 223(f) Loans Place Limits on Rehabilitation Work?
HUD 223(f) loans allow for rehab work up to $15,000 per unit, which is multiplied by a local cost factor , often between 190-270%. In addition, renovations are not permitted to replace more than 50% of any two major building components, such as electrical systems, plumbi
HUD 223(f) Loans and Rehabilitation Limits
Unlike some other kinds of HUD multifamily loans, such as HUD 221(d)(4) loans, HUD 223(f) loans are not designed specifically for construction or rehabilitation. However, that doesn't mean that borrowers can't do some rehab work on their property. They just can't do a significant amount.
Specifically, HUD 223(f) loans allow for rehab work up to $15,000 per unit, which is multiplied by a local cost factor, often between 190-270%. In addition, renovations may not replace more than 50% of any two major building components, such as electrical systems, plumbing, mechanical systems, building structural systems, and the building envelope.
What Are the Local Cost Factors in Major Cities?
Here are a few examples of the local cost factors in major cities-- and how much per unit of renovations a borrower can make with a HUD 223(f) loan:
New York City: 270%: $40,500
Atlanta: 259%: $38,850
Fort Worth: 223%: $33,450
Los Angeles: 270%: $40,500
What types of rehabilitation work are allowed under HUD 223(f) loans?
HUD 223(f) loans allow for rehab work up to $15,000 per unit, which is multiplied by a local cost factor, often between 190-270%. In addition, renovations may not replace more than 50% of any two major building components, such as electrical systems, plumbing, mechanical systems, building structural systems, and the building envelope.
Here are a few examples of the local cost factors in major cities-- and how much per unit of renovations a borrower can make with a HUD 223(f) loan:
City Local Cost Factor Max Renovations Per Unit New York City 270% $40,500 Atlanta 259% $38,850 Fort Worth 223% $33,450 Los Angeles 270% $40,500 Are there any restrictions on the amount of rehabilitation work that can be done with a HUD 223(f) loan?
Yes, there are restrictions on the amount of rehabilitation work that can be done with a HUD 223(f) loan. Specifically, HUD 223(f) loans allow for rehab work up to $15,000 per unit, which is multiplied by a local cost factor, often between 190-270%. In addition, renovations may not replace more than 50% of any two major building components, such as electrical systems, plumbing, mechanical systems, building structural systems, and the building envelope.
Here are a few examples of the local cost factors in major cities-- and how much per unit of renovations a borrower can make with a HUD 223(f) loan:
City Local Cost Factor Max Rehab Cost Per Unit New York City 270% $40,500 Atlanta 259% $38,850 Fort Worth 223% $33,450 Los Angeles 270% $40,500 What types of improvements are not allowed under HUD 223(f) loans?
HUD 223(f) loans do not allow for significant rehabilitation work. Specifically, HUD 223(f) loans allow for rehab work up to $15,000 per unit, which is multiplied by a local cost factor, often between 190-270%. In addition, renovations may not replace more than 50% of any two major building components, such as electrical systems, plumbing, mechanical systems, building structural systems, and the building envelope.
For very large HUD 223(f) loans, HUD allows for certain geographic area adjustments. For example, in Hartford CT, the maximum mortgage limit is 270%, in Richmond VA it is 265%, in Memphis TN it is 219%, in Cincinnati OH it is 245%, in Houston TX it is 213%, in Salt Lake City UT it is 266%, and in Honolulu HI it is 405%.
Are there any restrictions on the types of materials that can be used for rehabilitation work with a HUD 223(f) loan?
Yes, there are restrictions on the types of materials that can be used for rehabilitation work with a HUD 223(f) loan. Specifically, renovations may not replace more than 50% of any two major building components, such as electrical systems, plumbing, mechanical systems, building structural systems, and the building envelope. For more information, please refer to this HUD document.
What is the process for obtaining approval for rehabilitation work with a HUD 223(f) loan?
The process for obtaining approval for rehabilitation work with a HUD 223(f) loan is relatively straightforward. First, you must fill out an application form and submit it to the lender. The lender will then review the application and determine if the loan is appropriate for your project. If approved, the lender will provide you with a loan estimate that outlines the terms and conditions of the loan. Once you accept the loan estimate, the lender will begin the process of underwriting the loan. During this process, the lender will review the project plans and determine if the proposed rehabilitation work meets the requirements of the HUD 223(f) loan program. If approved, the lender will provide you with a commitment letter that outlines the terms and conditions of the loan. Once the commitment letter is accepted, the loan can be closed and the rehabilitation work can begin.
Sources: