HUD/FHA Multifamily Loan Outlook Report
By Terry Painter/Mortgage Banker
Author of “The Encyclopedia of Commercial Real Estate Advice”
Publisher – Wiley.
Member: Forbes Real Estate Council
HUD is Lending More Money on Multifamily Now
As conventional multifamily lending has continued in a conservative direction, HUD/FHA Multifamily loans have gotten more lenient. HUD’s goal is to stimulate the housing market by lending more money and making it possible for more borrower’s to qualify. They have raised LTV/LTC, Lowered DSCR, lowered the minimum vacancy underwriting requirement and lowered Mortgage Insurance Requirements (MIP).
On January 8, 2025 HUD made these favorable changes:
| LTV/LTC | DSCR | Vacancy | |
| Market Rate Rents | |||
| Acquisition/Purchase | from 85% to 87% | from 1.176 to 1.15 | from 9% to 7% |
| Construction/Major Rehab | from 85% to 87% | from 1.176 to 1.15 | from 9% to 7% |
| Affordable Housing | |||
| Acquisition/Purchase | from 87% to 90% | from 1.15 to 1.11 | from 7% to 5% |
| Construction/Major Rehab | from 87% to 90% | from 1.15 to 1.11 | from 7% to 5% |
Lower Mortgage Insurance Premiums Lower Monthly Payments
Effective October 1, 2025 all HUD Multifamily Loan programs will have a 0.25% Mortgage Insurance Premium which is added to the mortgage interest rate. Previously, only apartment complexes that were certified green were eligible for this very low MIP rate. For non-green properties the MIP was .65%. Lowering the MIP to .25% will be a savings of 40 bps on the mortgage interest rate. On a $10 million dollar loan this can save 400,000 per year on mortgage payments.
Lower Vacancy Underwriting Requirement Means a Larger Loan
Since the great recession of 2008, HUD/FHA has underwritten all multifamily loans with a 9% vacancy on market rent properties, and 7% on affordable housing project, even if actual vacancy was considerably lower. This has greatly lowered the gross rental income for many and thus lowered the net operating income, the result of which has been a smaller loan. In January of 2025 HUD lowered the underwriting vacancy requirement to 7% for market rent properties and 5% of affordable rent properties.
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HUD Loans are one of the best options with the current level of interest rates. For a complete guide to HUD Multifamily Loans please go here: