Compare
223(f) or 221(d)(4): existing property or construction
223(f) is for buying or refinancing an existing, stabilized apartment property; 221(d)(4) is for building or substantially rehabilitating one. Both lend up to 87% at 1.15x for market rate and 90% at 1.11x for affordable, but 221(d)(4) measures against cost, covers construction, runs up to 40 years after completion and requires Davis-Bacon wages. 223(f) measures against value and runs up to 35 years.
Which one is your deal?
If the building exists, is leased up and needs no more than moderate repairs, it is a 223(f). If you are building it, or the renovation crosses HUD’s substantial rehabilitation line, it is a 221(d)(4). Everything else follows from that.
Side by side (2026)
| Term | 223(f) | 221(d)(4) |
|---|---|---|
| Use | Purchase or refinance of an existing property | New construction or substantial rehabilitation |
| Leverage basis | Appraised value | Total development cost |
| Max ratio, market rate | 87% LTV | 87% LTC |
| Max ratio, affordable or 90%+ assisted | 90% LTV | 90% LTC |
| Middle Income tier | Not available | 90% LTC at 1.11x (ML 2026-01) |
| Min DSCR | 1.15x market, 1.11x affordable | Same |
| Term | Up to 35 years, at least 10 | Construction period plus up to 40 years |
| Rate | Fixed, locked before endorsement | Fixed through construction and permanent |
| MIP | 0.25% upfront, 0.25% a year | 0.25% a year; upfront covers each construction year |
| Cash-out | Allowed, capped at the greater of 80% of value or actual refinance cost | Not applicable |
| Davis-Bacon wages | Does not apply | Applies |
| Pre-application stage | No, firm application only | Yes, unless HUD lets the lender skip it |
| Prepayment | No prepayment for 5 years by statute (exceptions) | HUD imposes no restriction; note terms govern |
| Working capital escrow | No | 4% of loan for new construction, 2% for rehab |
| Cost certification | Repairs only | Full CPA-certified cost certification |
| Commercial space | 25% of area, 20% of income | 25% of area, 15% of income |
| HUD application fee | 0.30%, all at firm application | 0.30%, half at pre-application for market rate |
Ratios: ML 2025-03 and ML 2026-01. Everything else: the 2020 MAP Guide, chapter 3, and the 2025 MIP notice. Loans of $130 million or more (the 2026 large-loan threshold) are sized more conservatively under both programs.
The substantial rehabilitation line
This is where most “which program” questions get settled. Under MAP Guide 5.1.2, a renovation is substantial rehabilitation, and needs 221(d)(4), when its aggregate cost exceeds HUD’s limit: a base of $20,406 per unit for 2026 (ML 2026-05), times the area’s high cost percentage, times the number of units. Aggregate cost includes general contractor and architect fees and whatever is spent from contingency and completion escrows, so HUD tells lenders to judge it conservatively rather than close to the line. The higher 315% high cost area multiplier cannot be used to raise this threshold. Below that, 223(f) handles it: critical life-safety repairs are done before closing, and other repairs can be escrowed at 120% and finished after.
Check your local high cost percentage on the statutory limits page.
What the choice means in practice
- Davis-Bacon. 221(d)(4) jobs pay federal prevailing wages and file weekly certified payrolls. That changes the construction budget and the general contractor pool. 223(f) repairs are not covered. See Davis-Bacon.
- Timing. 223(f) goes straight to a firm application. A 221(d)(4) normally runs two stages (pre-application, invitation letter, firm application); the MAP Guide lets a lender ask to skip the pre-application only for strong markets, experienced teams and sites with no environmental issues, with the borrower accepting in writing that the fee is at risk. Either way construction comes before the permanent loan begins.
- Leverage in practice. 87% of cost on a new building and 87% of value on an existing one are not the same dollars. A developer who builds below value can get more from a later 223(f) refinance than from the original construction loan; one who builds above value cannot.
- Exit. 223(f) is locked for five years by statute (with exceptions). 221(d)(4) has no statutory bar, but its Ginnie Mae securities usually carry a penalty schedule. See HUD prepayment.
A common sequence
Some sponsors build with a bank construction loan, lease up, then refinance into 223(f) once the property is stabilized. Others use 221(d)(4) from the start to lock long-term, non-recourse, fixed-rate debt before breaking ground. The trade-offs are on HUD vs bank construction loans.
Size both with the 223(f) sizer and the 221(d)(4) sizer.
Sources
- HUD Mortgagee Letter 2025-03, Multifamily changes in DSCR and LTV/LTC (Jan. 8, 2025)
- HUD MAP Guide, Handbook 4430.G, 2020 edition, chapter 3 (3.1, 3.2, 3.3, 3.7)
- HUD Mortgagee Letter 2026-05, CY2026 high cost percentages, sub-rehab and large-loan thresholds
- HUD Mortgagee Letter 2026-01, Middle Income Housing option for 221(d)(4) (Jan. 22, 2026)
- HUD Mortgagee Letter 2026-12, build-to-rent underwriting eligibility
- 90 FR 45789, Changes in Mortgage Insurance Premiums for FHA multifamily programs (Sept. 23, 2025)
- 12 U.S.C. 1715n(f), Section 223(f) prepayment prohibition
- HUD Firm Commitments and Initial Endorsements database and FY2026 production summary
Checked against these sources on October 31, 2026. HUD changes program rules by Mortgagee Letter and Federal Register notice; the lender's commitment governs any loan.
Short answers
What is the difference between HUD 223(f) and 221(d)(4) loans?
223(f) insures a loan to buy or refinance an existing apartment property that needs no more than moderate repairs. 221(d)(4) insures a loan to build a new property or substantially rehabilitate one, covering construction and then a long permanent term in a single loan. The leverage and coverage ratios are now the same; what differs is the basis (value against cost), the term, Davis-Bacon and the process.
Can a 223(f) loan fund renovations?
Yes, up to the point where the work counts as substantial rehabilitation. Critical repairs are finished before closing and other repairs can be escrowed and finished after. Once the total cost of the work exceeds the substantial rehab threshold (for 2026, a base of $20,406 per unit multiplied by the local high cost percentage and the number of units), the deal moves to 221(d)(4).
Which is faster, 223(f) or 221(d)(4)?
223(f), because it goes straight to a firm application with no pre-application option and has no construction period. HUD does not publish end-to-end processing times for either program.
Can a new building use 223(f) instead of 221(d)(4)?
A recently completed building can refinance with 223(f), but generally needs a certificate of occupancy at least three years old, or must already be at the program's debt service coverage, with extra conditions such as holding back half of any cash-out. Build-to-rent communities with a certificate of occupancy under three years old are eligible under ML 2026-12.
Which program does HUD insure more of?
223(f). HUD's FY2026 production summary shows $8.16 billion across 331 223(f) endorsements, against $5.88 billion across 160 new construction and substantial rehab loans.