Who and what qualifies for a HUD multifamily loan

Property requirements

Rule	Requirement	MAP Guide
Unit count	5 or more dwelling units on one site; each parcel of a scattered site needs 5 or more	3.1.30; 24 CFR 200.73
Section 231	8 or more units	3.2.1
Kitchens and baths	Full kitchen and bath in every unit (new construction)	3.2.1
Group homes	Not eligible	3.1.30
Single room occupancy	Only with existing project-based Section 8	3.2.1
Transient use	No leases under 30 days, no hotel services (maid service, linens, room service), including in commercial space	3.1.24
Furnished or corporate units	Generally no more than 10% of units	3.1.27
Student housing	Cannot be designed solely for students; underwritten at family-housing rents, not per-bed rents	3.1.22
Land	Fee simple, or a long ground lease (99 years renewable, 50 years from the mortgage, or 10 years past maturity, by program)	3.1.23
Fair housing accessibility	Required; 223(f) properties first occupied after March 13, 1991 must be retrofitted if they do not comply	3.1.13, 3.7.6

Build-to-rent communities of houses, duplexes and triplexes now qualify on one contiguous site, under the rules in Mortgagee Letter 2026-12.

Program-specific property rules

223(f) purchase or refinance

• Certificate of occupancy at least 3 years old, with stable occupancy of at least 85%. Newer properties qualify once they reach the program’s coverage for one full month, with three consecutive months before endorsement and 50% of any cash out held until six months at coverage.
• No substantial rehabilitation (above $20,406 per unit times the area’s high cost percentage in 2026), no new units, and ancillary improvements up to 5,000 square feet.
• Not eligible: manufactured home parks (except HUD’s 2024 program for mission-driven owners), group homes, projects providing meal service.
• Critical repairs are done before closing; non-critical repairs can be escrowed at 120% and finished after.

221(d)(4) new construction or substantial rehab

• Absorption up to 18 months (24 for build-to-rent), with an initial operating deficit escrow.
• Davis-Bacon wages and cost certification apply.

223(a)(7)

• Only properties with a current FHA-insured loan. No cash out, and no work that would need Davis-Bacon or more than a categorically excluded environmental review.

Commercial space

Program	Max share of net rentable area	Max share of effective gross income
221(d)(4), 231, 241(a)	25%	15%
220	25%	30%
223(f)	25%	20% (existing commercial only)

Commercial income is underwritten conservatively: in 221(d)(4) at no more than 80% occupancy, in 223(f) at the lesser of 90%, actual or market.

Borrower requirements

• Single-asset entity. The borrower owns only the insured property. Natural persons, foreign entities, tenancies in common and DSTs cannot be the borrower, but can sit above it.
• Non-recourse. The entity is liable for the debt; principals are liable only for the bad acts listed in the regulatory agreement.
• Previous participation. Every individual and entity in control files through HUD’s Active Partner Participation System (APPS) or on form HUD-2530. HUD can issue an invitation letter or firm commitment conditioned on clearance if there are no critical findings.
• Credit and character. The lender investigates credit and background of each principal.
• Financial capacity. HUD’s test is the underwriter’s analysis of past financial condition, present liquidity and projected capacity (MAP 8.5). For an existing property, the borrower supplies three fiscal years of property financial statements plus year to date; principals submit personal financial statements (form HUD-92417 or equivalent).
• Experience for acquisitions. Borrowers with no experience operating multifamily rental housing will not be considered for 223(f) acquisition financing unless there are significant mitigants: clean credit, strong diversified finances, a conservative valuation and an experienced HUD management agent.
• Large loans. At $130 million and above, principals together need net worth of 20% and liquidity of 7.5% of the loan. See large loans.
• Large FHA exposure. Principals with more than $500 million of FHA-insured debt need HUD approval before the lender submits.
• Identity of interest. In a 223(f) purchase, any identity of interest between buyer and seller turns it into a refinance for underwriting (affordable deals excepted).

Sizing requirements

The loan is the lowest of the requested amount, the statutory per-unit limit, the amount the coverage ratio supports and the loan-to-value or loan-to-cost amount, plus program tests such as cost to refinance. Since January 2025 (ML 2025-03):

Property	Max LTV / LTC	Min DSCR	Min underwriting vacancy
Market rate	87%	1.15x	7%
Affordable (LIHTC with a rent advantage)	90%	1.11x	5%
90% or more units with rental assistance	90%	1.11x	3%

Reserves

• Replacement reserve: required on every insured loan, with an initial deposit and monthly deposits set from the capital needs assessment in HUD’s CNA e-Tool.
• Operating deficit escrow: required on new construction and many substantial rehabs; may be required on a 223(f) where the analysis calls for it. It is not mortgageable, and unused amounts go back to the borrower.
• Repair escrow: 120% of deferred non-critical repairs on 223(f) (110% possible for affordable deals and 223(a)(7)).
• Working capital (construction): 4% of the mortgage for new construction, 2% for substantial rehab.

Before you apply

Gather three years of operating statements, a current rent roll, the organizational chart down to every principal, personal financial statements and the existing loan documents. A MAP lender will then order the third-party reports and tell you which sizing test is likely to bind.