FHA/HUD loans are government-backed financial instruments specifically designed for multifamily investors. They offer long-term, fixed-rate financing with the added security of federal backing. They are well-suited for those looking to invest in stable, cash-flowing assets while mitigating risk through government assurance.
FHA/HUD Multifamily Loans FAQ’s
What is HUD?
The Department of Housing and Urban Development is tasked with promoting fair and equal housing, and it primarily does so through agencies that the department oversees.
Among other work, the department provides loans for low-income housing through its agencies. These include both loans for low-income homebuyers, and commercial loans for affordable housing projects.
Except for a specialized loan program that serves Native Americans, HUD itself doesn’t directly guarantee loans. Instead, it offers guaranteed loans through agencies such as the FHA. The vast majority of HUD’s affordable housing loans are processed and approved by the FHA.
(Although affordable multifamily housing loans are technically procured through the FHA, the terms “HUD loans” and “FHA loans” are often used interchangeably in non-technical conversations.)
What is the FHA?
The Federal Housing Administration is broadly overseen by HUD, but specific loan applications are solely approved by the FHA.
For approved loans, the FHA provides mortgage insurance that serves as a guarantee. In the event of nonpayment, the administration will cover the lender’s losses and remainder of the loan.
Many lenders are willing to loosen their lending requirements for FHA loans, because the loans are guaranteed even if the borrower defaults. The looser requirements are especially helpful when underwriting loans for low-income homebuyers and low-income affordable housing properties.
What Are FHA Loans?
The FHA offers many commercial loan programs for multifamily housing, and many affordable housing properties can qualify for at least one program.
Each FHA loan program has its own particular requirements, but most programs generally require that properties provide affordable housing for low- and moderate-income individuals/families.
Properties can be a variety of different types, including apartments, senior housing, student housing, assisted living housing, and select other multifamily properties. Multifamily is defined for commercial purposes as having more than four units, and not having the owner reside on the property.
FHA loans offer some of the most generous terms of any commercial real estate loans. Their high allowed leverages, low interest rates and long available terms make HUD/FHA loans attractive to investors who are purchasing, building or renovating qualifying multifamily properties. Few other loan programs match what HUD and the FHA offer.