The economic crunch that hit several economies left many banks incapacitated to offer loans to their clients while others just cut back on their lending programs. So what is left for the multifamily market? FHA/HUD loans. FHA/HUD loans are federal-subsidized loans where the mortgage interest rate is lowered based on the percentage of your income.
The Office of Multifamily Housing (MFH) has also created a model that utilizes industry best practices to improve the ability to deliver excellent HUD loaning services while increasing accountability and national consistency. However, most borrowers are still ignorant of how these loans work.
Lending for FHA/HUD loans is a process that demands a lot of documentation and underwriting before a commitment can be issued to service your loan. Though most lenders are interested in major markets, HUD loans are also available for smaller multifamily markets. The process is, however, not complicated.
The lender begins by reviewing the property’s history and your financial position then issues you a quote, which is a document indicating the lender’s capacity to offer you the loan. You then sign the quote and other appraisal documentation that follow to complete the underwriting before the lender offers their commitment.
This application process should typically not exceed 60 days. Once you accept the lender’s commitment, the loan process closes and the lender services you with the loan. The only straining bit in this process is the large amount of documentation required.
Rates and Costs
HUD multifamily loan programs outline the factors that determine the interest rates that HUD loans attract. Among other factors include the size of loan you are applying for and the repayment period. It is these two major factors that also affect how lenders tailor their quotes and the underwriting process. This rate consists of the transaction cost, too. However, lenders usually cap this fee at the application deposit you pay during primary stages of processing your loan.
While the income-expense analysis in the underwriting of HUD loans is straightforward, it is important that you engage an experienced HUD multifamily lender to help you in documentation to facilitate HUD multifamily loan servicing.