Section 223(f): FHA-insured apartment refinancing
Up to 35 years, fully amortizing, fixed rate, non-recourse and assumable, with no balloon and no refinance risk. Since January 2025 market-rate deals size to 87% of value at 1.15x coverage, and since October 2025 the mortgage insurance premium is a uniform 0.25%.
Key terms
Current as of October 13, 2026
- Market rate
- 87% LTV · 1.15x
- Affordable
- 90% LTV · 1.11x
- Rental assisted
- 90% LTV · 1.11x
- Acquisition
- 80% of cost
- Cash-out
- 80% LTV
- MIP
- 0.25% / 0.25%
- Term
- Up to 35 years
The insurable mortgage is the lowest result among all applicable criteria.
What the program is for
Section 223(f) of the National Housing Act authorizes FHA mortgage insurance for the refinance or acquisition of existing multifamily rental housing. It is the workhorse of the FHA multifamily platform and the program most apartment owners mean when they talk about “a HUD loan.”
What distinguishes it from the conventional and agency alternatives is not primarily price. It is structure: a loan that amortizes fully over as much as 35 years has no balloon, which means it carries no refinance risk at all. Owners who held agency debt maturing in 2023 and 2024 and had to refinance into a sharply higher rate environment learned precisely what that is worth.
Eligible properties
- Existing multifamily rental housing, five or more units
- Market-rate, affordable, LIHTC and rent-subsidized properties; some age-restricted properties
- Commercial space limited to 25% of net rentable area and 20% of effective gross income
- Borrower must be a single-asset, bankruptcy-remote entity — for-profit or non-profit
The three-year rule no longer bars new properties. A property that has not reached three years from its final certificate of occupancy can still qualify, at 1.17x DSCR market-rate or 1.11x broadly affordable demonstrated over three consecutive months pre-endorsement, with 50% of any cash-out held back pending a six-month test. Most published sources still state a flat three-year requirement, which was superseded in March 2020. The detail here.
Structure
| Term | Up to 35 years, capped at 75% of remaining economic life; 10-year minimum |
|---|---|
| Amortization | Fully amortizing, no balloon |
| Rate | Fixed for the term, set at rate lock |
| Recourse | Non-recourse; bad-boy carve-outs signed by key principals |
| Assumable | Yes, with HUD and lender approval — 0.05% fee to HUD |
| Prepayment | Typically 10 years of protection; commonly 10% in year one declining 1 point annually |
| Rate lock deposit | Commonly 0.50%, refunded at closing |
| Secondary financing | Surplus cash note; combined LTV generally capped at 92.5% unless governmental |
| Replacement reserves | Initial deposit per CNA (mortgageable) plus at least $250/unit/year |
| HUD application fee | 0.30%; reduced in Opportunity Zones |
| Inspection fee | $30/unit, 1% of repairs, or a flat fee by repair level |
Loan sizing
The criteria, and the lowest one governs
FHA does not size to a target. It applies several independent tests and insures the lowest result, rounded down. A change to the LTV ceiling only helps if LTV was the binding constraint — and on a high-value property the statutory per-unit limit frequently binds first.
| Tier | LTV refinance | LTC acquisition | Cash-out LTV | DSCR | Min. vacancy |
|---|---|---|---|---|---|
| Market rate, or LIHTC without rent advantage | 87% | 80% | 80% | 1.15x | 7% |
| Affordable — LIHTC with rent advantage | 90% | 80% | 80% | 1.11x | 5% |
| 90% or more units with rental assistance | 90% | 80% | 80% | 1.11x | 3% |
Mortgagee Letter 2025-03 raised the market-rate tier from 85%/1.176x and the affordable tier from 87%/1.15x. It expressly did not change the cash-out LTV under Criterion 10, and it does not apply to Section 232 or to Section 542 Risk-Share.
LIHTC alone does not qualify you for the affordable tier. Restricted rents must carry an advantage relative to achievable market rents. LIHTC without that advantage is underwritten as market rate. The appraisal establishes it, so the tier may not be certain until the appraisal is in. How the test works.
The vacancy floor often matters more than the ratio. A property running 3% physical vacancy underwritten at 7% takes a four-point haircut to income that exists only on paper — and underwritten NOI is what drives the coverage test.
Other criteria that bind
- Statutory per-unit limits, indexed upward 2.3% for 2026 retroactive to January 1, multiplied by the applicable high-cost percentage. Frequently the binding constraint on a high-value asset.
- High-cost percentages per ML 2026-05, effective January 1, 2026: up to 170% increase in standard areas (270% multiplier), up to 215% in designated High Cost Areas (315%), capped at 405% in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
- The large-loan threshold of $130 million, above which separate parameters apply. Many published figures still say $120 or $125 million.
Figures on this page are current as of October 13, 2026. See primary sources for every document cited.
Repairs: how much work the program can carry
223(f) is a refinance program, not a rehabilitation program. The boundary is the substantial rehabilitation threshold — a per-unit figure above which the transaction must move to 221(d)(4), with Davis-Bacon wages and a construction-period timeline.
For 2026 the base threshold is $20,406 per unit, set by ML 2026-05, multiplied by the high-cost percentage for the property's area. The test runs against aggregate cost — the repairs, the associated fees, and the completion assurance escrow — so a scope that looks comfortable on contractor pricing can breach it once those are added.
Nearly every published figure is stale. The field is anchored to the $15,000 base from the 2016 MAP Guide; we found $15,000, $15,536 and similar on prominent sites. That understates real repair capacity by roughly a third before the high-cost multiplier is applied, and we found no competitor site mentioning that the figure indexes annually. The current numbers.
Critical and non-critical
The Capital Needs Assessment sorts repairs by urgency. Critical items — life safety, code, accessibility, habitability — must be completed before closing, which often drives the closing schedule. Non-critical items are escrowed at typically 120% of estimated cost and must be completed within twelve months.
The CNA also sets the replacement reserve schedule, and it is refreshed on a ten-year cycle for the life of the loan — three times over a 35-year term, each refresh capable of raising the required deposit. Ongoing obligations in detail.
Against the alternatives
223(f) versus agency debt
Mortgage insurance used to be the strongest argument against FHA. At 25 basis points it is a much smaller one, and the comparison now turns on term, amortization and prepayment.
| Feature | FHA 223(f) | Typical agency execution |
|---|---|---|
| Maximum term | Up to 35 years | Commonly 5–30 years |
| Amortization | Fully amortizing, no balloon | Often 30-year schedule with balloon |
| Refinance risk | None — self-liquidating | Balloon at maturity |
| Max leverage, market rate | 87% | Typically lower |
| Coverage requirement | 1.15x | Typically higher |
| Mortgage insurance | 0.25% / 0.25% | None |
| Ongoing oversight | Regulatory Agreement, escrows, audits | Lighter |
| Timeline | ~5–6 months | Materially faster |
| Prepayment | ~10 years protection, then open | Varies; yield maintenance common |
FHA suits a long hold, where eliminating refinance risk is worth the regulatory overhead. For a five-year hold and a sale, the prepayment structure and ongoing obligations often argue the other way — a legitimate conclusion an honest comparison should sometimes reach. The full comparison.
Timeline
Expect roughly five to six months from engagement to initial endorsement on a clean, well-prepared market-rate refinance. Published estimates across the industry range from 60 days to twelve months, because publishers measure different things.
| Stage | Typical duration | Who controls it |
|---|---|---|
| Lender screening and term sheet | 1–3 weeks | Lender and borrower |
| Third-party reports | 4–8 weeks | Third parties — usual bottleneck |
| Application assembly and underwriting | 4–8 weeks | Lender, overlapping |
| HUD review to Firm Commitment | ~60 days | HUD workload |
| Rate lock, closing, initial endorsement | 3–8 weeks | Lender, counsel, title |
Stages overlap; this is not additive. What actually makes it slow.
Ordering third-party reports early is the single most effective way to compress the schedule. Paying a higher fee does not move HUD's queue, and neither does lender league-table position.
Have a specific property in mind?
Tell us what you are trying to accomplish
Tell us the property and the objective, and the HUD-approved MAP lender we are affiliated with will take a look — including telling you when FHA is the wrong tool.