The best HUD lenders for 2021 are:

• Berkadia - Founded in 2009 as a joint venture between Berkshire Hathaway and Leucadia National Corp., Berkadia provides financing solutions for a broad range of asset classes, from affordable multifamily housing to hospitality properties. The New York-based firm had a HUD origination volume just above $2.6 billion in 2021, a 43% uptick compared to the year before. Source
• Merchants Capital - Established in 1990 to finance multifamily and health care assets, Merchants Capital hit a new high this past year, with HUD originations of nearly $1.7 billion — an 88% increase from 2020. In addition to FHA loans, the lender works extensively with a broad range of financing options, including Freddie® Mac® and Fannie® Mae® packages and USDA-backed multifamily loans. Source

HUD loans offer a number of benefits, including extremely high leverage, fixed interest rates, and the ability to lock in the interest rate early on in the application process. HUD loans across the board are well known for allowing some of the highest loan-to-value ratios in the multifamily industry, with an LTC ratio of up to 85% for market-rate properties and up to 87% for properties with an affordable housing component. For subsidized housing developments, a HUD 221(d)(4) loan can have a maximum loan-to-cost ratio of up to 90%. For all HUD loans endorsed between January and September 2022, the fixed interest rates averaged 3.35%, according to data provided by the department.

For more information, please visit Top 5 Advantages of HUD Construction Financing.

HUD's multifamily loan programs are designed to help borrowers of all experience levels access the financing they need to succeed in the multifamily housing market. The minimum credit score for most programs is just 620, and there are options for borrowers with even lower scores.

In addition, each property must be covered by property and liability insurance for the duration of the loan. The first year’s premiums must be paid in full at closing. In addition, borrowers must provide their lenders with evidence of insurance on or before the closing date or before the policy’s renewal date.

For more information, please visit HUD 232 Insurance Requirements and 5 Myths about HUD-Insured Multifamily Loans.

HUD multifamily loans are some of the most competitive types of financing out there. There are many different kinds of HUD multifamily financing, with several described below.

The HUD 223(f) loan is arguably the pièce de résistance of multifamily purchase loans. HUD definitely prefers more experienced borrowers, but they offer LTVs up to 85% and DSCRs as low as 1.18x for market-rate properties, with higher LTVs and lower DSCRs for affordable properties.

HUD also offers its 221(d)(4) program for apartment construction and substantial rehabilitation, but they can be significantly more risky (in general, these types of projects may not always be ideal for first-time apartment investors). All HUD Apartment loans are non-recourse, fixed-rate, and fully amortizing over 35+ years, making them a fantastic option for longer-term buy and hold investors.

Comparing HUD lenders can be a tricky process. It's important to consider the lender's experience, loan terms, and customer service. You can start by researching lenders online and reading reviews from other borrowers. You can also ask for referrals from other real estate professionals or contact the HUD office in your area for more information.

When comparing lenders, make sure to look at the loan terms they offer. HUD loans are typically fully amortizing, fixed-rate loans with terms of 35 years or more. Look for lenders that offer competitive interest rates and low fees. You should also consider the lender's customer service and how quickly they can process your loan.

Finally, make sure to compare the overall cost of the loan. This includes the interest rate, fees, and other costs associated with the loan. By comparing the total cost of the loan, you can make sure you're getting the best deal possible.

HUD loans across the board are well known for allowing some of the highest loan-to-value ratios in the multifamily industry. This is especially true for HUD 221(d)(4) financing, which typically allows for a loan-to-cost ratio of up to 85% — far higher than any Fannie or Freddie loan or other conventional financing product.

And that’s just for market-rate properties. If you are planning to develop a property with an affordable housing component, an LTC ratio of up to 87% is possible. Granted, this will require a regulatory agreement to be in place for a specified period of time — say, a commitment to reserve 20% of units for households earning a maximum of 50% of area median income — but this requirement may not be much higher than local affordable housing requirements for new developments.

Finally, if the property is a subsidized housing development, meaning 90% of the units are covered by a project-based Section 8 contract or covered by Low-Income Housing Tax Credits restrictions, a HUD 221(d)(4) loan can have a maximum loan-to-cost ratio of up to 90%.

While many loan products include fixed interest rates, HUD loans’ interest rates trend lower than nearly any other kind of financing. For all HUD loans endorsed between January and September 2022, the fixed interest rates averaged 3.35%, according to data provided by the department. Of course, as interest rates have risen across the board, so too have HUD rates — but they remain among the lowest available.

Best of all, borrowers are able to elect to lock the interest rate early on in the application process. While it requires a deposit equal to 1% of the loan’s amount — which is refunded at closing — this can be a great way to ensure advantageous debt costs, particularly when rates are expected to rise more.