A HUD 221(d)(4) loan is an FHA-insured, non-recourse loan that finances the construction or substantial rehabilitation of an apartment property and then becomes its permanent loan, with no refinance. It covers the construction period plus up to 40 years, fixed-rate and fully amortizing, at up to 87% of cost for market-rate projects and 90% for affordable or subsidized projects. Plan on about 12 months from engagement to construction closing.
Key terms (loans under $130 million)
| Term | Market rate | Affordable | Subsidized |
|---|---|---|---|
| Max loan-to-cost | 87% | 90% | 90% |
| Min debt service coverage | 1.15x | 1.11x | 1.11x |
| Term | Construction period plus up to 40 years | Same | Same |
| Rate | Fixed for construction and permanent phases | Same | Same |
| Mortgage insurance premium | 0.25% at closing, then 0.25% a year | 0.25% | 0.25% |
MIP shown applies to applications submitted or amended on or after October 1, 2025 (HUD notice, Changes in Mortgage Insurance Premiums Applicable to FHA Multifamily Insurance Programs, 90 FR 45789 (Sept. 23, 2025)). For loans of $130 million and above, sizing tightens to 75% and 1.30x for market-rate, 80% and 1.25x for affordable, and 87% and 1.15x for subsidized.
Who a 221(d)(4) fits
- Developers building market-rate, workforce, affordable or LIHTC apartments who want one loan from groundbreaking through permanent financing
- Owners doing a substantial rehabilitation too large for a 223(f) repair scope
- Sponsors who value non-recourse, long fixed-rate debt over speed to close
What to expect
- Davis-Bacon prevailing wages apply to contractors and subcontractors
- HUD reviews plans, specifications and costs through an architectural and cost review, plus a market study
- Escrows during construction cover interest, taxes, insurance, working capital and an initial operating deficit reserve
- Commercial space is limited to 25% of net rentable area and 20% of effective gross income
- At completion, the loan converts to permanent debt automatically
Process and timeline
- Concept meeting with HUD to surface issues before you spend on a full application.
- Third-party reports, plans and market study; lender underwriting.
- Firm application to HUD and firm commitment.
- Initial endorsement (construction loan closing) and construction draws.
- Final endorsement once construction is complete; the loan is permanent from then on.
The longer runway than a 223(f) comes from plan and cost review, the market study and Davis-Bacon wage determinations. A bridge or construction loan can carry a project if the schedule cannot wait.
Questions borrowers ask
Is a 221(d)(4) only for affordable housing?
No. Market-rate apartments qualify, though affordable and subsidized projects get higher leverage and lower coverage requirements.
Do I need a new loan when construction ends?
No. A 221(d)(4) converts from construction to permanent financing automatically at final endorsement.
How long does a 221(d)(4) take?
Plan on about 12 months from engagement to construction closing, longer than a 223(f) because HUD reviews plans, costs and the market study.
What does a 221(d)(4) cost?
The main HUD-specific costs are the FHA application fee of 0.30% of the loan amount and, for applications submitted on or after October 1, 2025, a mortgage insurance premium of 0.25% at closing and 0.25% a year, plus Davis-Bacon wage compliance, third-party reports, and lender, legal and title costs.
About the author
Aaron Krawitz is the founder and CEO of Bravo Capital, a HUD-approved MAP and LEAN lender in New York City. He founded Bravo in 2021 after serving as president of Dwight Capital. Bravo and its affiliate, Bravo Property Trust, have closed more than $2.5 billion in financing, and Bravo closed every HUD firm commitment it received in 2025.
