HUD Financing (221-d-4)

Ricky Rosay's picture
Rank: Neanderthal | 3,179

Yo forum--have any of you guys used HUD financing for a construction loan? Trying to understand whether I can get it to work for an o-zone development deal I have. It's a long term hold so I am not concerned about the prepay penalties, but more so about documentation process, prevailing wage requirements, etc. Any info appreciated. Thanks.

Comments (5)

May 9, 2019

Have you asked a DUS lender?

May 10, 2019

I just did one for a deal that was tight and the terms are awesome. Really painful process though; it took us somewhere around 20 months from engaging a broker to closing. Make sure you have a really good broker (preferably with connections in the HUD office) to guide you through the process if you've never done it before.

In regards to wage scale - we saw little to no premium but it depends on your market. Talk to some GCs. If you're going over 4 stories you will trigger a different wage scale and it will be a huge premium.

It's a lot of work but the payoff is awesome. 85% LTC, no recourse, 40-year fixed rate money.

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May 10, 2019

awesome, thanks for this intel. Wow, I was told it usually takes about 12 months. Anything in particular on your deal drag it out for longer? I have to start construction (it's a funded O-Zone deal) to get equity out on time no later than 13-14 months from now...trying to figure out if worth it or if the critical path is too tight.

May 13, 2019

Mostly it was driven by the design process (you have to have a third party review all the plans for HUD, which makes coordination a bit tricker since every little plan change needs to be shipped off, your architect and their MEP guys all need to track their changes, etc.), then it took us a while to pull the permit and the government shut down right before we were supposed to close so there were some non-typical variables there.

I would think you could get it done in 14 months if you pushed. I would have the broker map out the timeline for you and you can sit down and discuss each phase and determine whether it feels reasonable (particularly with the architect).

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May 15, 2019