In one sentence
The FHA program for new construction or substantial rehabilitation of multifamily housing, combining construction and permanent financing in one insured loan.
The longer version
221(d)(4) is the construction-to-permanent workhorse of FHA multifamily: one loan funds the build and converts to a long amortizing permanent loan, all non-recourse. It carries the heaviest documentation of the common programs.
Because it spans construction and permanent phases, the exhibit list is enormous and the draw process runs for the life of construction, making process discipline essential.
Common questions
- What is a HUD 221(d)(4) loan?
- An FHA-insured loan for new construction or substantial rehabilitation of multifamily housing that covers both construction and long-term permanent financing in one loan.
- Why use 221(d)(4) instead of a construction loan?
- Because it eliminates the refinance risk of separate construction and permanent loans, with a long fixed-rate term from the start, at the cost of HUD's longer approval process.
- How long does a 221(d)(4) take to close?
- Generally longer than conventional construction financing, because HUD reviews the plans, budget and third-party reports and issues a firm commitment before closing.
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