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FHA 223(a)(7) LOANS

For multifamily property owners with an existing loan, the FHA 223(a)(7) multifamily loan provides an avenue for restructuring the debt through refinancing. This loan type is specifically for multifamily and healthcare properties. For some, it can make repaying the debt easier.

FHA 223(a)(7) Loan Highlights

Eligible Properties:
Properties must be either multifamily properties or health care properties with existing HUD-insured debt.

The loan term and amortization: The remaining term plus up to 12 years without exceeding the existing loan term, and the loan is fully self-amortizing. The expenses are underwritten based on the previous 3 years of operating data and estimates from the FHA field office.
Interest Rate:
Fixed-rate based on market conditions. See current LIBOR Rates.
No cash out:
There is no opportunity for cash-out refinancing.
Single asset entity, either a for-profit or nonprofit.
Amount borrowed:
Lowest of – original principal balance of the existing loan, 100% of the refinancing costs (which could include the principal amount, repairs, fees, prepayment penalties, initial reserve deposits, and third-party reports), or minimum debt service coverage of 1.11.
Tax and insurance escrow:
Monthly deposits to escrows required for real estate tax, property insurance, reserves for replacement, and mortgage insurance premiums.
HUD application fee:
Fee of 0.15% of the amount borrowed to HUD with Firm Commitment Application.
Inspection fee:

Other terms and conditions may apply to these loans.

Advantages of FHA 223(a)(7) Loans

FHA 223(a)(7) multifamily loans offer a number of advantages to property owners, including the following:

  • Better affordability: These loans allow property owners to refinance into better loan terms, reducing overall costs. More so, the loans help to reduce the current interest rate paid while also extending the original loan term, reducing costs for property owners.
  • Use with prepayment penalties: Many property owners cannot refinance existing loans due to high prepayment penalties. The FHA 223(a)(7) loans wrap those fees into the new loan, eliminating the out-of-pocket expense of having to pay the fee at the time of refinancing.
  • Easier to refinance: The FHA 223(a)(7) loans are easier to refinance than even traditional, single-family residential properties. They do not require appraisals of the property, environment reviews, or market studies. This makes it a more streamlined option for borrowers.
  • Fees are lower: There are lower overall costs involved with the out-of-pocket 0.3% application fee reduced by half when the loan closes, and the funds are returned.
  • Refinancing more: Property owners can refinance 100% of eligible costs. In some situations, property owners can increase the unpaid principal of the loan. This would then allow them to cover closing costs and pay for things like repairs. It can also help to increase replacement reserves.

Disadvantages of FHA 223(a)(7) Loans

There are some concerns or factors to be aware of with the HUD FHA 223(a)(7) for some property owners. Those include:

  • Only available to existing HUD-insured: One of the most limiting features is that the refinancing opportunity is only available to those with an existing HUD-insured loan. It only applies to health care and multifamily properties.
  • No cash out: There is no availability to cash out the loan, which could limit the use of these loans for some borrowers. The amount borrowed cannot exceed the original mortgage loan amount either.
  • Some exclusions apply: This includes risk share mortgages, Section 202 loans, co-insured properties, and some other types of HUD-insured mortgages.

Bobby W.

“I would like to thank you in helping me purchase the 20 unit apartment building. You guys were very helpful and found a good rate! I closed yesterday and I cant thank you enough”

FHA 223(a)(7) LOANS FAQ’s

What Are FHA 223(a)(7) Loans?

FHA 223(a)(7) loans are for properties backed by the Department of Housing and Urban Development (HUD). These loans are exclusively for existing debt on multifamily and healthcare properties with the goal of reducing interest rates charged, increasing amortization, as well as improving property cash flow. HUD believes these loans can reduce the risk of default on the existing loan.

FHA 223(a)(7) Loan Features

Prepayment Penalties

One key advantage of these loans is that they can be used on properties with prepayment penalties. The penalty can be absorbed into the new loan. That is critical for many property owners since prepayment penalties often apply to these types of properties for 10 or more years.

Faster and Easier to Obtain

Another key feature of these loans is the ease of the process of obtaining them, with fewer steps and requirements to complete than most other refinancing loans. There is no need to complete a market study, obtain an appraisal, or have an environmental report completed, which is common in other refinance loans. Property owners must complete a project capital needs assessment, PCNA, in order to obtain these loans.


The HUD application fee, which could be as high as 0.3% of the borrowed amount, is due at the time of application. Half of this amount is then refunded after the closing, making the fee 0.15% overall.

Closing Timelines

In most situations, the FHA 223(a)(7) multifamily loans will close in about 60 days. This makes it one of the fastest loan terms for closing for these types of properties, a key advantage to many borrowers.

What is the HUD mortgage insurance premium on HUD FHA 223(a)(7) multifamily loans?

The FHA insurance cost is set by HUD based on several factors. For market-rate properties, this is 0.50% upfront as well as 0.50% each year. For broadly affordable or energy-efficient properties, the rate is set at 0.25% upfront and 0.25% annually. For Affordable properties, this cost is 0.35% upfront and 0.35% each year.

Can HUD 223(a)(7) multifamily loans be used for repairs on qualifying properties?

In some situations, yes, that is possible. The repairs must be approved by HUD to receive this type of funding. The costs can be funded by the mortgage proceeds with a 10% completion assurance escrow. The amount per unit is limited to just $1,500.

What type of inspections and forms are required for a HUD 223(a)(7) multifamily loan?

One of the benefits of these loans is a streamlined process that includes fewer reports than most other refinanced loans. A new PCNA is required if the previous report is more than 2 years old.

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Bobby W.

“I would like to thank you in helping me purchase the 20 unit apartment building. You guys were very helpful and found me a good rate! I closed yesterday and I can’t thank you enough.”