Developer Requirements & Fees for HUD 221(d)(4) Loans

HUD 221(d)(4) Developer Requirements & Fees

Developers interested in taking out an HUD multifamily construction loan like the HUD 221(d)(4) loan must meet certain requirements and also pay certain fees.

Requirements

• The general contractor must pay Davis-Bacon wage rates (required by the Department of Labor)

• After construction is completed, both the general contractor and owner must submit a cost certification

• In addition to submitting the required general contractor information, the general contractor must also provide either:

  • a 100% performance and payment bond

  • or a 15-20% cash escrow

  • or a FHA-accepted letter of credit

• The general contractor must also have a liquid net worth of at least 5% of the project’s construction contract and additional uncompleted construction work

Fees

• $25,000 application fee. Covers lender’s due diligence and third-party reports:

  • Appraisal

  • Phase 1 environmental

  • Construction cost review

  • Market study

  • Plans and specs review

• 0.50% FHA inspection fee (paid from mortgage proceeds)

• 0.30% FHA exam fee (paid in two payments - 0.15% at pre-application, 0.15% at application)

• Financing and placement fees: usually capped at 3.50% of the loan amount. Paid from mortgage proceeds at closing

• Good-faith deposit (commitment and rate lock): between 0.50% and 1% of loan amount. Paid at commitment, refunded at closing

• Standard borrower closing costs such as lender's legal, title, and others

Source: https://www.hud.loans/fha-221d4

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