Multifamily
HUD 241(a) Supplemental Loans
A 241(a) is a second HUD-insured loan behind your existing FHA-insured first mortgage. It funds repairs, renovation or new units without refinancing the first mortgage, so the fixed rate on your existing loan stays in place.
Key terms
| Term | Section 241(a) |
|---|---|
| Eligible properties | Properties with an FHA-insured first mortgage. HUD-held and risk-share loans are not eligible |
| Uses | Repairs, alterations, substantial rehabilitation and additions. New units are allowed up to the number of units in the existing building, on the existing parcel or a contiguous or nearby parcel added to the first mortgage security |
| Maximum loan | The lowest of: 90% of HUD's estimated value of the improvements (the cost of the work and the transaction, including builder's profit); the statutory limit for the first mortgage's program, counting the first mortgage balance; and combined debt service coverage of 1.11 on the property's total income |
| Owner equity | At least 10% of total development cost. Reserve funds above the CNA's required deposit, added land and cash count; equity in the existing property does not |
| Term | Generally matches the first mortgage when more than 25 years remain on it; otherwise up to 40 years, within 75% of the property's remaining economic life |
| Rate | Fixed, fully amortizing, non-recourse |
| Mortgage insurance premium | 0.25% upfront and 0.25% annual |
| Construction funding | Insured advances during construction (minimum advance $200,000) or insurance upon completion |
| Reports | Capital Needs Assessment for the whole property; plans, specifications and cost review for rehabilitation or additions; environmental review |
| Cash out | Not permitted |
When it makes sense
- You want to keep your first mortgage. Your existing low fixed rate stays in place; only the new money is priced at today's rate.
- The property needs capital work that cash flow and reserves can't fund.
- There's room to add units on the site or an adjacent parcel, and the combined income supports 1.11 coverage on both loans.
Davis-Bacon
Prevailing wages do not apply to a 241(a) when the first mortgage is a 223(f) or a 223(a)(7). They do apply when the first mortgage is a 221(d)(4).
Timing
The 241(a) follows the first mortgage. HUD headquarters said in October 2026 that it will not issue an FHA number for a 241(a) until the 223(f) first mortgage is endorsed, so a refinance now with an expansion later is two loans in sequence. Plan both from the start and we size them together.
Common questions
Can I take cash out with a 241(a)?
No. A 241(a) funds improvements only, and HUD has said it has no statutory authority to insure an equity-out second loan behind an existing HUD loan. If you need cash out, a 223(f) refinance of the whole loan is the route.
Does a 241(a) change my first mortgage?
No. It is a separate second loan. A default on the first mortgage is a default on the 241(a), but not the other way around.
Can I build a new building next to my existing one?
Yes, as long as the new building has no more units than the existing one. The new parcel is added to the first mortgage security.
Does my current lender have to make the 241(a)?
No. The first mortgage lender or a new lender can originate it; the two lenders agree on who holds the combined reserve account.
Can I apply for the 241(a) while my 223(f) is in process?
No. HUD processes the 241(a) after the first mortgage is endorsed.
Send us your scope of work, budget, current loan statement, T-12 and rent roll and we'll size the 241(a).
Updated October 2026. Program terms summarize HUD's MAP Guide, Section 3.6, and current HUD notices; every loan is subject to HUD approval. Not a commitment to lend. See also: HUD 223(a)(7) refinance | HUD multifamily MIP: 0.25% | HUD loan types.