Permanent financing for apartments
HUD 223(f) vs. Agency vs. Bank Loans
Owners refinancing or buying a stabilized apartment property weigh three kinds of permanent debt: a HUD-insured Section 223(f) loan, a Fannie Mae or Freddie Mac agency loan, or a bank loan. They trade off differently on term, leverage, recourse and flexibility.
Side by side
| Feature | HUD 223(f) | Agency (Fannie Mae / Freddie Mac) | Bank |
|---|---|---|---|
| Term | 35 years | 5 to 30 years | 3 to 10 years |
| Amortization | Fully amortizing over the full term | Up to 30 years, with a balloon at maturity | 25 to 30 years, with a balloon at maturity |
| Interest rate | Fixed for the full term | Fixed or floating | Floating, or fixed for a short period |
| Maximum LTV | 87% / 80% on cash out | 80% | 65% to 75% |
| Minimum DSCR | 1.15 | 1.25 | 1.20 to 1.35 |
| Recourse | Non-recourse | Non-recourse | Full or partial recourse |
| Assumable | Yes, with HUD approval | Yes, with lender approval and a fee | Case by case |
| Prepayment | Customizable 10-year step-down | Yield maintenance or defeasance | Declining penalty |
| Mortgage insurance | 0.25% annual MIP | None | None |
| Time to close | Approximately 6 months | 45 to 60 days | 30 to 60 days |
| Refinance risk | None during the term | At each maturity | At each maturity |
HUD terms shown are for market-rate Section 223(f) loans below $130MM. Agency and bank terms reflect common market executions and vary by lender, program, property and market. All terms are indicative, subject to underwriting, and not a commitment to lend.
Which one fits
HUD 223(f)
Finance once. A 35-year, fully amortizing fixed rate removes maturity and refinance risk for the life of the loan.
Maximize proceeds. Up to 87% LTV at a 1.15 DSCR is more leverage than agency or bank debt.
Hold, or sell with the debt. The loan is assumable with HUD approval, so a below-market fixed rate can add value at sale.
Plan ahead. Processing takes about 6 months, which suits a refinance on a timeline rather than a race to a maturity date.
Agency
You need to close in about 60 days.
You plan a sale or recapitalization within 5 years.
You want floating-rate or interest-only structures HUD does not offer.
Bank
The property is in transition (lease-up, repositioning or heavy renovation) and needs flexibility before permanent financing.
Speed and relationship matter more than leverage or term.
You accept recourse and a shorter maturity.
Bridge now, HUD later
Many owners use a bridge loan to acquire, build or renovate, then refinance into a HUD 223(f) once the property stabilizes. A newly built property can apply once it has a final Certificate of Occupancy and has achieved HUD's required DSCR for one full month. Harper arranges both ends.
Frequently asked questions
Is a HUD loan cheaper than an agency loan?
HUD pricing benefits from FHA insurance, but HUD adds the 0.25% annual mortgage insurance premium and higher upfront costs. The test is all-in cost over your hold period, and we'll run it for your property.
Why does HUD allow more leverage than Fannie Mae or Freddie Mac?
FHA mortgage insurance protects the lender against loss, so HUD sizes market-rate 223(f) loans to 87% LTV at a 1.15 DSCR. Agency loans carry no federal insurance and size to 80% LTV at a 1.25 DSCR.
Can I refinance a Fannie Mae or Freddie Mac loan into HUD?
Yes. A Section 223(f) can refinance an existing apartment property however it is financed today, subject to the prepayment terms on the existing loan.
Is a HUD 223(f) loan recourse?
No. HUD 223(f) loans are non-recourse, with standard carve-outs.
Want to see how a HUD 223(f) compares for your property? Send us the rent roll and trailing 12 and we'll size it.