Distributions – FHA has relaxed the provision for cash distributions to borrower partners. Previously, FHA only permitted cash distributions to occur semi-annually. FHA now permits cash distributions to occur on a monthly basis under specific conditions, and with HUD approval.

Cash-out – FHA will permit cash-out financing for both stabilized and newly constructed multifamily properties. For a cash-out transaction the maximum loan/value is decreased from 85% to 80%.  

Replacement Reserves – FHA requires funded replacement reserves for all transactions. The typical range for ongoing replacement reserves is $250/unit (programmatic minimum) - $500/unit, with an initial deposit required at closing. The amount of the initial deposit varies depending on the property.

Processing Timelines – The following are the typical timelines for processing a FHA transaction:

Rates – All FHA transactions feature a fixed interest rate on a fully amortizing loan term. Each transaction is funded via a Ginnie Mae security and the interest rate is among the lowest in the market.

Commercial Income – FHA permits the underwriting of commercial income, subject to programmatic limits per the specific loan program.

Secondary Financing – Subordinate financing behind the FHA first mortgage is permitted up to a combined loan/value of 92.5% and subject to FHA review and approval of the secondary financing.