FHA Apartment Loan Application Process
Published 09-21-2018

FHA Loan Overview

The Federal Housing Administration (FHA) Division of the US Department of Housing and Urban Development (HUD) offers government-insured loans for multifamily properties with experienced (and patient!) investor/owners. It also offers loans for healthcare facilities (i.e. hospitals and residential care facilities) as well as special needs facilities for the elderly or disabled. Although FHA apartment loans have longer closing times and higher fees than any other mainstream multifamily product, this is a strong go-to product for long-term investors with large loan requests because of the long fixed term and amortization, non-recourse structure, low interest rates, and high leverage point.

Loan Features

RecourseNon-recourse, except standard “bad boy” carveouts
Interest-Only PeriodNot available for pre-existing buildings; available during construction period on new buildings
Prepayment Penalty10-1% declining (lighter prepayment penalties can be negotiated for a fee)
Loan AssumptionAvailable with pre-approval and assumption fee
Loan ServicerOriginator, or may be transferred to a third party
Cash Lock-BoxYes
Secondary FinancingYes, through FHA’s Supplemental Loan Program
Insurance & Tax ReserveAlways required
Capital ReservesAlways required; amount depends on the results of the Physical Condition and Needs Assessment (PCNA)

Loan Application Process

Because the loan is guaranteed by the government and is non-recourse, the FHA due diligence and pre-closing process is unlike any other loan product in the market. If you have never been through the process previously, you can expect pages of checklists, stacks of documentation and forms, interviews with the HUD office on the property and your experience, and plenty of fees. In addition, typical closing times range from 6-9 months for stabilized properties and 9-12+ months for construction loans because of the various layers of approval that need to be completed.

Getting a FHA Quote

In order to get a FHA rate quote, plan on submitting the following documents:

  • 3 Years of Annual Operating Statements

  • Trailing 12 Month Operating Statement

  • Current Rent Roll/Occupancy Report (with move-in and lease-end dates)

  • Interior/Exterior Photos of the Property (or property website)

  • Personal Financial Statement (including a schedule of real estate owned)

  • Real Estate Resume

Getting a FHA Application

In order to be be able to apply to HUD for an apartment loan, the lender must first submit a “concept package” which will be reviewed by the FHA representatives in the office closest to the property’s location. If this concept package is acceptable, a phone interview will be conducted between the respective HUD office and the prospective borrower(s). In order to prepare a concept package, prepare to submit the following information:

  • Questionnaires

  • Copy of Current Note

  • Organizational Chart of Borrowing Entity (including EINs)

  • Organizational Chart for Management Agent

  • Property Photos (including Amenities)

  • Monthly Occupancy for Last 3 Years and YTD

  • Real Estate Resumes for Key Principals and Management Company (including previous HUD experience for key principals, i.e. years of experience, number of properties, number of units, etc.)

  • REO and Debt Schedule for Key Principals

  • Site Plan, Survey, Engineering Survey, or Marketing Site Plan (if available)

  • Current Rent Roll (including: unit ID, unit type, asking rent, contract rent, move-in date, lease start date and lease end date)

  • Breakout of Units (by market rate, tax credit, Section 8, HAP or other orientation variable, if HAP contact is in place)

  • Unit Mix (with # of units, units sizes and floor plans)

  • Current Concession Policy and History

  • Previous 3 Years and Year-to-Date Property Financials (including balance sheet and income statement)

  • Purchase Agreement, including all amendments (if purchase) or Existing Title/Deed (if refinance)

  • Previous 3rd Party Reports (if available)

  • List of Project Amenities and Unit Features/Finishes

  • List of utilities included in monthly rental rates (i.e. water/sewer, trash, electric, internet, cable, washer/dryer, etc.).

  • Real Estate Purchase Contracts or Listing Information (within the last three years)

Due Diligence/Pre-Closing

After your concept meeting call, plan on submitting the additional documentation below in order to receive an FHA loan approval:

Borrower Documents

  • Organizational Documents for Borrowing Entity (including all amendments and authorizations)

  • Borrowing Entity Resume (evidencing borrowing entity/mortgagor qualifications and experience)

  • Verification of Borrowing Entity EIN (i.e. IRS establishment of the number or filed tax return)

  • Previous Year Annnual Property Financials (audited or CPA reviewed)

  • Updated Year-to-Date Property Financials (including balance sheet and income statement)

Principal/Sponsor Documents

  • Organizational Documents for Principal(s) of the Borrowing Entity (applicable for sponsors or principals that are entities, not individuals). Entity type determines needed documents: Corporation (Articles of Incorporation, Bylaws and Authorizing Resolutions), Partnership (Partnership Agreement, Certificate of Partnership and Authorizing Resolutions) and for LLCs (Articles of Organization, Operating Agreement and Authorizing Resolutions).

  • Verification(s) of Principal(s) of Borrowing Entity SSN/EIN (acceptable forms of proof: IRS establishment of the number, filed tax return, or social security card)

  • HUD Form 92417 – Personal Financial Statement (for all individual Key Principals).

  • Debt/REO Schedule(s) – For all Key Principals of the Borrowing Entity (both individuals and entities). Schedules should include RE owned and maturing debt information with loan maturity dates identified.

Property Management Documents

  • Organizational Chart of Management Agent Entity

  • Verification of Management Agent Entity EIN (i.e. IRS establishment of the number or filed tax return)

  • Management Plans

  • Sample Lease for Residents

  • Management Agreement (Executed)

Property-Related Documents

  • Evidence of Insurances (ACORD certificates for property, liability and fidelity bond insurances indicating policy term, limits and deductibles)

  • Updated Rent Roll

  • Copies of Most Recent Utility Bills (electric, gas/oil, telephone, cable, water and sewer, garbage, storm sewer etc.).

  • Plan for Relocating Tenants During Repairs (if applicable).

  • Occupancy History (by quarter for the last 3 years)

  • Annual Operating Budget (12 month operating budget including census mix and occupancy assumptions) – for stabilized properties

  • Initial Lease-Up Operating Budget (initial occupancy to stabilized occupancy broken out monthly) – for construction loans

  • Tenant Occupancy Review form

  • Schedule of Capital Expenditures (list of repairs and improvements made in the last 2 years with associated cost(s) in addition to a description of the current condition of the property)

  • Copies of Outstanding Notes

  • Loan Pay-Off Statement(s)

  • Certificate of Occupancy/Final Inspection Report

  • Preliminary Title Report (including any and all easement and maintenance agreements, exception documents and disclosed lien and secured transactions)

  • ALTA/As Built Land Survey with HUD Form 2457

  • Evidence of Permissive Zoning and Compliance (verification from appropriate jurisdiction indicating permissive zoning (legal, conforming, non-conforming or legal non-conforming), zoning code and variances)

  • Copies of Commercial Leases (with total square feet and percentage of total income used for Commercial purposes), if applicable

  • Land/Ground Leases (if applicable).


  • All HUD Forms and Certifications

Loan Tips

  • FHA loans takes a lot of time, money and patience and require substantial multifamily ownership experience. If you are short in any of these areas, skip the wasted time and money and consider a Fannie or Freddie loan instead.

  • This is a very complicated loan product. Make sure you work with a lender that is deeply experienced in FHA loan applications and submissions or you could automatically be rejected because it wasn’t submitted properly. One way to do this is to ask how many FHA loans the lender closed in the previous year. If it’s less than 20, pick another lender.

  • If you’re not sure how to fill out the forms, ask your packaging coordinator. It’s better than doing the same paperwork multiple times.

  • Get your items in quickly. It helps reduce the risk of the interest rates climbing on you while you’re waiting to close or for your HUD calls to be scheduled.

  • Because the fees are so substantial on this product, ask for a fee schedule and due dates before you start putting together your concept package to make sure it makes financial sense for your investment plan on the subject property.

  • Disclose any potential credit issues up front (i.e. bankruptcy, foreclosure, short sale, liens, judgments, charge-offs, etc.) on the borrowing entity, sponsors, or sponsor holdings. You don’t want to have paid thousands of dollars in deposits only to find out later you don’t qualify for the loan because of a previous credit issue (which WILL come out in the legal and/or credit searches).

About the Author

Leanne is a JD/MBA and works as a Managing Director for Commercial Loan Direct, specializing in large balance transactions, portfolio loans, and complex financing structures. When not negotiating the best deals for her clients, you can find Leanne in the yoga studio or snowboarding up in the Rockies.