HUD 221(d)(4) Multifamily Construction Loans

HUD 221(d)(4): The Apartment Builder’s Long Game

FHA-insured construction-to-permanent financing for multifamily — one loan, fixed rate, non-recourse, built for sponsors who plan to hold.

First liens at 70 to 75% LTV, and a seller-carried second can push total financing higher. Credit stories considered, not just scores.

The short answer

Section 221(d)(4) is HUD’s FHA-insured loan program for new construction and substantial rehabilitation of multifamily apartment properties. Unlike a bank construction loan followed by a scramble for permanent financing, a 221(d)(4) loan covers construction and the long-term mortgage in a single loan, at a fixed rate, and it’s non-recourse to the sponsor. It’s among the highest-leverage construction programs available for apartments — and it’s also one of the slowest and most paperwork-heavy. Lawton Building and Loan works this program with experienced sponsors who understand both halves of that sentence.

What it covers

• New apartment construction — market-rate and affordable multifamily, generally five units and up.
• Substantial rehabilitation of existing multifamily properties.
• Construction + permanent in one loan — no take-out loan to hunt for when the build finishes.
• Fixed-rate, long-term amortization — terms measured in decades, not months.
• Non-recourse structure — the loan is against the property and the entity, not the sponsor’s personal balance sheet (outside standard carve-outs).

Who this fits

• Experienced multifamily developers building to hold, not to flip.
• Sponsors with a real project — site control, a workable budget, and the patience for a federal process.
• Owners of aging apartment properties planning a substantial rehab and a long hold afterward.
• (Building assisted living or healthcare instead? Different FHA lane — see our assisted living facility loans page.)

The honest part

This is a marathon program. The application and underwriting process is long, the documentation is heavy, and HUD’s timeline is HUD’s timeline. Sponsors who succeed here start early, keep their paperwork clean, and treat the process as part of the project’s cost. In exchange, they get leverage, rate certainty, and a non-recourse structure that conventional construction lenders rarely match. If your project needs money in 60 days, this is the wrong lane and we’ll tell you so — and show you the construction options that do fit your timeline.

How it works

1. Call (817) 862-6922 with the project: location, unit count, budget, where you are on site control and design.
2. We pressure-test the deal against the program’s requirements and give you a straight read on fit and timeline.
3. If it fits, we build the submission and walk it through with you, stage by stage.

FAQ

How is this different from a regular construction loan? A regular construction loan is short-term money you must replace when the build is done. A 221(d)(4) loan is the construction loan and the permanent loan in one — fixed rate, long term, non-recourse.

How long does the process take? Longer than any conventional alternative — plan on many months of processing before construction funds flow. It’s the right trade for the right project, and the wrong one for a project on a deadline.

What size projects qualify? The program is built for multifamily of five or more units, and it pencils best at meaningful scale. Bring us your numbers and we’ll tell you whether your project is in the program’s weight class.

Does it work for mixed-use? Residential-dominant projects with a limited commercial component can fit. Describe your project and we’ll check it against the rules.

Do you do smaller apartment construction loans too? Yes — ground-up construction and conventional commercial financing for smaller multifamily are regular work for us. See our ground-up construction and commercial real estate pages.

Start here

Call (817) 862-6922, or visit lawtonbuildingandloan.com.

Educational information only — not a commitment to lend. All loans are subject to credit approval and HUD program requirements, which change.

— Joel Lawton, Lawton Building and Loan, NMLS #380245