What Is a HUD Section 223(f) Loan?

Key points

• Eligible properties have at least five residential units and do not need substantial rehabilitation.
• Properties with a certificate of occupancy at least three years old must show stable occupancy of at least 85 percent; newer properties face added tests.
• MAP Guide sizing for market rate deals: 85 percent of value and a 1.176 DSCR, with higher leverage for affordable and assisted properties.
• Critical repairs are completed before closing; non-critical repairs can be escrowed and generally finished within 12 months.
• The National Housing Act restricts prepayment during the first five years after endorsement, subject to limited exceptions.

What 223(f) finances

The program insures loans for the purchase or refinancing of existing rental housing, whether originally financed with conventional debt, equity or an earlier HUD loan. The MAP Guide excludes properties needing substantial rehabilitation, manufactured home parks, group homes and properties providing meal services (with a narrow exception for some assisted properties). Construction of additional units is not allowed, though ancillary improvements such as a leasing office, community building or pool are permitted if they total no more than 5,000 square feet of gross floor area.

Commercial space is limited to 25 percent of net rentable area and 20 percent of effective gross income. Age-restricted housing can qualify if it does not have the features of a Section 232 facility. Davis-Bacon prevailing wages generally do not apply to 223(f) repairs; confirm for the specific scope.

Occupancy and operating history

Properties with certificates of occupancy issued three or more years before application must document stable occupancy of at least 85 percent and stable operating results. Newer properties can apply once they have achieved the program DSCR for at least one full month, but they must show it for three consecutive months before endorsement, provide income and expense history from initial occupancy, a rent roll and leasing history, and disclose concessions. HUD underwrites their actual collected revenue less normalized expenses, and if cash out is requested, half of the available cash is held until six consecutive months of required coverage.

How a 223(f) loan is sized

The loan is the lowest of several criteria on form HUD-92264-A. Under the March 2021 MAP Guide, market rate properties size to 85 percent of value and 85 percent of NOI (a 1.176 DSCR); properties meeting HUD's affordable definition with tax credit rents at least 10 percent below market size to 87 percent and 1.15; and properties with 90 percent or more rental assistance size to 90 percent and 1.11. Statutory per-unit limits also apply. Cash-out refinances are capped at the greater of 80 percent of value or the cost to refinance. Confirm current levels under HUD guidance.

Repairs, reserves and escrows

The capital needs assessment sorts immediate needs into critical and non-critical repairs. Critical life safety repairs are completed before endorsement. Non-critical repairs can be deferred with a repair escrow equal to 120 percent of their cost (the extra 20 percent is non-mortgageable and can be reduced to 10 percent for affordable transactions), and credible bids are required for items over $35,000. Every 223(f) loan also carries a replacement reserve funded by an initial deposit and monthly deposits set through the CNA e-Tool.

Acquisition-specific rules

How the transaction is classified depends on timing. A property acquired before the HUD application is processed as a refinance; one acquired after the application date is a purchase. Any identity of interest between seller and buyer, however small, makes it a refinance. Borrowers with no experience operating multifamily rental housing are not considered for 223(f) acquisition financing without significant mitigants, such as strong financial capacity, a conservative valuation and an experienced HUD management agent. Many buyers therefore close with a bridge loan and refinance into a 223(f) afterward.

223(f) as a bridge exit

A bridge loan carries a property through acquisition, renovation or lease-up until it meets 223(f) occupancy, coverage and operating history tests. Bravo has received 19 HUD 223(f) firm commitments since April 2022 totaling $379.6 million, and all closed. Its 1620 New York loan in Brooklyn, a $21.0 million 223(f) that closed in January 2026, refinanced a $23 million Bravo Property Trust bridge loan on the 54-unit 1622 New York Avenue property. In Bravo's experience a 223(f) takes about six months from engagement to closing, with 45 to 60 days from firm commitment to closing.

Where to go next

For Bravo's 223(f) terms and requirements, see HUD 223(f) loans.

For a completed bridge-to-223(f) conversion, see 1620 New York, Brooklyn HUD 223(f) loan.

For Bravo's 223(f) closing record, see HUD closing scorecard.

Related guides: What Is Bridge-to-HUD Financing?; HUD 223(f) vs. 221(d)(4): Which Exit Fits the Property?; Acquiring a Multifamily Property with a HUD 223(f) Loan; From Lease-up to HUD 223(f): Financing a Newly Built Property.

Related terms: Loan-to-Value (LTV) in HUD Loans: Limits and Cash-Out Rules; Debt Service Coverage Ratio (DSCR) in HUD Loan Sizing; Repair Escrow: How HUD Funds Deferred Repairs after Closing; Prepayment Lockout and Penalty on HUD Loans Explained.

For portfolio figures by state, metro and program, see the HUD multifamily data hub. Bravo Capital’s record: all 26 HUD firm commitments received since April 2022 have closed, totaling $526.0 million (HUD Closing Scorecard).