FHA Increases Maximum Loan Thresholds and Expands Eligible High-Cost Areas for Multifamily Projects

January 26, 2024

FHA Increases Maximum Loan Thresholds and Expands Eligible High-Cost Areas for Multifamily Projects

This week, the Federal Housing Administration (FHA) announced an increase in the threshold at which a multifamily loan is considered a “large loan,” from $120 million to $125 million.

In its original announcement in June 2023 where it made its first loan limit increase since 2014 (from $75 million to $120 million), the FHA indicated it would review the threshold annually with the potential to increase it in $5 million increments if warranted. With that said, the FHA issued a new Mortgagee Letter on January 22, 2024 with a $5 million increase announcement.

This announcement highlights that multifamily HUD mortgage limits per unit type (studio, 1-BR, 2-BR, 3-BR, 4-BR+) are each multiplied by a local cost factor, which can be as high as 270%. For high-cost areas, waivers up to 315% can be granted. As per this latest mortgagee letter, HUD is recognizing the recent escalation in construction costs and has significantly expanded the areas in the country that would qualify as a “high-cost” area.

According to the FHA’s original loan increase announcement last year, increasing the large loan threshold enables more transactions to now use standard underwriting criteria. The FHA noted that “the changes are designed to simplify underwriting for multifamily housing development without presenting undue risk to FHA.”

“With this new incremental change, more borrowers on large-scale projects may more easily qualify for standard FHA underwriting requirements, which is critical today in the face of rising construction costs and other barriers that multifamily developers and investors face in their efforts to deliver and maintain quality multifamily housing,” said Nikhil Kanodia, head of FHA lending at Greystone.

As the #1 multifamily and healthcare HUD lender*, Greystone is poised to assist borrowers in leveraging the highly favorable HUD-insured financing platform that includes the longest loan terms (30-35 years+) and lowest rates in today’s market.

*For HUD’s 2023 fiscal year. Based upon combined firm commitments received by Greystone Funding Company LLC and Greystone Servicing Company LLC and excludes risk sharing and hospital loans.