Why you need an FHA 221(d)(4) loan

Inputs-Outputs.orgIf you need to rehabilitate your age-old multifamily property but are lacking some funds, a Federal Housing Administration (FHA) financing option can be secured with ease. The FHA has a line of mortgage programs that assist low- to medium-income families.

One product, the FHA 221(d)(4) loan, is available to fund new construction or substantial rehabilitation of multifamily rental housing. It also covers cooperative housing for moderate-income families, for the elderly, and for the handicapped.

The FHA 221(d)(4) loan is known for its affordability, but there are more benefits that one can gain from it. Like most government-insured loans, the FHA 221(d)(4) loan is borrower-friendly. It is generous, is not subject to change, and is securitized.


The 221(d)(4) program offers more generous terms pegged at a high of 85% loan to cost (non-recourse) spread out in 40 years, with an amortization rate of 4.50%. Throughout the life of the loan, the fixed interest rate allows you to manage your payments easily with little trouble. As such, the terms target lower-income owned properties, providing not only lower interests but also a non-restrictive term.

Not subject to change

While many mortgage loan terms are subject to change to adjust to the behavior of the business cycle and the larger economy, the 221(d)(4) loan preserves its accessibility feature. The terms, compared to conventional bank financing or most private lending options, are not subject to change in whatever condition the market is heading. This makes the program a very popular choice under the current economic environment.

Securely backed

Ginnie Mae securely backs 221(d)(4) loans via mortgage-backed securities (MBS). MBS are securitized by the full credit and faith of the government, hence allowing for easier borrower access, more robust fund availability, as well as advantages to investors and lenders like liquidity, less risk, and efficiency.