Most people searching for an FHA commercial loan expect to find financing for a retail strip, office building, or small business property. That's not what this is. An FHA commercial loan is actually a HUD-insured loan for multifamily housing or healthcare facilities — not general commercial real estate. So if you're trying to buy or build an apartment building, assisted living facility, or nursing home, you're in the right place. But if you're looking to finance a warehouse or storefront, you'll need a different path.

We see this confusion often. The name sounds like it should cover any commercial property. But the U.S. Department of Housing and Urban Development (HUD) runs these programs specifically for residential-use properties at scale — and the terms they offer are genuinely hard to match anywhere else in commercial lending.

What an FHA Commercial Loan Actually Covers

FHA-insured commercial financing covers four main property types:

• Multifamily rental housing with five or more units
• Nursing homes and skilled nursing facilities
• Assisted living communities
• Hospitals and related care facilities

Per HUD program guidelines, FHA-insured multifamily loans are available for properties with five or more residential units under programs including HUD 221(d)(4) and HUD 223(f), but not for retail, office, or general commercial real estate.

Mixed-use properties can qualify too. But the rule is strict: at least 51% of the building's floor area must serve as residential living space. So a small apartment complex with ground-floor retail can qualify, as long as the apartments take up the majority of the building.

It's also worth separating small and large multifamily here. Properties with two to four units fall under standard residential FHA home loan guidelines, and the borrower may need to live in one of the units. Properties with five or more units cross into HUD's multifamily programs — and the rules and underwriting process change significantly at that threshold.

The Main HUD Loan Programs for Multifamily and Healthcare

Three programs cover most of what investors and developers use under this umbrella. Each serves a different purpose, and choosing the right one depends on what you're building, buying, or refinancing.

According to HUD program guidelines, the 221(d)(4) program offers loan terms of up to 40 years plus an additional construction or rehabilitation period, making it one of the longest fixed-rate financing options available for multifamily real estate.

For most apartment investors, HUD 223(f) is the starting point. It covers purchase or refinance of an existing property with five or more units. HUD 221(d)(4) is for ground-up construction or major rehabilitation projects — longer timelines, more complexity, but also the most financing available per dollar of equity. HUD 232 is the healthcare track, and it has its own set of operational requirements around licensing and facility management.

How Qualification Works for an FHA Commercial Loan

This is where a lot of people get confused — and where the advice you find online often oversimplifies things.

For small multifamily properties (two to four units), personal finances drive the approval. Your credit score, income, and debt-to-income ratio all matter heavily. Per FHA guidelines, borrowers with a credit score of 580 or higher qualify for the minimum 3.5% down payment, while those with scores between 500 and 579 must put down at least 10%.

For larger HUD programs — 223(f), 221(d)(4), and 232 — the underwriting shifts. The property's own financials become the primary factor. HUD underwriters look at the property's net operating income, debt service coverage ratio (DSCR), current occupancy levels, and physical condition. Your personal credit still matters, but a strong property can carry a borrower with a more modest financial profile in ways that conventional commercial lending would not allow.

Personal Credit and DTI Requirements

For both tracks, borrowers need a clean credit history — no recent bankruptcies or foreclosures, no pattern of late payments. HUD also looks for at least 12 months of documented housing payment history. Per HUD guidelines, a borrower's debt-to-income ratio generally should not exceed 45%.

One more requirement: you must work with a HUD-approved lender. These aren't the same as standard FHA-approved lenders for residential loans. HUD maintains a separate list of approved lenders for its multifamily programs. Borrowers with complex income structures — self-employed investors, real estate professionals, or those with entity-held properties — often need extra care with documentation to meet HUD's standards.

According to the CFPB, your debt-to-income ratio compares your total monthly debt payments to your gross monthly income, and lenders use it to gauge how much additional debt you can reasonably carry.

Why Investors Choose FHA Multifamily Financing

The terms available through HUD programs are hard to find anywhere else in commercial lending. When we work with clients comparing options, three features consistently stand out.

According to HUD program guidelines, loans under HUD 221(d)(4) and HUD 223(f) are generally structured as non-recourse instruments, meaning the lender's claim in a default is limited to the property itself — not the borrower's personal assets.

Non-recourse is a significant risk protection for investors. With most conventional commercial loans, the lender can come after your personal assets if the property fails to cover the debt. HUD programs typically limit that exposure to the property itself. That matters a lot when you're putting a large amount of capital into a single asset.

Long Fixed Terms and High Leverage

Conventional commercial loans often carry terms of 5 to 25 years and balloon payment structures. HUD programs offer fully amortizing fixed rates for up to 35 or 40 years. That stability makes cash flow planning far more predictable. And high leverage — up to 83–90% LTV depending on the program and affordability tier — means less equity required at closing.

These loans are also assumable. So when you sell, the buyer can take over your existing loan terms. In a high-rate environment, an assumable low-rate HUD loan can be a real selling point.

What to Know Before You Apply

The benefits are real. But HUD programs come with trade-offs, and going in without knowing them wastes time and money.

The Process Takes Time

HUD's multifamily application review process is thorough. For most programs, expect several months from application to closing — and for new construction under 221(d)(4), timelines can stretch longer depending on complexity and HUD's current processing capacity. This is much slower than a conventional commercial loan. If you need to close quickly, HUD is rarely the right tool.

Before HUD approves a loan, the property must go through third-party inspections: an independent appraisal, a physical needs assessment, and in many cases an environmental review. Those reports take time and cost money upfront — before you know whether the deal closes.

Mortgage Insurance Premiums Add to Your Costs

HUD-insured loans carry an annual mortgage insurance premium (MIP). The rate varies by program and property type, but it adds an ongoing cost to your loan that conventional commercial loans typically don't include. You need to factor it into your cash flow projections. For many investors, the long fixed term and non-recourse protection still make the math work — but the MIP is real and shouldn't be ignored.

For investors whose properties don't fit neatly into HUD programs, there are other paths worth evaluating — including non-QM financing options that serve complex property types and borrower situations. It's worth reviewing all your loan program options before committing to a path.

Elevation Mortgage works with investors in Colorado and Florida across a range of property types and financing structures. Whether you're evaluating a HUD program or exploring what else fits your deal, our Colorado mortgage team can help you compare options without pressure.

Frequently Asked Questions