Rising construction costs and increased trade values of sales have made large loans a regular occurrence of PR Mortgage customers. What constitutes a “large” loan you might ask? HUD considers a large loan to be over $40 million for new construction/sub-rehab and over $50 million for refinance/acquisition loans. HUD has created specific underwriting criteria for the large loans with regard to Loan to Cost, Debt Service Coverage, and Initial Operating Deficit Reserves with respect to new construction loans. HUD has also created Loan to Value and Debt Service Coverage requirements for the refinance/acquisitions loans. The intent of HUD policy is to reduce the risk of these large loans by increasing the thresholds of these categories.
For example: a $60 million dollar market rate new construction/sub-rehab project would require a 1.25 DSCR and 80% LTC vs the under $40 million policy of 1.20 DSCR and 83.3% LTC. The same method applies to Tax Credit Deals however a tax credit deal at $60 million would be limited to 1.20 DSCR and 85% LTC vs the sub $40 million policy of 1.15 DSCR and 87% LTC respectively.
Refinance and acquisition loans behave in a similar way. A $60 million refinance/acquisition would be limited to 1.25 DSCR and 80% LTV (75% if Cash Out) vs the below $50 million policy of 1.20 DSCR and 83.3% LTV (80% if Cash Out). A $60 million refinance/acquisition of an affordable project would be limited to 1.20 DSCR and 83.3% LTV (75% if Cash Out) vs the below $50 million policy of 1.176 DSCR and 85% LTV (80% if Cash Out). Additional thresholds apply to loans above $75 million.
We have had great success with borrowers combining phased projects or building in high cost areas with these HUD programs. Ask your PR Originator about your large loan today! firstname.lastname@example.org