Most apartment owners refinancing today are choosing between an agency execution through Fannie Mae or Freddie Mac and an FHA insured loan under Section 223(f). Both are good products. They suit different plans.
| Feature | FHA 223(f) | Typical agency loan |
|---|---|---|
| Maximum term | Up to 35 years | Commonly 5 to 30 years |
| Amortisation | Fully amortising, no balloon | Often 30 year schedule with a balloon |
| Refinance risk | None, the loan self liquidates | Balloon at maturity |
| Maximum leverage | 87% market rate | Typically lower |
| Coverage requirement | 1.15x | Typically higher |
| Recourse | Non recourse with carve outs | Non recourse with carve outs |
| Mortgage insurance | 0.25% upfront, 0.25% annual | None |
| Assumable | Yes, 0.05% fee to HUD | Sometimes, with conditions |
| Ongoing oversight | Regulatory Agreement, escrows, audits | Lighter |
| Timeline | Around five to six months | Significantly faster |
Where HUD wins
Term and amortisation. A 35 year fully amortising loan has no balloon, which means no refinance risk at all. Owners who held agency debt maturing in 2023 and 2024 and had to refinance into a much higher rate environment learned what that risk is worth.
Leverage and coverage. 87% at 1.15x is more generous than most agency executions.
Mortgage insurance is no longer the objection it was. It fell to 0.25% upfront and 0.25% annually in October 2025, down from 1.00% and 0.60% on a 223(f).
Where the agencies win
Speed. An agency loan can close in a fraction of the time. With a maturing loan or a purchase contract, that alone can decide it.
Lighter ongoing obligations. No Regulatory Agreement, no HUD governed surplus cash test, no HUD approval on transfers.
Shorter holds. FHA carries roughly ten years of prepayment protection. On a five year plan that works against you.
Mixed use and unusual properties. 223(f) caps commercial space at 25% of area and 20% of income. Agency programs are often more flexible.
How to decide
Compare the all in constant including mortgage insurance rather than coupon against coupon. Price the balloon on the agency side by asking what happens to equity value if the refinance rate is 200 basis points higher. Use the hold period you actually intend. And give some value to assumability, because below market FHA debt is an asset a buyer will pay for.
We are happy to run both sets of numbers on a specific property and tell you which one we would take.
Primary sources for this article
HUD revises mortgagee letters and handbooks frequently; where a provision is a draft rather than operative guidance we say so on the page. This is general information, not legal, tax or financial advice, and not a commitment to lend.
Have a property this bears on?
We will tell you which program fits and what the guidance actually requires including when the answer is that FHA is the wrong tool.