Our group recently received a loan commitment from Evanston Financial for just over $10M to cover the construction and long term financing for our 132-unit apartment development. Evanston, an affiliate of Oppenheimer, will package the loan as MAP lender for HUD under the 221(d)4 New Construction Program.
The interest rate is currently at 6.0%, plus .45% for Mortgage Insurance Premium, and the amortization period is 40 years. The loan is non-recourse and assumable.
Once HUD accepts the loan proposal, they will issue a Letter of Invitation. Here is what HUD guidelines state about the Letter of Invitation:
“The pre-application stage for new construction or substantial rehabilitation is designed to permit HUD to review the most important exhibits affecting the feasibility of a proposed project. At the end of the review, HUD invites the Lender to submit an application for a Firm Commitment or declines to issue an invitation. The Lender who receives an invitation has reason to believe that, if its application for a Firm Commitment is consistent with the information it presented at the pre-application, there is a high likelihood that HUD will issue a Firm Commitment.”
Once we have this commitment, we can begin to put in place the equity funding that will be necessary to cover the down payment and associated costs, now estimated to be about $1,125,000.
