Little-known to most real estate investors, the Federal Housing Association (FHA), in conjunction with the U.S. Department of Housing and Urban Development (HUD), collectively offer mortgage insurance programs for both apartments and health care facilities (such as assisted living facilities). The programs cover substantial rehabilitation programs and new construction loans as well as refinance loans. FHA and HUD are not the lender; they are the insurer of the mortgage. These “HUD” loans are offered through FHA-approved lenders.

Unique benefits of these FHA-insured, ‘HUD’ sponsored loan programs

  • Because of the government-backed mortgage insurance, these programs offer more favorable loan terms and lower interest rates than conventional construction and rehabilitation loans.
  • Section 8 subsidy requirements, affordable housing percentages, and low/middle income requirements for tenants are not required.
  • Financing of upscale multifamily properties with pools, tennis courts, and other amenities is allowed – as long as mar­ket rents and market expenses support the costs.
  • The loans have fixed interest rates and 40-year terms with no balloon payments. The 40-year amortization period starts when construction is completed and the loan becomes a per­manent mortgage.
  • Loan amounts are based on “loan to cost” ratios of 90% for healthcare projects and 85% for multifamily projects.
  • Final loan amounts often allow a credit for appreciated land value at closing. This cal­culation uses value estimates from an appraiser for the intended use of the land, as of the day of closing. Consequently, final loan amounts may climb to more than 100% of total project costs!
  • These mortgages are non-recourse and always assumable (not just a one-time assumption).
  • The program can also allow for a 10% Builder Sponsor Profit Risk Allowance (BSPRA) for apartment loans. This is similar to a “developer fee” that is based on all the hard and soft costs (not including the land) and is added to 85% of the costs or mortgage amount, and can be used reduce the amount required from the sponsor at closing.


Additional requirements of these loans

  1. Lenders must participate in a concept meeting with a HUD coordinator prior to application. The HUD coordinator will schedule the meeting either in person or by teleconference. There is no cost for this project concept meeting.
  1. The first draw of the construction loan occurs on closing of the construction loan. Therefore, all documents, detailed architectural plans and specs must be completed, submitted and approved before closing.
  2. The project architect must supervise and sign off on all subsequent construction draws to ensure that the plans and specs have been followed.
  3. The general contractor must provide a performance completion bond so the financial risk that a project “will be finished on time and on budget” is insured.
  4. One of the last draws of the construction loan includes funding for a cost certification/audit of the contractor’s books to be performed by a CPA, the purpose of which is to ensure that all funds were properly applied to the project.


One of the most important decisions is choosing a mortgagee who is experienced with HUD programs, as the mortgagee is expected to know HUD’s programs and to be able to complete the application for HUD’s review.  An experienced mortgagee can help the Sponsor make basic real estate decisions that can ensure the highest loan amounts and terms.  Sponsors who use and develop an understanding of HUD’s programs tend to use it exclusively.


HUD Financing Specialists

Lynn Daugherty

Lynn Daugherty is an affiliate of Trust Mortgage and President of Vector Financial, LLC, a company that assists clients with obtaining HUD development loans for apartment developments and assisted living facility projects in conjunction with his association with John Panagako and Trust Mortgage. Daugherty is a CPA and previously worked for Price Waterhouse (Miami) and was the manager in charge of Real Estate Consulting for South Florida. Daugherty works with investors, developers and entrepreneurs to assist with various stages of the development process to optimize development process from initial conception planning to completed projects. In addition to assisting private clients to obtain favorable HUD financing for apartments and assisted living facilities, Vector Financial, LLC is actively developing apartments and assisted living projects on their own behalf, by partnering with selected investors.

Lynn A. Daugherty

Vector Financial, LLC

1415 Panther Lane, Suite 368

Naples, FL 34109


John Panagako

John Panagako has been awarded the Certified Property Manager designation, has managed more than 60,000 apartment units and personally financed developments using FHA insurance programs from Alaska to Florida. Previously, Panagako had his own property management company and is now the President of Trust Mortgage Company, Inc. He handles origination and processing of HUD loan applications from his Boston office. Since 1988,Trust Mortgage Company and its affiliates have processed hundreds of HUD and commercial real estate loans as a direct lender and correspondent.  Panagako was appointed to a lobbying group that met quarterly with the HUD central office, to plan future housing programs and critique current programs. He was also appointed to the legislative committee of the Mortgage Bankers Association.


John P. Panagako

Trust Mortgage Company

10 Kearney Road

Needham Heights, MA 02494

800-536-3371 ext. 101



Kim Lisa Taylor

Kim Lisa Taylor

Kim Lisa Taylor, Esq., is founding attorney of Syndication Attorneys, PLLC, a boutique corporate securities law firm that helps clients nationwide with their federal real estate securities offerings. She has been licensed in California since 2002 and in Florida since 2012 and has made securities transactional law the focus of her practice since 2008. The firm employs two additional contract attorneys with securities experience as well as other support staff. Kim and her team are available for consultation in St. Augustine, Florida.
Kim Lisa Taylor