RAD debt sizer
How much first mortgage can a RAD property carry under each execution? This sizes the loan side by side under FHA 223(f), FHA 221(d)(4), Freddie Mac, Fannie Mae and a bank loan, shows which test binds, and gives the annual debt service with FHA's mortgage insurance.
Worked example: 100 units at $1,100 a month carry about $7,040,000 under FHA 223(f) at a 1.11 coverage ratio. The largest loan in the example is FHA 221(d)(4) at $7,310,000.
Example: 100 units, net operating income $525,400
FHA 221(d)(4): $7,313,628| Execution | By coverage | By loan ratio | Loan | Binding test | Principal and interest / yr | MIP / yr | Debt service / yr | DSCR | Per unit |
|---|---|---|---|---|---|---|---|---|---|
| FHA 223(f) | $7,037,705 | $8,100,000 | $7,037,705 | Coverage | $455,739 | $17,594 | $473,333 | 1.11 | $70,377 |
| FHA 221(d)(4) | $7,313,628 | $9,000,000 | $7,313,628 | Coverage | $455,049 | $18,284 | $473,333 | 1.11 | $73,136 |
| Freddie Mac Section 8 | $6,761,198 | $7,200,000 | $6,761,198 | Coverage | $437,833 | $0 | $437,833 | 1.20 | $67,612 |
| Fannie Mae affordable | $6,761,198 | $7,200,000 | $6,761,198 | Coverage | $437,833 | $0 | $437,833 | 1.20 | $67,612 |
| Bank loan | $5,681,733 | $6,750,000 | $5,681,733 | Coverage | $420,320 | $0 | $420,320 | 1.25 | $56,817 |
How this works
- Net operating income = (contract rent + other income) x 12 x units x (1 - vacancy), minus operating costs and the replacement reserve per unit. FHA's vacancy factor for properties with 90% or more of units assisted is 3% (ML 2025-03), which is the default.
- Loan by coverage = NOI / minimum DSCR / annual debt constant. The constant is the level monthly payment on $1 over the amortization, times 12, plus the annual MIP for FHA (0.25%, 90 FR 45789).
- Loan by loan ratio = value x maximum LTV, or total cost x maximum loan to cost for 221(d)(4).
- The loan is the smaller of the two; the table names the test that binds and the coverage the loan produces.
The defaults. FHA: 1.11 and 90% for properties with 90% or more of units under rental assistance (Mortgagee Letter 2025-03), 35-year maximum for 223(f) and 40 years for 221(d)(4) (MAP Guide 3.1.6). Freddie Mac: 1.20x and 80% from its Optigo HUD Section 8 term sheet; the same sheet allows 1.15x and 90% when new LIHTC are present and asks 1.25x for rental assistance other than HUD project-based Section 8, so ask your lender how it treats a RAD PBV contract. Fannie Mae publishes its affordable ratios in a lender form we could not confirm from a public Fannie Mae source, so its column holds placeholder ratios: confirm them with a term sheet. The bank column is a placeholder too.
What it leaves out: construction-period interest and the 221(d)(4) construction loan, FHA statutory per-unit limits, the FHA initial MIP and fees, interest-rate floors, HUD's 10-year RAD feasibility test (1.11 at 2% revenue and 3% expense growth, Supplemental Notice 4C, Section X) and every lender's own underwriting.
Questions people ask
What coverage and loan ratio does FHA use for a RAD conversion?
Under Mortgagee Letter 2025-03 (January 8, 2025), FHA 223(f) and 221(d)(4) loans on properties with 90% or more of units under rental assistance size at a 1.11 debt service coverage ratio and a 90% loan ratio, with a 3% vacancy factor. A RAD property with every unit under the HAP contract falls in that tier. Annual mortgage insurance is 0.25% for applications from October 1, 2025.
Why is the FHA loan sometimes smaller than the agency loan here?
FHA counts the 0.25% annual mortgage insurance premium in debt service and the loan is sized on both coverage and value, so at the same rate the binding test decides it. Change the rates to real quotes: FHA rates and agency rates rarely match, and the order of the columns often changes.
Does HUD set its own coverage test for RAD deals?
Yes. Supplemental Notice 4C, Section X, says a conversion taking on new hard debt should keep debt coverage at 1.11 or more over ten years, using 2% annual revenue growth and 3% expense growth. Lender minimums apply on top of that.
Can I start from my project's HUD rent?
Yes. Look up the project in the RAD rent check, which carries its unit count and 2026 RAD contract rent into this page through the link under its results. You can also add ?units=120&rent=1050 to this page's address.
Sources
- HUD Mortgagee Letter 2025-03, Multifamily Changes in DSCR and LTV/LTC Ratios (January 8, 2025) Properties with 90% or more of units under rental assistance: 90% loan ratio, 1.11 DSCR, 3% vacancy factor, for both 221(d)(4) and 223(f). LIHTC with a rent advantage: 90% and 1.11. Market rate: 87% and 1.15.
- HUD notice, Changes to Mortgage Insurance Premiums for FHA Multifamily Programs (90 FR 45789, FR-6522-N-02) (September 23, 2025) Annual MIP of 0.25% for all FHA multifamily programs, for applications submitted or amended on or after October 1, 2025.
- HUD Multifamily Accelerated Processing (MAP) Guide, 4430.G (March 19, 2021 revision) Section 3.1.6: maximum term 40 years for new construction or substantial rehab, 35 years for 223(f). Section 3.7.11, Criterion 10: 223(f) cash-out limit is the greater of 80% of value or the cost to refinance. Section 18.3: 223(a)(7) coverage 1.05 for projects over 90% project-based Section 8, 1.11 otherwise; no cash out; term up to 12 years beyond the existing maturity.
- Freddie Mac Multifamily, Optigo HUD Section 8 Financing term sheet (September 2025) Minimum DCR 1.20x with at least 50% of units under HUD project-based Section 8, 1.25x for other rental assistance, 1.15x with new LIHTC. Maximum LTV 80% without LIHTC, 90% with. Loan terms 5 to 15 years, amortization up to 35. A contract shorter than the loan term is underwritten as short-term.
- HUD Notice H-2025-01 / PIH-2025-03, RAD Supplemental Notice 4C (January 16, 2025) Section II: blended rent schedule is the unit-weighted average of RAD rents and, for TPV units, the lower of 110% of FMR (or exception payment standard) less utility allowance, or reasonable rent. Section X: leveraged deals should keep DSCR at 1.11 or more over ten years at 2% revenue and 3% expense growth.
This is a sizing sketch, not a loan offer, a commitment or advice. Rates shown are illustrative inputs you can change; this site advertises no rates or terms. Lenders, HUD and investors underwrite with their own figures and current guides. Janover Capital LLC is a commercial mortgage advisor, not a lender, and is not affiliated with HUD.
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Want a lender's read on these numbers?
Send the project with its rents, scope of work and where the CHAP stands. A senior advisor at Janover Capital LLC replies with a first read on how it sizes across FHA, agency, bank and bond executions.
- FHA 223(f), 221(d)(4) and 223(a)(7)
- Fannie Mae and Freddie Mac affordable
- Bank, bond and tax credit executions