HUD 232 Replacement Reserves

LTV: Loan-to-Value Ratio in Relation to HUD 232 Loans

LTV: Loan-to-Value Ratio in Relation to HUD 232 Loans

Loan-to-value ratio, or LTV, is one of the most important financial metrics that lenders look at when deciding to approve a borrower for a loan. LTVs for HUD 232 and HUD 232/223(f) loans typically vary between 75% and 85%, depending on the specific property type and borrower.

What are the Replacement Reserve Requirements for HUD 232 Loans?

What are the Replacement Reserve Requirements for HUD 232 Loans?

Both HUD 232 loans for new construction and substantial rehabilitation and HUD 232/223f loans for purchase and refinancing require borrowers to have a certain replacement reserves; money which can fund the repair and replacement of outdated or broken building systems without putting a financial strain on the project itself. Borrowers for these loans must provide a 15-year replacement reserve analysis along with their loan application. Plus, replacement reserves for both of these types of loans must have a minimum balance of $1,000 per unit in years 2 through 15 (HUD 232 loans), and in years 1 through 15 (HUD 232/223f loans).