A firm commitment, also known as ‘firm commitment underwriting’, is a lender’s promise to enter a loan agreement with a borrower. Getting a firm commitment is an essential part of the closing process for HUD 232 and HUD 232/223(f) loans.

For sample firm commitment paperwork from HUD, click here.

A firm commitment, also known as ‘firm commitment underwriting’, is a lender’s promise to enter a loan agreement with a borrower. Getting a firm commitment is an essential part of the closing process for HUD 232 and HUD 232/223(f) loans.

The benefits of a firm commitment in HUD 232 financing include:

• Less time and money spent on the approval and origination process
• HUD 232 refinancing of multiple properties can greatly increase cash flow, potentially giving developers the capital to purchase or construct new assets
• HUD fixed-rate financing allows large companies to stabilize expenses and make accurate financial projections well into the future

A firm commitment, also known as ‘firm commitment underwriting’, is a lender’s promise to enter a loan agreement with a borrower. Getting a firm commitment is an essential part of the closing process for HUD 232 and HUD 232/223(f) loans.

To pass through the firm commitment process to full loan approval, you'll need documentation including a transmittal letter and an Application for Multifamily Housing Project (Form HUD-92013) which has a fee of $3 per $1000 of mortgage. Plus, you'll also have to pass an intergovernmental review. On top of that, you should contact your local HUD office to see who you need to contact in the state where the property is located (and if any additional reviews are required).

In addition, you'll need to fill out Byrd Amendment paperwork, which is intended to make sure no illegal lobbying or lobbyist-based conflicts of interest are likely to occur as a result of the project. And, you'll also need to submit Form HUD-92013, in which you must disclose any recent legal actions regarding parties involved in the project. This is especially important if the legal actions are related to delinquent federal debt.

To check out the full list of documents you'll need to apply for an FHA/HUD 232 loan, visit our FHA/HUD 232 loan checklist.

It typically takes four to six months from application to closing to get a Firm Commitment in HUD 232 financing. HUD has an estimated 45-day review period for multifamily properties and an estimated 60 days for healthcare properties. However, each case is different and in some instances, it could take as long as 3 months to close. A typical timeline might be as follows:

• Firm application is typically submitted to HUD within 30 days.
• After HUD issues the firm commitment and rate lock, most HUD 232 loans close in 45 to 60 days.

The main risk associated with a Firm Commitment in HUD 232 financing is that interest rates may increase before closing on the property. This could result in a higher interest rate and more money out of your pockets. Additionally, early rate locks are not typically allowed, so borrowers should check with their individual lender to see if they are available. Rate lock deposits typically cost 1% of the entire loan amount and are refunded at closing.