FHA 223(a)(7): refinancing a loan FHA already insures

A 223(a)(7) replaces an existing FHA-insured apartment loan with a new FHA-insured loan, usually to lower the rate, stretch the term or move to the 0.25% mortgage insurance premium. There is no cash out. HUD’s MAP Guide sets a 30-day target for the firm commitment decision once the application is complete (section 18.3.1).

The loan-size tests

The new loan is the smallest of (MAP Guide 3.8.3):

1. the original principal amount of the loan being refinanced;
2. the existing debt plus transaction costs: HUD’s fees, upfront MIP, lender fees, any prepayment premium, title and legal, and any required repairs and reserve deposits;
3. what 90% of net operating income supports, a 1.11 coverage ratio, or 95% (1.05) for properties with more than 90% project-based rental assistance on a contract running more than 15 years after endorsement.

Term

Up to 12 years beyond the current maturity, but never longer than the original program allowed (35 years for 223(f), 40 for 221(d)(4)) and never past 75% of the buildings’ remaining useful life (12 U.S.C. 1715n(a)(7); MAP Guide 18.3.4). Earlier 223(a)(7) extensions count against the 12 years.

Costs

0.25% annual MIP and 0.25% up front since October 1, 2025, down from 0.50% (90 FR 45789). HUD’s application fee is 0.15%, half the usual, and there is no HUD inspection fee. Lender fees are capped at 3.5% of the first $2 million and 2% above that (MAP Guide 18.3.7). No Davis-Bacon.

Who can’t use it

Risk-sharing loans (542(b) and 542(c)) and coinsured loans aren’t eligible, and neither is a deal that needs new construction or work that would trigger Davis-Bacon or a full environmental review (MAP Guide 3.8.1 and 18.2). A property that needs that kind of work refinances under 223(f) or, for substantial rehabilitation or new construction, 221(d)(4).

When it pays

It depends on the old loan’s rate and premium. A loan insured at 0.60% MIP that refinances at the same note rate still saves 0.35% of the balance a year in premium, before costs. One at 2.75% from 2021 usually won’t recover its costs. Put the numbers through a payment comparison before paying for third-party reports.