What is the minimum DSCR for a HUD 223(f) refinance?

Market-rate vs affordable minimums

For market-rate 223(f) refinance transactions, the minimum DSCR is 1.176x, calculated on stabilized net operating income divided by annual debt service inclusive of the annual MIP. NOI uses actual trailing-12-month operations adjusted for vacancy at the greater of actual or 7% physical plus 3% economic vacancy.

For affordable refinance transactions — broadly any project with at least 50% of units restricted at 80% AMI or below for a 30-year affordability period — the minimum DSCR drops to 1.11x. HUD accepts the lower coverage because the rent restriction caps upside but also reduces the volatility the higher DSCR is meant to absorb.

DSCR is one of five binding sizing tests

The actual 223(f) loan amount is the LOWEST amount that satisfies all five HUD sizing criteria. For a refinance you model criteria 1, 2, and 4; LTC and replacement-cost tests do not apply.

• •1. DSCR test — NOI ÷ annual debt service (incl. MIP) ≥ minimum DSCR
• •2. LTV test — loan ÷ appraised value ≤ max LTV (85% market-rate refi)
• •3. Loan-to-Cost test, where applicable
• •4. Statutory per-unit limits (adjusted for high-cost area)
• •5. Replacement-cost test (221(d)(4) new construction only)

The MIP-inclusive math sponsors miss

DSCR is forward-looking on a stabilized NOI estimate. If trailing performance is below the stabilized assumption, HUD's underwriter may require a 3-6 month debt-service reserve at closing. That reserve does not change the DSCR calculation but does increase the equity required.