This section of the module walks you through the Gap Analysis tab of the HOME Multifamily Underwriting Template. At this point, you should have completed all input tabs of the Template. Click on the Gap Analysis tab to proceed.

After completing this section of the module, you will be able to:

• Understand the gap in financing as calculated and presented by the Template based on data you have provided; and
  
• Describe ways to address a gap-in financing for a multifamily affordable housing project.

The Gap Analysis tab presents:

• Funding Sources Summary, as calculated on the Financing Sources tab;
  
• Development Uses Summary, as calculated on the Development Costs tab (with permanent loan origination fees (points costs) calculated based on inputs on the Financing Sources tab); and
  
• The Gap in Financing.

The Gap in Financing, shown at the bottom of the Excel worksheet, is the difference between total development uses and total funding sources.

A positive value for the gap in financing indicates that the project is not feasible - development costs and points costs exceed the availability of funding. You can address the gap in financing in two ways:

1. Lower costs. Consult the Development Costs tab to begin cutting costs. Note that to lower some costs, you may have to reevaluate your vision for the project. Perhaps your project should include fewer units to lower construction costs. Make sure that you make changes on all of the relevant tabs of the Template to reflect your new vision for the project.
   
   To address the cost of points for the first and second mortgage, consult with the prospective lender about your options and revise the data provided on the Financing Sources tab.
   
   
2. Access additional financing. Try different funding scenarios to close the gap in financing. Perhaps the developer could contribute additional equity to the project. Perhaps the project should access additional public funds. Again, make sure that you make changes on all of the relevant tabs of the Template to reflect your new vision for the project. For example, accessing additional public funds may have implications for the rents you can charge for some units.

A negative value for the gap in financing indicates that the project is oversubsidized using HOME funds. Reallocate funding to eliminate the surplus subsidy.

After you have established that the project is adequately financed, review the details of the project in the context of subsidy layering. Continue to Subsidy Layering Considerations to learn more about subsidy layering and how it applies to your project.

Once you have a grasp of the Gap Analysis tab and have learned the basics of subsidy layering, proceed to the Summary tab.