The primary challenge of underwriting a multifamily housing development project using HOME funds is finding the right mix of private and public contributions that will allow the project to reach sustainability, while complying with HOME Program requirements.

The HOME Multifamily Underwriting Template enables you to achieve that balance through planning and analysis. Using the Template, users can experiment with alternative financing scenarios and quickly see the results. The Template is designed to incorporate HOME Program requirements into the planning and analysis of the project (and to accommodate the requirements of another affordable housing program, as well). Using data you provide, the Template generates useful financial projections for the project going forward. (As previously discussed the format of the pro-forma generated by the Template is effective in exploring a project's feasibility, but it is not the only format used by lenders and other members of a typical development team.)

The Template consists of several interconnected worksheets, each focusing on a different component of the project. Since each successive worksheet supplies data for those that follow, users should complete each section before continuing to the next section.

Template Introduction - This section provides basic instructions for using the Template and fields for labeling the workbook to avoid confusion with other projects.

HOME and Other Affordable Housing Requirements - This section includes basic data about the HOME Program requirements that will affect the project, such as restrictions on the amount of HOME funds invested per unit, the maximum rents charged for HOME-subsidized units, etc. Because some multifamily affordable housing projects use funds from Federal, State, and local programs besides HOME (e.g., Low-Income Housing Tax Credits or the Community Development Block Grant), the Template accommodates requirements for another affordable housing program, as well.

Rents and Income - This section contains detailed information on the rental income for the project. The data in this section are especially important for generating the project's operating pro-forma.

Development Costs - This section includes detailed data on the costs of the project during the development phase. After entering data on individual cost items and providing information on your construction loan, the Template totals your development costs, an important calculation for planning permanent financing for the project.

Operating Expenses - This section uses monthly data on the project's operating expenses to generate a total operating expense for its first year in service. The total operating expense for subsequent years is generated by entering a fixed percentage increase in operating expenses per year. Operating expenses are a critical component of the Operating Pro-Forma and help to determine the project's profitability.

Financing Sources - This section describes the plan for financing the housing project. A typical project uses an array of funding sources, including equity, first and second mortgages, etc.

Custom Loans - This section allows you to enter customized payment schedules for up to two complex or atypical loans.

Operating Pro-Forma - This section provides a year-by-year projection of the project's income and expenses based upon the information provided in the previous sections. These projections of a project's long-term viability are of particular interest to investors and lenders. Investors use the operating pro-forma to assess their return on investment, while lenders use it to determine the likelihood that their loans will be repaid.

Gap Analysis - This section summarizes the projects sources and uses and calculates any gap between the amount of financing obtained and the total funding needed for the project. If a positive gap in financing exists, the project is not viable unless costs are reduced or the amount of financing is increased. If the gap in financing is negative, the project has more funding than necessary.

Template Summary Page - This section contains a snapshot of the project's key financial data. The Summary is calculated using data from the preceding worksheets.