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HUD 232 Loans
HUD-Insured Financing for Building or Renovating Senior Housing, Assisted Living, and Skilled Nursing Facilities
HUD 232 Healthcare Financing
HUD 232 Loans for Building or Substantially Rehabilitating Senior Living and Healthcare Facilities
Right now, the market for senior housing is red hot-- and with 10,000 Americans turning 65 each day, it looks like the market will only be getting hotter in the foreseeable future. If you're a developer looking to expand your presence in the senior housing or healthcare market, a HUD 232 loan could be the perfect option. HUD 232 loans allow for the new construction or substantial rehabilitation of senior housing, assisted living, and skilled nursing facilities with 20 or more residents. And just like other HUD multifamily loans, HUD 232 loans are fully assumable (with FHA approval and a 0.05% fee), and are non-recourse. Plus, HUD 232 loans now use HUD 232 LEAN loan processing, a streamlined form of processing which reduces approval times and reduces the need for duplicate paperwork.
Keep reading below to learn more, or simply click here to download our easy-to-read HUD 232 loan term sheet.
Sample Terms for HUD 232 Loans in 2023
Size: Minimum loan of $2 million (typical loan averages $7.6 million)
LTV/Leverage:
New Construction: 75% (for profit), 80% (non-profit)
Substantial Renovation:
75% (for profit), 80% (non-profit), OR
Borrower-owned: 100% of current mortgage debt or 90% pre-rehabilitation market value (95% for non-profits)
Purchase/substantial rehabilitation: 85% of purchase price or 90% pre-rehabilitation market value (95% for non-profits)
HUD/FHA Approved Full Property Appraisal
Borrower/Stakeholder Credit Reports
Plans and Specifications Review
Phase I Environmental Assessment
Architectural/Engineering Report
Market Study
House 20 or more long-term patients
Provide constant/ongoing medical attention for individuals in need of care
Be licensed by the appropriate city or state organization
Have had construction be complete for at least three years, though newer property additions are allowed, as long as they are smaller than the original building (for HUD 232 substantial rehabilitation loans)
Have no more than 20% of the project's gross area or gross income devoted to/derived from non-resident day care
Have no more than 25% of all units can be independent living units
Have no more than 10% of the gross floor space filled and no more than 15% of the property's income derived from commercial tenants
Low, fixed interest rates
Loans are fully assumable (with FHA/HUD approval)
HUD 232 loans are non-recourse, limiting risks for developers
Requires that borrower/owner makes regular contributions to a replacement reserve fund
An FHA application fee of 0.30% of the loan amount and an FHA inspection fee of 0.50% of the loan amount are both required
Requires both an initial, one-time MIP (mortgage insurance premium) at closing, as well as monthly MIPs throughout the life of the loan
Requires annual audited financial statements from owners
Term: 40 years, fixed-rate
Amortization: Up to 40 years, fully amortizing
Minimum DSCR: 1.45x
MIP: Mortgage insurance premiums for HUD 232 loans include a one-time MIP fee of 1% of the entire loan amount, due at closing, and an annual MIP fee of 0.65%
Third-Party Reports:
HUD 232 loans typically require third-party reports, including:
Eligible Properties for HUD 232 Loans
In order to be eligible for HUD 232 financing, a project must:
Davis-Bacon Wages: Since HUD 232 projects involve federal insurance and construction over $2000, they are subject to the Davis-Bacon act, which requires that all workers be paid the "prevailing wage" in their area. In order to determine the prevailing wage in your area, you can use this free Davis-Bacon wage calculator, provided by wdol.gov.