HUD 232 Loans

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 2024

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)

Term: 40 years, fixed-rate 

Amortization: Up to 40 years, fully amortizing

Minimum DSCR: 1.45x

MIP: For applications submitted or amended on or after October 1, 2025, the mortgage insurance premium is a flat 0.25% of the loan amount due at closing and 0.25% annually thereafter, for all property types; the prior tiered MIP rate categories (including the Green MIP reduction) were eliminated (90 FR 45789). In order to determine the prevailing wage in your area, you can use this free Davis-Bacon wage calculator, provided by wdol.gov. 

Advantages

• Low, fixed interest rates

• Loans are fully assumable (with FHA/HUD approval)

• HUD 232 loans are non-recourse, limiting risks for developers

Disadvantages

• 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