HUD 232/223(f) Loans
The HUD 232/223(f) loan is designed for financing senior housing, assisted living, or skilled nursing facilities.
Loans for Acquiring or Refinancing Senior Living and Healthcare Facilities Insured by HUD
The HUD 232 loan is a fantastic way to build or rehabilitate senior living and healthcare properties. However, if you want to acquire such a property as-is, or even refinance a property you currently own with HUD financing, then a HUD 232/223(f) loan would be the best financing vehicle instead. While HUD 232/223(f) loans are specifically tailored for as-is acquisitions and refinancing borrower-owned properties, they are similar to HUD 232 loans in that HUD 232/223(f) loans use HUD LEAN processing and are intended for healthcare properties with 20 or more residents. Plus, these loans are fully assumable (with FHA approval), and are non-recourse.
2021 Sample Terms For HUD 232/223(f) Loans
Size: Minimum loan of $2 million (typical loan averages $7.6 million)
LTV/Leverage:
- Purchase:
- Non-profits: The lesser of 90% of the acquisition price or appraised value
- For-profits: The lesser of 85% of the acquisition price or appraised value
- Refinance:
- For-profits: The lesser of 85% of the appraised value or 100% of the cost to refinance
- Non-profits: The lesser of 90% of appraised value or 100% of the cost to refinance
- HUD/FHA Approved Full Property Appraisal
- Borrower/Stakeholder Credit Reports
- Phase I Environmental Assessment
- Architectural/Engineering Report
- Market Study
- House 20 or more residents
- Provide ongoing medical care for long-term patients
- Be licensed by the appropriate municipal or state organization/agency
- Have been constructed at least three years ago, though newer property additions are allowed, as long as they are smaller than the original structure
- Have no more than 20% of the project's gross area or gross income devoted to/derived from non-resident daycare
- Have no more than 25% of all units designated as independent living units
- Have no more than 20% of the gross floor space filled and no more than 20% of the property's income derived from commercial tenants
- Low, fixed interest rates
- Loans are fully assumable (with FHA/HUD approval)
- HUD 232/223(f) loans are non-recourse, limiting risks for developers
- Borrowers/owners must regularly contribute to a replacement reserve fund
- FHA application fees of 0.30% of the entire loan amount and FHA inspection fees of 0.50% of the entire loan amount are required
- Requires both an initial, one-time MIP (mortgage insurance premium) at closing, as well as monthly MIPs throughout the life of the loan
Term: 35 years, fixed-rate
Amortization: Up to 35 years, fully amortizing
Minimum DSCR: 1.45x
MIP: HUD 232/223(f) MIPs include an MIP fee of 1% of the loan amount, paid at closing, and an annual MIP of 0.65%
Third-Party Reports:
HUD 232/223(f) loans require multiple third-party reports, including:
HUD 232/223(f) Eligible Properties:
In order to be eligible for HUD 232/223(f) financing, a project must:
Advantages:
Disadvantages: