HUD FHA Section 232 Healthcare Loan Program

Section 232 provides commercial mortgages for assisted living facilities, skilled nursing, skilled nursing and intermediate and memory care properties meeting the following requirements:

• Must provide continuous care.
• Must offer three meals per day.
• Facility must be licensed by appropriate government entity.
• May include up to 25% non-licensed independent living units.
• 20 bed minimum.
• Operating leases to qualified facility operators are permissible, subject to HUD approval.
• The facility must have been completed or substantially rehabilitated for at least three years prior to the date of the application. Projects with additions completed less than three years previous are eligible as long as the addition was not larger than the original project size and number of beds.

Commercial space is limited to 20% of gross floor area and commercial income is limited to 20% of gross income.

Prohibited under regulations of Section 232.

Maximum loan amount will be the lesser of:

1. 80% of appraised value (85% for non-profits);
2. 100% of the transaction cost for a refinance, and 85% of the transaction cost for a purchase transaction. Recognizable transaction costs include repairs, initial replacement reserves, third party reports, closing costs, along with eligible existing indebtedness or purchase price.;
3. Minimum Debt Service Coverage of 1.45x

All 50 states, Puerto Rico, U.S. Virgin Islands, and Guam

35 years not to exceed 75% of remaining economical useful life or improvements.

1.45.

Negotiable - typically a two-year lock out followed by a step down premium (e.g. 8,7,6,5,4,3,2,1).

Non-recourse for most loans subject to standard carve-outs.

Yes, subject to lender approval.

• Tax and Insurance Impounds: Required.
• Replacement Reserves: Required - Monthly deposit required and amount depends on property condition.
• Initial Deposit to Reserve Fund: Required - One time deposit may be required depending on property condition.
• Critical and Non-Critical Repair Escrow: May be required for properties with life, safety, health or code related repair and/or maintenance concerns.

Payable at Closing in an amount equal to 0.65% of the loan amount for each year of construction.

1. HUD Fees - Application Fee and Inspection Fee;
2. FHA Mortgage Insurance Premium due at closing;
3. Lender Financing and Placement fee up to 3.5% payable at closing;
4. Actual cost of Third Party Reports.

Appraisal, Market Study, Phase I Environmental, Engineering Report and Seismic where applicable.

• Experienced owner operators.
• Minimum credit and financial capacity requirements.