FHA HUD 232/223(f) Healthcare Loan Program

The FHA HUD 232/223(f) is federally insured loan program to help investors finance residential health care facilities. Investors can use this program to finance the acquisition, refinance, and substantial rehabilitation of properties such as nursing homes and assisted living facilities. While this is an FHA HUD program, the Office of Residential Care Facilities oversees this program.

Since these HUD loans are insured by the federal government, they offer some of the most favorable terms for health care real estate investors and developers. In specific, the FHA HUD 232/223(f) loan program is a great option for developers of health care properties looking for long term financing options with very attractive terms. This loan program offers long term, fixed-rate and non-recourse debt to health care real estate developers and investors, making it one of the best loan options in the health care space.

FHA HUD 232/223(f) Healthcare Loan Program Loan Program Terms and Guidelines

Eligible Properties
Properties must be residential healthcare properties such as skilled nursing facilities. They must offer care for people in need of long-term medical attention. Properties must be established, not in the planning stages. Facilities must be licensed and regulated. Commercial space cannot take up more than 20% of the property area/income and independent living spaces cannot exceed more than 25% of the property’s use. Facilities must be able to accommodate at least 20 patients who need long term care. Hospitals, clinics, halfway houses and facilities that demand entrance fees are not eligible for these loans.

Eligible Borrowers
Can be public, for-profit and not-for-profit entities. Investors and developers are welcome as well. Borrowers must have experience owner-operating like kind properties.

Utilization of Funds
HUD will allow the financing of a 15-year replacement reserve fund. These funds cannot be more than 15% of the after-repair property value.

Loan Amount

• Up to 85-90% LTV for acquisitions and refinances
• Refinances are subject to the lesser of 100% of refinance cost and 85-90% LTV

DSCR must hit at least 1.45x

Loan Terms
Loans must be a minimum of 10 years. Maximum loan term of 35 years

Interest Rates
Rates are fixed for the life of the loan

Prepayment penalty
Various different options.

Loan Assumption
Loans are assumable subject to HUD approval

Recourse
Loan is non-recourse with standard “bad-boy” carveouts

Escrows
Escrows are required for taxes, MIP, property insurance and replacement reserves

Mortgage Insurance Premium
1% at closing and .65% annually thereafter

Annual Reporting
FHA HUD 232/223(f) loans require borrowers to submit audited financials each year within 90 days of the close of the fiscal year.