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Caffrey & Company > FHA HUD 232 Program:

FHA HUD 232 Program:

Eligible Property: For the construction or rehabilitation of skilled nursing and assisted living facilities. Unlicensed independent living units are also allowed but cannot exceed 25% of the total units of the project without a waiver.  Other licensed seniors housing property types are also eligible, including intermediate care facilities.

Eligible Borrowers: Experienced for profit and not-for-profit enterprises.  Single Asset Entity.

Maximum Term and amortization:  Construction period (interest only) plus 40-years.

NEW CONSTRUCTION: The lesser of:

  • 80% of stabilized value (85% for non-profits) for skilled nursing and independent living units.
  • 75% of stabilized value (80% for non-profits) for assisted living units.
  • 90% of FHA’s allowable replacement cost (95% for non-profits).
  • Amount that results in a debt service coverage ratio of 1.45x.
  • 100% of FHA’s allowable costs less grants, public loans and tax credits.

SUBSTANTIAL REHABILITATION: The lesser of:

  • 80% of stabilized value (85% for non-profits) for skilled nursing and independent living units.
  • 75% of stabilized value (80% for non-profits) for assisted living units.
  • 90% of FHA’s allowable replacement cost (95% for non-profits).
  • Amount that results in a debt service coverage ratio of 1.45x based on the underwritten Net Operating Income.
  • If owned – 100% of hard and soft costs plus the lesser of existing debt or 90% of existing value (95% for non-profits). To be acquired – 90% of hard and soft costs 95% for non-profits) plus 90% of the lesser of purchase price or existing value (95% for non-profits).
  • 100% of FHA’s allowable costs less grants, public loans and tax credits.

Prepayment Penalty: Negotiable. Generally two-year lockout with a 10% to 1% declining pre-payment penalty. Other pre-payment options are available.

Assumable:     Yes, subject to approval and payment of the Assumption Fee.

Third Party Reports: Appraisal (feasibility for new construction), phase one environmental, property assessment (PCR).

HUD Application Fee:            Non-refundable fee of $3 per $1,000 (0.3%) of the mortgage amount due to HUD with the firm commitment submission package.

HUD Inspection Fee: $30 per unit when repairs are less than $3,000 per unit. 1% of the cost of the repairs otherwise.

Davis-Bacon Wages:       Davis-Bacon wage rates will apply to all projects for the construction or rehabilitation

HUD Mortgage Insurance Premium: 

  • 0.65% for Market Rate Properties
  • 0.45% for Affordable Properties