HUD 232 Loan - New Construction or Rehabilitation of Healthcare Facilities

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Eligible Properties

Licensed skilled nursing and rehabilitation, assisted living, memory care, intermediate care, and board and care facilities with limited independent living units.

Eligible Borrowers

Single-asset, special purpose entities, either for-profit or non-profit.



Loan Amount

No minimum/no maximum (subject to General Loan Parameters).

General Loan Parameters

Maximum loan amount:

  • For new construction projects, the lesser of (a) 90% of total replacement cost, (b) 80% of stabilized value for skilled nursing facilities, 75% of stabilized value for assisted living and memory care facilities, or (c) an amount that results in a DSCR of 1.45x based on the underwritten NOI.
  • For substantial rehabilitation projects, there will be an additional limitation: 100% of rehabilitation costs plus the lesser of (a) 90% of the as-is value of the property or (b) 100% of existing indebtedness (if owned) or 85% of eligible acquisition costs (for acquisitions).

Please note, the maximum LTV may be increased by 5% for non-profit borrowing entities.

Interest Rate

Fixed-rate, subject to market conditions at time of rate lock.

Term & Amortization

Interest-only during construction period followed by 40 years, fully amortizing.



Mortgage Insurance Premium

0.77% at closing,
0.77% annually thereafter.


Fully assumable, subject to HUD approval.


Typically loans are prohibited from prepayment for the 1st year, then have a 9% penalty declining 1% each year thereafter until 0%.  Alternative lockout and prepayment structures are available.

Professional Liability Insurance

HUD requires a minimum coverage of $1 million per occurrence and $3 million in aggregate.  Waivers may be granted in cases where premiums are high and claims history is clean.

Davis-Bacon Wages

Payment of prevailing wages is required by HUD for all contractors and subcontractors.  

  • Unlicensed independent living units are allowed, but cannot exceed 25% of the project's total units. 
  • Escrows required for repairs, mortgage insurance premium, taxes, insurance, and replacement reserves.
  • Required third party reports include Market Study, Appraisal, Plans and Specs Review, and Phase I.
  • Secondary financing is allowed, subject to HUD approval.