HUD 232 / 223(f) Loan

Arranging the financing for a healthcare property without expert guidance can be complicated. You can count on the dedicated professionals at LSG Lending Advisors to help you every step of the way. We have many years of industry knowledge and experience in this very specialized area of lending. Whether it is your objective to secure financing for a purchase, acquisition, new construction, refinance or rehabilitation, you can depend on our team to be there when you need us. We know that every client has their own unique business needs and challenges. We take the time to get to know our clients and create custom financing solutions to meet the needs of each one.

  • Over 7 years multifamily property loan underwriting experience.
  • Expert knowledge of financial terms and principles.
  • Highly experienced at guiding clients through complex transactions.
  • In depth analysis of current operating statements and projected financials.
  • Specialists in evaluating third party reports, including appraisals, environmental documents, market studies and project capital needs assessments.
  • Loan review documentation.
  • Tailor fit financing solutions for every client.

We help our clients adhere to FHA/HUD LEAN lending guidelines and also work with some of the best FHA/HUD LEAN lenders in the marketplace. You can count on LSG Lending Advisors to help you successfully navigate top quality, healthcare property financing. Contact us today to learn more about how we can put our years of expertise and experience to work for you.

Commercial Loans for the Refinance or Purchase of Healthcare Properties 

The HUD 232 / 223(f) program provides mortgage insurance for the refinancing or acquisition of nursing homes, assisted living facilities, intermediate care facilities, or board and care homes. This attractive program offers a low fixed rate loan that is fully amortized with a maximum term of 35 years, or 75% of the remaining economic life. The loan is non-recourse, and assumable subject to HUD approval.

Maximum Loan Amount for HUD 232 / 223(f):

  • 80% of market value (85% for non-profits) for skilled nursing and independent living units. 
  • Amount that results in a debt service coverage ratio of 1.45x based on the underwritten net operating income. 
  • 100% of the transaction cost of a refinance, and 85% of the transaction cost for a purchase

Transaction Costs for a Purchase Include:

  • Existing indebtedness of purchase price;
  • Third party reports;
  • Repairs;
  • Initial replacement reserves; and
  • Closing costs.

Overview & Key Requirements of HUD 232 / 223(f) Loan

Eligible Borrowers

  • Experienced for-profit and non-profit owners are eligible.

Eligible Facilities

Nursing homes, assisted living facilities, intermediate care facilities, and board and care homes that meet the following requirements:
  • Must offer 3 meals per day;
  • Continuous care;
  • May include up to 25% non-licensed independent living units;
  • Facility must be licensed by the state;
  • Minimum number of 20 beds; and
  • The facility must have been completed or substantially rehabilitated for at least three years prior to the date of application. If additions have been done in the last three years, the additions cannot be larger than the original project size and original number of beds. 

Loan Term

  • Up to a 35-year fixed rate, or 75% of the remaining economic life (fully amortizing loan).

Interest Rate

  • Fixed, subject to market conditions.

Commercial Space 

  • 20% of net rental area and 20% of effective gross income.

Rate Lock Deposit

  • 0.50% of mortgage amount collected at the time of client’s acceptance of the Firm Commitment. The rate lock deposit will be fully refunded at the transaction closing.

Prepayment

  • 2-year lockout followed by 8 years of declining pre-pay of 8%, 7%, 6%, 5%, 4%, 3%, 2%, and 1% (other terms may be negotiated)

Assumable 

  • Fully assumable, subject to HUD approval. This feature makes the property very appealing to a buyer to assume a low rate in increasing rate environments.

Davis-Bacon Wage Rates 

  • Not applicable for this program.

HUD Fees for 232 / 223(f) Loan

The borrower is responsible for HUD fees.
 

HUD Fees for 232-223(f) Loan

 

Lender Ordered Third-Party Reports for HUD 232 / 223(f) Loan

The third-party reports listed are required prior to Firm Application submitted to HUD. They are all mortgageable, and can be reimbursed from loan proceeds at closing. The amount of the reports varies depending on the size and complexity of the project.
 
  • Market Study 
  • Appraisal
  • Phase I Environmental Assessment
  • Phase II Environmental (if necessary)

Lender Fees for HUD 232 / 223(f) Loan

After the loan sizing, the processing fee (approximately $5,000 to $10,000) along with the required third-party reports are usually collected at the time of engagement with the lender.
 

Financing and Permanent Placement Fees

  • Up to 3.5% of the final loan amount, and payable from mortgage proceeds at closing
The borrower is responsible for the lender financing, placement, and legal fees. These amounts vary based on the size and complexity of the transaction. These fees are paid out of the loan proceeds at closing.
 
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Estimated Timeline for HUD 232 / 223(f) Loan

The timing to receive a Firm Commitment will depend on the LEAN underwriting queue, and how many deals that are currently being processed at the time.
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HUD 232 / 223(f) Basic Checklist for Loan Sizing

The information listed is required for the most accurate estimate for both the loan eligibility amount and costs for the loan. 

Click on the image to download the checklist.PDF-ICON

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