HUD 232 Loan Terms in 2025

HUD 232 loans have terms including: 

• Loan Size: $2 million ($7.6 million average loan size)

• Loan Term: 40 years

• Leverage:

  • New Construction:

    • Skilled Nursing:/Independent Living:

      • For profit: 75% LTV

      • Non-profit: 80% LTV

    • Assisted Living:

      • For profit: 75% LTV

      • Non-profit: 80% LTV

  • Purchase:

    • For profit: 75% LTV

    • Non-profit: 80% LTV

  • Substantial Rehabilitation*:

    • For profit: 75% LTV

    • Non-profit: 80% LTV

    • Borrower owned properties: 100% of existing mortgage debt or 90% pre-rehab market value (95% for non-profits)

    • Purchase/substantial rehabilitation properties: 85% of purchase price or 90% pre-rehab market value (95% for non-profits)

• DSCR: 1.45x minimum DSCR

*For substantial rehabilitation, the hard cost of the rehabilitation needs to be more than 15% of the project's post-rehab value, or, alternatively, two or more major building systems (i.e. plumbing or roofing) must be replaced.  

What Properties Are Eligible for HUD 232 Loans? 

While HUD 232 loans are designed solely for healthcare properties, not every healthcare property is eligible for a HUD 232 loan. In particular, projects financed with these loans:

• Must be designed for individuals who need long-term care or attention

• Need to provide continuous care and at least 3 meals a day for residents

• Must have at least 20 beds for residents

• Cannot have more than 25% of the units designated as independent living units

• Need to be licensed by the appropriate city or state authority

• Cannot have commercial space exceeding: "10% of the gross floor area of the project and 15% of the gross project income."

Additional Requirements for FHA 232 Loans

Much of the approval process for HUD 232 properties is actually managed by the Office of Residential Care Facilities (OCRF), a subdivision of HUD's Office of Healthcare Programs (OHP). For Section 232 properties, the OCRF will require certain additional forms of documentation to make sure that a facility has fully been approved by the relevant state government agency.

In most cases, a project will need a CON (Certificate of Need), a type of endorsement that some states require before a healthcare facility is constructed. This is to make sure that an excess of healthcare facilities in an area does not unnecessarily drive up costs for patients. In states that do not require a CON for new healthcare facilities, a state agency may perform an independent market need and feasibility study.

In addition, HUD requires that HUD 232 projects take out significant insurance. This includes:

• Property Insurance: Property insurance must cover 90% of a project’s replacement cost, with a deductible of $25,000 or less for properties with a $100 million in replacement value or less, and a deductible of $250,000 or less (or 1% of property value) for properties worth $100 million or more in replacement value.

• Commercial General Liability Insurance: Coverage must be set at a minimum amount of $1 million (per occurrence), or $3 million/location. Umbrella liability coverage may also be required in situations when an owner/operator owns multiple facilities. Deductible must be $25,000 or less for properties with $100 million in replacement value or less, and must be $100,000 or less for properties worth $100 million or more in replacement value.

• Professional Liability Insurance (PLI): PLI must either must be taken out by the state-licensed facility operator or the company which operates the facility on a day-to-day basis.

HUD 232 Loans vs. HUD 232/223(f) Loans

HUD 232 loans are the best option for developers who want to build or substantially rehabilitate a healthcare facility. However, they don't quite work for as-is purchases or refinances of healthcare properties. That's why HUD has another, similar program, the HUD 232/223(f) loan, which is specifically intended for that purpose. Just like HUD 232 loans, HUD 232/223(f) loans are non-recourse, fixed-rate, fully assumable (with FHA approval), and have similar terms to HUD 232 loans. 

In addition, it should be noted that both HUD 232 and HUD 232/223(f) loans can be refinanced with the HUD 232/223(a)(7) loan program, which generally only requires one third-party report, a project capital needs assessment (PCNA). In addition, these loans can increase the term of your financing by an additional 12 years, and offer DSCRs as low as 1.11x (for-profits) and 1.05x (non-profits).

Pros:

• HUD 232 loans offer fixed interest rates

• Loans are fully assumable with FHA approval

• HUD 232 loans are non-recourse, which restricts liability for developers/investors

Cons:

• Mortgage insurance premiums (MIPs) are still required

• An FHA application fee of 0.30% of the entire loan amount is required

• An FHA inspection fee of 0.50% of the loan amount is also required (though this can be funded with the loan balance)

• Like other HUD multifamily loans, the HUD 232 loan requires that a developer make regular payments into a replacement reserve fund

HUD 223(d) Operating Loss Loans and HUD 223(i) Fire Safety Loans

Borrowers who already have a HUD 232 loan, but have experienced an operating loss over the last 24 months may be able to apply for a HUD 223(d) Operating Loss Loan. However, in order to qualify, the loss must be considered “allowable,” it may not have lasted any more than 2 years, and the original lender must consent to the additional financing. In addition, the lender must assert that the owner has acted responsibly, and, in general, the borrower should not have many other risk factors (such as owning other businesses).

HUD 223(i) fire safety loans may also be of interest to potential HUD 232 borrowers. HUD 223(i) loans permit existing HUD 232 or HUD 232/223(f) borrowers to obtain additional funds to upgrade fire safety equipment on their property, and are typically used for fire sprinkler systems. 223(i) loans are relatively easy to acquire, as they only require a minimum DSCR of 1.11x.

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In this article:

1. New Construction or Substantial Rehabilitation Loans for Senior Living Properties  
2. HUD 232 Loan Terms in 2025
3. What Properties Are Eligible for HUD 232 Loans? 
4. Additional Requirements for FHA 232 Loans
5. HUD 232 Loans vs. HUD 232/223(f) Loans
6. Pros:
7. Cons:
8. HUD 223(d) Operating Loss Loans and HUD 223(i) Fire Safety Loans
9. Get Financing