Pros and Cons of HUD 232 Loans

What are the Pros and Cons of HUD 232 Loans? 

HUD 232 loans have a variety of advantages and disadvantages. Major advantages include the fact that these loans are fixed-rate, non-recourse, and offer incredibly high leverage. Some major disadvantages include the high upfront costs, long waiting times, and annual audits that these loans require. Keep reading to learn more of the advantages and disadvantages of HUD 232 FHA-insured mortgages and the HUD LEAN loan process.

Benefits of HUD 232 Financing 

  • For purchase and refinancing, HUD offers up to a 35-year loan term and amortization. Over the life of the loan, this saves the borrowers a good deal of money and frees up cash for other expenditures.

  • For new construction of healthcare facilities, only HUD offers only a 40-year, fixed-rate, non-recourse loan program.

  • Loans are low interest, fixed-rate, non-recourse, fully assumable with no balloon payments.

  • This program has one of the highest LTVs (loan-to-value ratio) available.

  • There are no financial capacity requirements, no geographic restrictions, and no minimum population requirements.

  • This assisted living financing program allows for repair and improvement funds.

  • HUD 232 allows supplemental financing.

Drawbacks of HUD 232 Financing

  • HUD 232 loans come with significant upfront costs.

  • FHA senior housing financing has higher fees than conventional loans which are added to the total loan cost.

  • Compared to the process for conventional loans, the application process for FHA senior housing financing is longer, usually a minimum of 120 days.

  • Borrowers must pay MIP (Mortgage Insurance Premiums), both initially and as an annual premium.

  • HUD property inspections are required.

  • Annual audited operating statements are required.

  • HUD 232 requires replacement reserve escrows.

  • This program restricts owner distribution and also has cash out restrictions.


To learn more about FHA 232 loans, fill out the form below to speak to a HUD/FHA loan expert.