HUD Multifamily and Healthcare Loans

The HUD 232 and HUD 232/223(f) loans are great ways to build, substantially rehabilitate, purchase, and refinance assisted living facilities, skilled nursing homes, and other healthcare facilities for senior citizens. But what if you want to purchase, build, or refinance an independent living (IL) facility for seniors, or even an apartment building without any age restrictions?

hud-multifamily-loans.jpeg

HUD has you covered with a variety of multifamily loan products that suit almost any need. On this page, we’ll review the major types of HUD multifamily loans currently on the market. First, however, we’ll recap the terms of HUD 232 and 232/223(f) loans in order to provide a suitable comparison.

HUD 232 Loans

HUD 232 loans are designed for the new construction or purchase/substantial rehabilitation of skilled nursing homes, assisted living facilities, and other healthcare properties intended for senior citizens.

What are the terms for HUD 232 loans?

Loan Term:

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

Leverage:

  • Skilled Nursing Facilities/Independent Living Units: 80% LTV (for profit), 85% LTV (non-profit) 

hud-healthcare-loans.jpeg
  • Assisted Living Facilities: 

    • New Construction: 75% LTV (for profit), 80% (non-profit) 

    • Purchase: 80% LTV (for profit), 85% LTV (non-profit) 

    • Substantial Rehabilitation: 80% LTV (for profit), 85% LTV (non-profit) 

      • Or, 90% of HUD eligible replacement costs (whichever is less)

      • For borrower owned properties, 100% of the existing mortgage debt or 90% of the “as is” market value of the property before rehabilitation (95% for non-profits)

      • For properties that will be bought and substantially rehabilitated, 85% of the purchase price of the property or 90% of the current market value of the property before rehabilitation (95% for non profits)

      • This applies to Skilled Nursing Facilities/Independent Living Units as well

  • DSCR: 1.45x minimum DSCR, 1.11x minimum DSCR for HUD 232(i) fire safety loans

  • Interest Rates: Fixed

  • Recourse: HUD 232 loans are non-recourse with standard bad-boy carve-outs

  • MIP: 1% one time MIP assessment, paid at closing, and a 0.65% annual MIP charge

HUD 232/223(f) Loans

The HUD 232/223(f) program is specifically designed for the acquisition and refinance of properties for senior citizens.

What are the terms for HUD 232/223(f) loans?

  • Loan Term: Minimum 10 years, maximum 35 years (or 75% of the property’s remaining economic life, whichever is less)

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

  • Leverage:

    • Purchase:

      • For-profits: 85 percent of the acquisition price or appraised value, whichever is less

      • Non-profits: 90 percent of the acquisition price or appraised value, whichever is less

    • Refinance::

      • For-profits: 100 percent of the cost to refinance or 85 percent of appraised value, whichever is less

      • Non-profits: 100 percent of the cost to refinance or 90 percent of appraised value, whichever is less

  • DSCR: 1.45x minimum DSCR

HUD 221(d)(4) Construction/Substantial Rehabilitation Loans

HUD 221(d)(4) loans allow borrowers to build and substantially rehabilitate multifamily properties, including independent living facilities for senior citizens, as long as there are no communal dining facilities. Meal services, however, may be offered.

What are the terms for HUD 221(d)(4) loans?

HUD 221(d)(4) loans have terms including:

hud-221d4-loans.jpeg
  • Loan Term: 40 years (+3 year construction term, for 43 years total)

  • Loan Size: $2 million+

  • Leverage: 85% LTV for market rate, 87% for affordable, 90% for rental assisted properties

  • Interest Rates: Fixed

  • Recourse: HUD 221(d)(4) loans are non-recourse with standard bad-boy carve-outs

  • MIP: 0.65% for market rate, 0.45% for Section 8/LIHTC properties, 0.25% for projects with Green MIP Reduction

HUD 221(d)(4) loans can make use of Low-Income Housing Tax Credits (LIHTCs), which allow investors to take a 10-year tax credit on their federal income taxes. However, these loans are typically subject to Davis Bacon wage requirements.

HUD 223(f) Loans

HUD 223(f) loans are designed to allow borrowers to acquire and refinance multifamily properties. Just like HUD 221(d)(4) loans, these can be used to finance independent living (IL) facilities without communal dining facilities.

What are the terms for HUD 223(f) loans?

hud-223f-loans.jpeg

HUD 223(f) loans have terms including:

  • Loan Term: 35 years

  • Loan Size: $1 million+ (exceptions may be made for smaller amounts)

  • Leverage: 85% LTV for market rate, 87% for affordable, 90% for rental assisted properties

  • Interest Rates: Fixed

  • Recourse: HUD 223(f) loans are non-recourse with standard bad-boy carveouts

  • MIP: 0.60% for market rate, 0.45% for affordable properties, 0.25% for projects with Green MIP Reduction

HUD 241(a) Loans

HUD 241(a) loans allow current HUD multifamily borrowers, including borrowers with HUD 223(f) and HUD 221(d)(4) loans to take out an additional loan to fund an expansion to their property, energy efficient project improvements, or other approved upgrades. Traditional HUD 241(a) loans are not permitted for HUD 232 and HUD 232/223(f) loan borrowers. However, another variant, the HUD 232/241(a) loan, is.

What are the terms for HUD 241(a) loans?

  • Loan Term: Must be coterminous with original HUD multifamily loan

  • Loan Size: The maximum loan size is equal to the lesser of:

    • 90% of the value of a new construction project for for-profit entities and 95 percent for nonprofit entities

    • The project’s maximum insurable amount (as determined by HUD)

    • 90% of the net operating income (NOI), including monthly payments for the original HUD multifamily mortgage

  • Leverage: 1.11x minimum DSCR

  • Interest Rates: Fixed

  • Recourse: HUD 241(a) loans are non-recourse with standard bad-boy carve-outs

  • MIP: 0.95% for market rate, 0.25% to 0.35% for certain environmentally friendly/affordable projects

HUD 223(a)(7) and HUD 232/223(a)(7) Refinancing

The HUD 223(a)(7) refinance is perhaps the easiest HUD multifamily loan to apply for. However, it’s only available for current HUD multifamily loan borrowers. Unlike other types of HUD multifamily financing, the 223(a)(7) program only requires one third-party report, a PNCA (project capital needs assessment). A variant of HUD’s 223(a)(7) refinance program, the HUD 232/HUD 223(a)(7) loan, is specifically designed for the refinancing of HUD 232 and HUD 232/223(f) financed properties.

  • Loan Term: Loan can increase by a period of up to 12 years, but the new loan cannot be longer than the original loan term: 40 years for HUD 232 loans and 35 years for HUD 232/223(f) loans        

  • Loan Size: Constrained by DSCR requirements

  • Leverage: 1.11x minimum DSCR for profits, 1.05x minimum DSCR for non-profits

  • Interest Rates: Fixed

  • Recourse: HUD 223(a)(7) loans are non-recourse with standard bad-boy carve-outs

  • MIP: HUD 232/223(a)(7) loans have an annual MIP of 0.55% of the entire loan amount