HUD 232 healthcare facility loans

Three programs under one section number

Sub-program	Use	Term	Insurance premium
Section 232 new construction or substantial rehab	Build or rebuild a licensed facility	Up to 40 years (or 75% of remaining economic life)2	0.77% (77 bps) per year3
232/223(f)	Buy or refinance an existing facility	Up to 35 years (or 75% of remaining economic life)2	1.00% upfront, 0.65% annual3
232/223(a)(7)	Streamlined refinance of a HUD-insured facility	Re-amortized within HUD’s limits	0.50% upfront, 0.55% annual3

All three are non-recourse and fully amortizing, so there is no balloon. Compare the premiums with the apartment programs: a 223(f) on an apartment building now pays 0.25% (25 basis points) per year⁴, while a 232/223(f) still pays the higher schedule above. Price that difference into any comparison with agency seniors loans.

Leverage and coverage

Facility	Maximum loan-to-value, for-profit owner (non-profit shown after)	Coverage
Skilled nursing (new or existing)	80% (85% non-profit)1	1.45x (includes MIP); 1.11x for 223(a)(7) and 232(i)1
Assisted living, existing	80% (85% non-profit)1	Same test
Assisted living, new construction	75% (80% non-profit)1	Same test

The coverage figure includes the insurance premium in debt service, which makes the test tighter than it looks next to an apartment loan’s ratio. These figures come from Handbook 4232.1 Chapter 3. HUD has posted draft revisions to that chapter, but no final revision had been confirmed as of November 1, 2026; ask the lender which edition it is underwriting to.

Sizing example (illustration)

An illustration, not a quote: a stabilized for-profit skilled nursing facility valued at $15,000,000 with $1,600,000 of underwritten net operating income after a market management fee. The note rate is an illustrative 6.70% plus the 1.00% upfront, 0.65% annual schedule (the annual piece is included in debt service), on a 35-year amortization.

Test	Arithmetic	Loan it allows
Loan-to-value	$15,000,000 x 80%	$12,000,000
Debt coverage	$1,600,000 / 1.45 = $1,103,000 of debt service; divided by the 7.96% constant (7.35% over 35 years)	$13,858,000
Loan	lower of the two	$12,000,000

Here leverage binds, which is common on well-run facilities. On a facility with thinner margins the coverage test takes over quickly, because healthcare NOI depends on census, payer mix and staffing costs that move faster than apartment rents.

What HUD’s healthcare office reviews

Section 232 loans go through HUD’s Office of Residential Care Facilities, and the review reaches past the real estate:

• The operator. Track record, other facilities, survey and enforcement history with state regulators, and financial strength. Where the owner and operator are different companies, the operating lease and the operator’s own agreements with HUD are part of the loan.
• Licensing and census. Current licenses, occupancy trends and payer mix (Medicare, Medicaid and private pay).
• Seasoning. Completed or substantially rehabilitated at least 3 years before application².
• Physical plant. A property condition review sets the repair and replacement reserve.
• Ground leases. 99-year renewable lease, or at least 10 years past loan maturity⁵.

Costs and timeline

HUD publishes no processing time for 232. Budget for the insurance premium, HUD’s application fee, the lender’s fees, third-party reports (appraisal, property condition, environmental and a market study on new construction) and legal costs for both owner and operator. Because the operator review is detailed, the time to prepare a complete application often matters more than HUD’s queue.

Deal killers

• Survey problems. Open deficiencies or enforcement actions at the facility or elsewhere in the operator’s portfolio.
• Census or payer mix that dropped in the trailing period the underwriting uses.
• A recent opening or major rehab that has not reached the seasoning requirement.
• Cash-out expectations on a 232/223(f).
• An operating lease that does not meet HUD’s requirements, or an operator unwilling to sign HUD’s agreements.

Alternatives

Situation	Look at
Independent or assisted living that needs a faster close	Fannie Mae seniors housing or Freddie Mac seniors housing
Facility in turnaround or lease-up	Bridge loan, then a 232/223(f) after seasoning
Need equity out	Bank loan or bridge
Already HUD-insured, rates have fallen	232/223(a)(7); see how the apartment version works on FHA 223(a)(7)