FHA SECTION 232 – Lean Processing

Loans to construct or substantially rehabilitate skilled nursing, assisted living and specialized use facilities


  • Combines construction and permanent financing into a single transaction approved at the same time.
  • Skilled nursing facilities generally are underwritten at an 80% loan-to-value ratio (LTV) and a 1.45 X debt service coverage (DSC); assisted living transactions generally use a 75% LTV (80% for not-for-profit borrowers) and a1.45 X DSC.
  • Loan is pre-payable, assumable, and non-recourse; maximum term is 40 years with full amortization.
  • Projects must comply with the State’s eligibility requirements for licensure and operating standards.
  • Construction and rehabilitation costs are subject to Davis-Bacon Prevailing Wage Requirements.
  • Up to 25% of a Project’s total bed count can be for unlicensed, independent living.


0.30% Application Fee to FHA
0.77% Mortgage Insurance Premium (.45% for low income housing tax-credit deals)
0.50% Inspection Fee
2.00% Maximum Financing (Origination) Fee
1.50% Maximum Placement Fee
2.00% Costs of Issuance for Tax-Exempt Bond Transactions

An annual 0.77% Mortgage Insurance Premium (.45% for Tax Credit Transactions) is paid to FHA as part of the monthly mortgage payment.


  • Escrows required for property insurance, real estate taxes, and FHA mortgage insurance premium.
  • Replacement reserve escrow for on-going replacement of depreciable items is required for the term of the loan. The amount of the annual deposit will be revised after 10 years based on a project capital needs assessment (PCNA).
  • An operating deficit escrow and in some cases a debt service reserve escrow will be required by FHA. This escrow must be funded by the borrower at closing with cash or a letter of credit.
  • A Working Capital deposit equal to 4% of the mortgage and escrow for Minor Movable Equipment is required at closing. These deposits must be funded by the borrower at closing with cash or letters of credit.