FHA® 232:
HEALTHCARE NEW CONSTRUCTION AND SUBSTANTIAL REHAB
Arbor provides FHA-insured, long-term, fixed-rate financing for new construction or substantial rehabilitation of assisted living, congregate care and nursing home facilities nationwide. Arbor uses the LEAN program to expedite underwriting and approval. Applications may be processed either as single-stage (firm application), or two-stage (preliminary application, followed by firm application).
| Loan Term & Amortization | Construction loan period (interest-only), followed by 40-year permanent (fully amortizing) |
| Maximum Loan to Value- New Construction & Substantial Rehab |
Determined by the lowest of:
|
| Fixed Rate | Yes – construction and permanent |
| Eligible Properties | New construction or substantial rehabilitation of assisted living; memory care; and intermediate, skilled nursing facilities, or combination thereof
|
| Ineligible Properties | Life-care-fee CCRC; LTAC (long-term acute care), adult day or currently in bankruptcy |
| Eligible Borrower | Single asset entity (for profit or nonprofit) |
| Ineligible Borrower | Owner, operator or any affiliates currently in bankruptcy, or filed/emerged from bankruptcy within prior five years |
| Experience | Owners, operators/management agents must demonstrate a successful track record commensurate with developing or rehabbing properties of similar type, size and complexity; an owner-operator must have at least three years’ ownership and operating experience; SNF administrators must also have three years of experience |
| Tax & Insurance Escrows | Monthly deposits required |
| Recourse | Nonrecourse, subject to HUD Regulatory Agreement |
| Commercial Space | Maximum 10% of gross floor area and maximum 15% of gross potential income; 20% vacancy rate applied (daycare space is not considered commercial) |
| Required Reports | Market Study, Appraisal, Architect Review of Construction Costs and Drawings and Phase I Environmental |
| Prepayment | Typically 10% year one, declining 1% per year; other prepayment options available subject to market conditions |
| Assumable | Subject to Arbor and HUD approval and payment of assumption fee |
| Good Faith Deposit | Negotiable based on project type |
| Expense Escrow | Yes – sufficient to cover Arbor’s expenses and third-party report costs |
| Origination Fee | Negotiable |
| HUD Application Fee | 0.15% due to HUD at pre-application, 0.15% at firm application; if borrower chooses nonrefundable straight-to-firm HUD application, fee is the full 0.3% |
| HUD Inspection Fee | $5 per $1,000 (0.5%) of the mortgage amount for new construction and $5 per $1,000 (0.5%) of improvement costs for substantial rehabilitation |
| Legal/Closing Fee | Borrower pays Arbor’s counsel fee and miscellaneous closing costs |
| Rehabilitation Qualifications | > 15% of the “as rehabbed” appraised value, or replacement of at least two major building systems |
| Davis Bacon | Davis Bacon labor standards and wage requirements apply to construction and rehab work |
| Licensing | Borrower must provide to HUD evidence/documentation from the appropriate local/state tax licensing authorities showing approval for the operation of the project (or applicable portions thereof) prior to occupancy of the project (or applicable portion thereof) |
| HUD Mortgage Insurance Premium (MIP) | 0.77% market rate; 0.45% affordable; 1% MIP upfront at closing |
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