Bedford Lending
HUD programs

HUD 232 Healthcare construction & substantial rehab

Build or substantially renovate a licensed care facility with construction-to-permanent HUD financing.

Program at a glanceDocuments & videosProgram detailsThe process

Program at a glance

Term
Up to 40 years after construction; limited to 75% of remaining economic life.
Interest
Fixed for the loan term.
Cost limit (LTC)
Up to 90% of HUD replacement cost, with required deductions.
Value limit (LTV)
Standard benchmarks of 75%–85% of appraised value; care type and nonprofit status matter.
Debt coverage (DSCR)
Standard 1.45× benchmark, including mortgage insurance.
Recourse
Nonrecourse; completion obligations apply.

The lowest applicable sizing result sets the loan amount. Debt coverage compares underwritten income with loan payments, including mortgage insurance.

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Documents & videos

Term SheetOpen PDF
More program documents 3 files

Construction requirements

Davis-Bacon Contractor Checklist

A current preparation checklist for wage determinations, payroll records and labor compliance.

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Ownership & closing

Healthcare Development Team Experience

Documentation of borrower, operator and management experience, including facility types, locations and responsibilities.

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Technical reference

Davis-Bacon Labor Standards Handbook (2023)

Official January 2023 handbook, retained as a dated reference. Later rules, court orders and project instructions may modify its application.

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Healthcare FAQsAll handoutsAll videos
Program details & considerations

Loan sizing

Maximum loan-to-value (LTV) by facility type
Facility typeFor-profitNonprofit
New assisted living75%80%
Skilled nursing80%85%
Existing assisted living / substantial rehab80%85%

These are HUD’s standard underwriting benchmarks. Mixed care types and nonprofit qualification require review. The standard debt-service coverage benchmark is 1.45×, including mortgage insurance: $1.45 of underwritten income for each $1 of debt service. Proceeds are limited by the lowest applicable calculation.

The replacement-cost test generally limits financing to 90% of HUD-eligible replacement cost, with required adjustments. Value, debt coverage and other cost tests can reduce proceeds. Escrows and nonmortgageable items may require additional cash. The maximum term is also limited to 75% of remaining economic life. Healthcare mortgage insurance follows its own schedule and is separate from the fixed note rate.

HUD healthcare sizing guidance (PDF)

HUD 232 finances eligible healthcare new construction and substantial rehabilitation, including assisted living, skilled nursing, memory care and board-and-care facilities. We review the real estate, facility operations, licensing and development plan together.

For an initial review, send us the proposed beds or units, care types, licensing information, construction scope and operating budget. The operator's experience and the local market are key parts of the review.

We'll also need the development team's relevant facility experience, including locations, care types, beds or units, dates and each principal's role. Include the borrower, operator and management agent so we can review the full team.

In addition to equity, the budget needs to account for working capital, lease-up support, completion assurance and reserves. During construction, the process includes inspections and draw administration, followed by cost certification and final endorsement.

Eligible uses & property features

  • Eligible licensed healthcare facilities
  • New construction and substantial rehabilitation
  • Construction-to-permanent execution
  • Healthcare-focused underwriting

What to consider

Facility type, licensing, operator experience and resident services are central to eligibility. Independent living components and ancillary uses require specific review; standalone medical offices are not eligible under Section 232.

Healthcare experience matters at the ownership level as well as the operator and management level. An experienced manager alone generally does not offset the borrower’s lack of relevant healthcare experience. We review the team’s track record, financial capacity, licensing and care-quality history early.

Eligibility, proceeds, terms and timing depend on the property, underwriting and current HUD requirements. This overview is not a loan commitment.

Loan processing timeline

  1. Pre-qualification & engagement

    Review the facility concept, market, operator, licensing approach and development budget.

  2. LEAN firm application preparation

    Coordinate plans, reports and underwriting for the owner, operator and proposed facility.

  3. Firm submission & HUD review

    Submit the application and work through HUD’s questions about the project and financing.

  4. Firm commitment

    If approved, review HUD’s commitment and the conditions that must be met before closing.

  5. Rate lock & initial closing

    Finalize closing requirements, coordinate the rate lock and close the construction financing.

  6. Construction & final endorsement

    Manage construction advances and complete the applicable licensing, cost certification and final endorsement requirements.

The schedule depends on the project and required reviews.

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