HUD 232 Loans for Assisted Living: Requirements and Timeline
HUD's Section 232 program insures long-term loans on nursing homes, board and care homes and assisted living facilities, and for many stabilized operators it is the cheapest permanent debt available. The 223(f) version, used to buy or refinance an existing facility, offers terms up to 35 years, full amortization and no personal recourse. Those terms come with requirements that rule out most newly built or recently repositioned buildings, which is why many owners treat HUD as the second loan rather than the first.
A property has to have been completed or substantially rehabilitated at least three years before the firm commitment application to qualify for 223(f). That rule alone shuts out a new building in lease-up, so most developers and buyers of turnaround facilities use a bank or bridge loan first and plan the HUD refinance once the property has stabilized and the operating history supports it.
Bridge-to-HUD loans exist for exactly this gap, and lenders who offer both often structure the bridge so it rolls into their own HUD execution, which can save time but limits your ability to shop the permanent loan.
Loan size is set by the lowest of several tests, and the maximum is generally 80 percent of appraised value, and the loan is also limited by a debt service test built around a 1.45 coverage ratio, so a facility with thin margins can qualify for far less than 80 percent. Run that coverage test on your trailing twelve months of operating results before you assume the loan will retire your bridge debt in full.
The cost sits partly in mortgage insurance, with a premium of 1 percent paid at closing plus an annual premium of 0.65 percent of the balance, or 0.45 percent on properties with low-income housing tax credits. Third-party reports add to it, because HUD requires an appraisal, an environmental assessment and a property condition and needs assessment, each prepared to its own standards rather than a bank's.
HUD has said its review of Section 232 applications could take up to 150 days, and in July 2025 it added an Express Lane that targets 10 to 15 days to a firm commitment for low-risk 223(f) refinances with leverage of 70 percent or less, an operator in place for at least two years and a loan of $50 million or less. Assembling a complete package still takes longer than most borrowers expect, whichever track the loan ends up on. Lenders who specialize in the program usually spend weeks gathering financial statements, licensure records, survey history and third-party reports before anything goes to HUD, so plan the refinance months before your bridge loan matures.
Operating history matters as much as the building, because HUD looks at census trends, payer mix, survey results and the operator's track record, and a facility with recent serious citations or a declining census will struggle to get through underwriting regardless of its value. In a building where a large share of residents rely on Medicaid, underwriters look especially closely at how a change in state reimbursement rates would affect coverage.
The trade for all of this paperwork is debt that rarely needs to be refinanced again during your ownership. A 35-year fully amortizing loan with a fixed rate removes maturity risk for a generation, and because the loan is non-recourse, the guarantees that come with SBA and most bank debt do not follow you.
If HUD is your exit, plan for it from the day you buy rather than the year your bridge loan matures. Choose bridge financing with a prepayment structure that allows a refinance around year three, keep audited or reviewed financial statements from the start, and treat every state survey as part of your HUD application. Then engage a HUD 232 lender at least six months before you need the money, so the package is ready when the three-year clock runs out.
Planning for HUD from the first day also means the bridge loan, the business plan and the operating results all have to point toward a refinance that clears HUD's coverage test about three years out. I help assisted living owners model that path from the bridge loan through the HUD refinance, with projections that show when the facility should qualify and how much the new loan should retire. If you are buying a facility with HUD as the exit, send the deal to amer@awadcapitaladvisors.com, and I can help you see whether the timeline and the numbers line up.