Section 232 program · 241(a)
241(a): supplemental loan for improvements or additions
A second FHA-insured loan on a property that already has a HUD loan, to pay for improvements, additions or equipment that keep the building competitive.
Who it fits
- The property has an FHA-insured primary loan.
- The work extends the building’s life, adds space or replaces obsolete equipment (2.8).
- Insurance of advances only for loans of $100,000 or more.
Loan limits
- Value test
- 90% of the increase from as-is to as-proposed value (3.7)
- Total debt test
- 90% of as-proposed value less all outstanding debt (3.7)
- Debt service
- NOI less the primary loan’s payments and premium, divided by 1.45 (3.7)
- Term
- Limited to the term of the existing insured loan unless HUD approves otherwise (2.8.E)
Costs
- Mortgage insurance premium
- 0.72% upfront and 0.72% a year (0.45% with tax credits)
- HUD inspection fee
- Same as substantial rehab: 0.50% of improvement costs
- Working capital deposit
- None required (2.8)
Reports to order
- Underwritten like substantial rehab: appraisal of as-is and as-proposed value, cost review
- Davis-Bacon applies only if the primary loan was subject to it
How long it takes
Firm commitment to closing, by fiscal year of closing, from HUD's endorsement database:
| Fiscal year | Loans | Median days | Middle half |
|---|---|---|---|
| 2016 | 8 | 110 | 80 to 209 |
| 2017 | 8 | 106 | 75 to 155 |
| 2018 | 15 | 81 | 74 to 102 |
| 2019 | 8 | 103 | 84 to 115 |
| 2020 | 9 | 107 | 97 to 255 |
| 2021 | 4 | 54 | 15 to 167 |
| 2022 | 2 | 89 | n/a |
| 2024 | 3 | 96 | n/a |
| 2025 | 5 | 103 | 92 to 153 |
| 2026 | 4 | 151 | 146 to 176 |
Endorsements of 241(a) loans by fiscal year: 2016: 8, 2017: 8, 2018: 15, 2019: 8, 2020: 9, 2021: 4, 2022: 2, 2024: 3, 2025: 5, 2026: 4. Fiscal 2026 runs through the database's data run of July 8, 2026.
Note rates on 241(a) loans that closed in fiscal 2025: median 6.18%, middle half 6.07% to 6.20%. Month by month.
Watch for
- A 241(a) may sit behind the primary loan; primary 232, 223(f) and 223(a)(7) loans must be first liens (2.5.Q).
The other Section 232 programs
Rules: HUD Handbook 4232.1 REV-1, Section II (effective January 19, 2017), section numbers in parentheses. Premiums: Federal Register, June 26, 2025 (90 FR 27330). Times and rates: HUD Office of Healthcare Programs records; see the methodology. Route 232 is not affiliated with HUD or FHA.