Go to: Eligible Projects Loan Highlights ALF Underwriting "Rules of Thumb" ALF Facility Requirements Application Procedure Fees & Assurances Financial Guarantees

Eligible Projects

This Program provides construction and permanent loan funding sources for proposed independent and assisted living facilities, special needs alzheimer/dementia care facilities and skilled nursing facilities. Lenders provide funding for new construction of proposed facilities and major rehabilitation of existing facilities. Mortgage rates are fixed for the construction and the 40 year permanent loan term before the start of construction.

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Loan Highlights

Loan determined as the lesser of 90% of the project's replacement cost and the amount that 90% of net operating income can debt service utilizing a maximum 93% stabilized occupancy rate. The loan is non-recourse with respect to the Mortgagor's personal liability. The interest rate is fixed, approximately 150 basis points over the 30-Year Treasury The loan is assumable by qualified buyer approved by the lender. Assumption fee 1% of the loan balance. The loan provides for, in addition to principal and interest payments, monthly deposits to escrow for real estate tax; special assessments; hazard insurance; replacement reserves for realty and major moveable equipment; and 1/2% of principal balance for MIP

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ALF Underwriting "Rules of Thumb"

Operating expenses average 55% of cost of care. Resident income requirement is approximately $25,000 annually. Profit margin is generally 35-40% before debt service coverage. Absorption typically 3 net admissions per month. Fill up is typically 10-12 months for experience operators. Construction costs average $85 square foot.

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ALF Facility Requirements

Facility may not charge an entrance fee. Designed for frail elderly, 62 years or older, requiring assistance with at least 3 activities of daily living. Each unit must provide emergency response system and 24 hour staff coverage. Sprinklers required. Must have central dining room, kitchen, lounges, multi-purpose rooms, and offer 3 meals per day to residents. Must provide supervision of nutrition and assistance with medication. Independant living units limited to a maximum of 25% of the residents for the total facility. Senior day care space allowed. Space and income may not exceed 20% of total project space and income.

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Application Procedure
Typically, before initiating the formal application procedure, First Housing on behalf of clients will request a preapplication meeting by submitting a package which will include among other items:

Detailed Income/Expense Proforma Construction Cost Breakdown Evidence of Site Control Market Study, dated within 120 days of the preapplication meeting. HUD's Environmental Factors Checklist Phase I Environmental Report Sketch Plan of Site, typical unit plans and elevations. Resumes for the mortgagor, principals, architect, general contractor, and property management agent or operator.

FHA will invite to the Firm Commitment stage those projects which are approved at the preapplication meeting. A Firm Commitment application requires a detailed review of completed working drawings and full specifications and cost detail, along with a detailed review of management and marketing plans. Firm costs for the project will be established and final economic and feasibility information will be confirmed.

All information, instructions and forms for the formal applications package will be supplied by First Housing. Closing can take place within a month from issuance of the Firm Commitment.

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Fees and Assurances

Application Fee: 0.3% (three/tenths of a percent) of the mortgage to be submitted with the application and pays certain processing
costs. May be financed in the mortgage.

Engineering Fee: 0.5% (five/tenths of a percent) which may be included in the mortgage.

Financing Fee: Up to 3.5% which may be included in the mortgage. (Typically 1.5 -2.0%)

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Financial Guarantees: First Housing will estimate the amounts of financial guarantees (typically Letters of Credit) you and your General Contractor must make at the time of closing. These include Initial Operating Deficit, Working Capital, GNMA Placement, and Construction Guarantee.

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