FHA 241a Supplemental Loans

FHA Second Lien Loans To Finance Repairs & Capital Improvements

FHA 241a Supplemental Loans

FHA 241a supplemental loans are second mortgage loans that can be used to finance repairs, additions and capital improvements to multifamily properties and healthcare properties that already have an existing HUD/FHA insured first lien mortgage.

Although FHA 241a supplemental loans seemingly share many of the features found in FHA 223a7 streamlined refinance loans, there are far more distinctive differences. The most substantial differences are the loan purpose and loan structure. The purpose of FHA 223a7 loans is to refinance the entire existing mortgage balance, presumably to take advantage of a lower interest rate. By definition, the structure of FHA 223a7 loans is a refinance of the entire existing mortgage balance.

The purpose of FHA 241a supplemental loans is to provide capital needed for repairs, additions and improvements as a supplement to the existing first lien mortgage loan, not a replacement for it. FHA 241a supplemental loans are the desired alternative when the existing first lien mortgage shouldn’t be disturbed, either because it has a low existing mortgage rate or because it contains provisions for a very high prepayment penalty.

Recently, FHA 241a supplemental loans are being used by hospitals and other healthcare facilities that are improving the structure, equipment or technology, including movable equipment, in order to remain competitive in a market segment which is especially sensitive to technology. Eligible borrowers for FHA 241a supplemental loans include any person or entity with an existing FHA mortgage loan that is in good standing.

Maximum Loan Term

40 years – not to exceed 75% of remaining economic life

Funding Flexibility

The loan can be funded by issuing Ginnie Maes, direct whole loan placement, or to credit enhance a secondary tax-exempt bond issue.

Personal Liability

Non-recourse for monetary default with typical “carve-outs”

Eligible Borrowers

For-profit individuals and entities and not-for-profit  single asset entities


Typically closed for 2 years then pre-payable year 3 at 108% of par declining 1% per year.  Shorter lock-outs are obtainable at a higher note interest rate

Maximum Loan Refinancing

  1. The amount supported by 83.3%, 87%, or 90% of the NOI for market rate, affordable, or rental assisted properties, respectively.
  2.  83.3%, 87%, or 90% of appraised value for market rate, affordable, or rental assisted properties, respectively.
  3. The amount of debt which when added to the current first mortgage balance does not exceed the guidelines under which the first mortgage was made
  4.  The amount of debt that can be serviced by the NOI less the current debt service of the first mortgage using the original program guidelines.
  5. FHA Statutory mortgage limits (FHA statutory loan limits are subject to adjustment based on the location of the project.
  6. Contact us for a determination of the loan limits that would apply to your project.

Interest Rate

Market interest rates change daily. Call for quote.

FHA Application Fee

0.3% of the loan amount due at application

Origination Fee



The first year 1% MIP fee due at closing, subsequently, .45% per annum

Replacement Reserves

Annual deposits (many in monthly installments) equal to the greater of (a) .60% of the structure cost or (b) $250 per unit per year

Additional Features

  • A PCNA (Project Capital Needs Assessment) is required and again every 10 years
  • A pre-review is required by HUD
  • Davis Bacon prevailing wage requirement apply if the underlying loan had them (for example: 221(d)3, 221(d)4 and 232) or not for 223f
  • The replacement reserve will be adjusted and funded at closing
  • Escrows for property taxes, insurance, and replacement reserves are required
  • Annual audit of operations is required

Need an apartment loan for your next project? We offer 40 year, fixed-rate, non-recourse apartment loans.