Written and reviewed by Jack Gladden, Senior Loan Officer, NMLS #1470164
Updated · 4-minute read · How these guides are written
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Care home loans in brief
- The key question
- Is it a home that also provides care, or a care business that happens to be in a house? The answer decides the loan.
- Small homes
- In California and Florida, licensed homes for six or fewer residents are treated as residential use for zoning.
- You live there and run it
- A regular mortgage can work if it’s a one-unit home, your main residence, and you own and run the business.
- Leased to an operator
- Investor and DSCR lenders can finance a home leased to a licensed operator, based on the lease.
- Buying the business too
- SBA 7(a) and 504 loans, bank loans, and HUD Section 232 for larger licensed facilities.
- Where
- Homes in California, Arizona, Florida and Ohio; commercial and SBA loans nationwide where permitted.
How size and use decide the loan.
| Your situation | Usually financed with |
|---|---|
| You live in the home and run the care business there | A residential mortgage, under the lender’s business-use rules |
| You own the home and lease it to a licensed operator | An investor or DSCR loan, or a small commercial loan |
| You’re buying the home and the operating business | An SBA 7(a) or 504 loan, or a bank business loan |
| A larger assisted living, memory care or nursing facility | Commercial, bank or HUD Section 232 financing |
Banks often decline small care homes because they see a business. The fix is usually the right lender for the structure, not a different property.
Licensing and zoning, state by state.
- California
- Residential care facilities for the elderly are licensed by the Department of Social Services. One serving six or fewer residents counts as a residential use, and its residents as a family, for local zoning.
- Arizona
- The Department of Health Services licenses assisted living. A home with ten or fewer residents is an assisted living home; eleven or more is a center.
- Florida
- Assisted living facilities are licensed by the Agency for Health Care Administration. A licensed home for six or fewer residents is a single-family, noncommercial use, allowed in residential zoning, with spacing rules between homes.
- Ohio
- The Department of Health licenses residential care facilities, which state law defines by the number of residents and the care provided; smaller adult care homes are licensed separately.
Lenders and appraisers look at the license, the number of beds and the zoning, so I gather those first.
If you live there and run it.
Fannie Mae accepts a home with a business use when
- It’s a one-unit home that you live in as your main residence.
- You both own the property and operate the business.
- The property is primarily residential.
- Changes for the business don’t hurt its value or appeal as a home.
Ramps, grab bars and an extra bathroom usually fit. Bigger changes, such as many added bedrooms or institutional fixtures, may lead the appraiser and lender to treat it as commercial. Income from the care business can help you qualify with tax returns or, with some lenders, bank statements.
If you lease it to an operator.
- The lease
- Lenders review the lease, the operator’s license and track record, and whether the rent covers the payment.
- Rent-based loans
- A DSCR loan can qualify on the lease rent instead of your income, with lenders that accept care-home tenants.
- Appraisal
- Few comparable sales exist for homes set up for care, so appraisers often value it as a house and comment on the changes.
- If the operator leaves
- A specialized layout can be harder to re-lease or sell; lenders weigh that, and so should you.
Have a care home in mind?
Send me the address, the license type and the number of beds, and whether you’ll run it or lease it. I’ll tell you which lenders fit.
Buying the home and the business.
SBA 7(a)
Up to $5 million for real estate, a business purchase, improvements or working capital, repaid from the business’s cash flow.
Best forBuying an operating care home
SBA 504
Long-term, fixed-rate financing for real estate and major equipment, up to $5.5 million. The business must use the property; it isn’t for rentals.
Best forAn operator buying or building its own facility
HUD Section 232
FHA mortgage insurance for nursing homes, assisted living and board and care: purchase, refinance, new construction or substantial rehab.
Best forLarger licensed facilities
These are business loans, qualified on the operation’s finances, licensing and experience. I work with the lenders who specialize in them.
What to plan for.
- Licensing timing. Some lenders want the license in place before closing; others finance a home you plan to license.
- Required changes. State rules can require safety features, which affect both the budget and the appraisal.
- Insurance. A care home needs coverage beyond a standard homeowner’s policy, and the lender will ask for it.
- Local rules. Spacing rules, fire codes and business licenses vary by city and county.
How we get started.
Tell me about the home
Address, license type, beds, and whether you’ll live there, run it or lease it.
I match the structure
Residential, investor, SBA or commercial, and the lenders who do each.
Approval
Including the appraisal, license review and any lease.
Close
Then refinance or expand later as the business grows.
Care home financing, answered plainly.
Is a care home financed as residential or commercial?
It depends on its size, licensing, who lives there and the lender. Small homes where the owner lives and operates can often use a residential mortgage; larger or investor-owned facilities usually need investor, SBA or commercial loans. See also: Apartments & mixed-use.
What qualifies as a residential loan?
Generally, a loan on a one- to four-unit home. A care home can qualify when it stays primarily a home, such as one you live in and run yourself. See also: Conventional loans.
Do I need the license before I buy?
Not always. Some lenders finance a home you plan to license, while others want it licensed and operating.
Can the care business’s income help me qualify?
Often, yes, documented with tax returns or, with some lenders, business bank statements.
Can I turn my home into a care home?
Often. In California and Florida, small licensed homes are treated as residential use for zoning, but you still need the state license, required safety features and the right insurance. Check with your lender before converting.
What are the requirements for a HUD 232 loan?
It’s for licensed facilities such as nursing homes, assisted living and board and care, made through a HUD-approved lender. It suits larger projects, not single homes. See also: Apartments & mixed-use.
DSCR & investor
Self-employed & bank statement
Renovation
Cash-out refinance