Ask anyone who has been involved with the HUD 242 (FHA Section 242) Hospital Insurance Program about his or her experience, and you are likely to hear about the patience and persistence it takes to successfully participate. But, while the program is indeed complex and challenging, the rewards can be great. Particularly in today's economy, many hospitals may find that FHA-insured financing is the only way they can obtain viable and affordable funding for a new building project. A thorough understanding of the process and potential pitfalls can make all the difference.
Engaging an architect with experience in HUD 242-funded projects and a mortgage banker specializing in the HUD 242 program is essential, as integration of financing and design tasks into a project design schedule is key to success. This design schedule ties all the critical dates and deadlines together, ensuring that in the cumulative process no piece is left out.
The design schedule for a HUD 242 project will be slightly longer than a conventionally financed project schedule, as it incorporates HUD's Division of Architecture and Engineering (DAE) in the process. DAE's role is to protect HUD's interests by reviewing, approving, and monitoring the entire design, development, and construction process, including all construction documents. While this second level of project oversight by DAE follows strict federal guidelines, a project team experienced with the HUD process can anticipate particular requirements and minimize the additional time required to approve a HUD-financed project to less than 60 days.
Schematic design should only begin after a successful pre-application meeting is held with HUD and an FHA mortgage lender, the only party that can make an FHA loan. The typical design timeline with HUD from start of the architectural narrative to delivery of HUD-approved construction documents can average 8-10 months. When handled by an experienced design and finance team, the FHA 242 process, from pre-application through approval, should average 7 to 9 months. Those processes run concurrently and should take a total of 8 to 10 months, although both could be affected by several factors, including project size and complexity.
