FHA 241(a): a second loan for improvements

A 241(a) loan is a second FHA-insured loan on a property that already has an FHA-insured first mortgage, used to pay for improvements, additions or equipment without refinancing the first. It’s how an owner with a 2.75% first mortgage adds units or replaces systems without giving up that rate.

How big it can be

• 90% of the value of the improvements, as HUD estimates it, counting the cost of the work and transaction costs as value (12 U.S.C. 1715z-6; MAP Guide 3.6.3).
• Combined coverage of 1.11: the debt service on the first mortgage and the 241(a) together must be supported by 90% of net operating income, including the income the improvements add.
• Combined statutory limit: the 241(a) plus the outstanding first mortgage can’t exceed the statutory limit of the section the first mortgage was insured under.

Costs and rules

The annual MIP is 0.25% for applications since October 1, 2025, down from 0.95% (90 FR 45789). Davis-Bacon prevailing wages apply unless the first mortgage is a 223(f) or 223(a)(7) (MAP Guide 3.7.9). The first mortgage keeps its rate and term; the 241(a) has its own.

When it fits

Additions and major improvements on a property whose first mortgage is too cheap to refinance. When the first mortgage’s rate is at or above today’s, a 223(f) or 223(a)(7) that rolls everything into one loan is usually simpler.