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5 Steps to Getting a Mobile Home Refinance
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You can save money with a mobile home refinance, but you may have to jump through extra qualifying hoops before you close. Whether you own a mobile home, manufactured home or a modular home, the following five steps will help you navigate the path to the best mobile home refinance for your finances.
- Step 1: Determine what type of mobile home you own
- Step 2: Determine if your home is “real property”
- Step 3: Choose the purpose of refinance for your manufactured home
- Step 4: Choose the right loan program for your mobile home refinance
- Step 5: Shop for the best manufactured loan rates and terms
Step 1: Determine what type of mobile home you own
The term mobile home is often used interchangeably with manufactured home. For lenders, though, there are important differences:
Manufactured homes (MH) are built in a factory and moved to a site (usually land you own) where the sections are assembled on a permanent foundation.
Mobile homes were built in factories before June 15, 1976, and had axles with wheels that were removed before setting the home on rented land. For lending purposes, most mobile homes built after June 15, 1976 are considered manufactured homes.
Modular homes, or “systems-built homes,” are built in a controlled environment before they’re transported to your land and follow the same building codes as site-built homes. Like manufactured homes, they are permanently attached to land you own.
To refinance a manufactured home with a traditional mortgage, the home must meet the following basic requirements:
- Have at least 400 to 600 square feet of living area, depending on the program
- Be permanently affixed to a foundation and taxed as real property
- Have a Department of Housing and Urban Development (HUD) certification label, a HUD data plate, a HUD seal or MH Advantage® sticker confirming the home has features similar to site-built homes and/or meets safety and livability standards set by HUD
Step 2: Determine if your home is “real property”
You’ll find a wider range of competitive mobile home refinance choices if your home is considered real property:
Real property is a dwelling attached to land that you own. A title company records a legal document called an “affidavit of affixture” proving the permanent attachment of the home meets local building guidelines. You’ll typically get the best manufactured home rates if your home is considered real property.
Personal property, also called “chattel” in the lending world, usually refers to a mobile home set on leased land. Lenders finance the home as personal property, similar to owning a car. You pay personal property taxes and can only take out chattel or personal loan financing.
Step 3: Choose the type of refinance for your manufactured home
If you own a manufactured home on a permanent foundation, or you’re refinancing to convert your home to real property, you have two options:
Limited cash-out refinances. With a limited cash-out refinance you can pay off current mortgages, roll in your closing costs and add the construction fees charged to attach your home to your land. An added bonus: You can pocket an extra $2,000 or 2% of the balance of the new mortgage, whichever is less.
Cash-out refinances. If you’ve owned your current home and land for at least 12 months, you can take out a loan larger than what you currently owe and pocket, or “cash out,” the difference. In most cases, you can’t borrow as much of your home’s value (also known as your “loan-to-value (LTV) ratio”) with a cash-out refinance on a manufactured home as you can with a non-manufactured home.
Step 4: Choose the right loan program for your mobile home refinance
The minimum mortgage requirements to refinance a manufactured home are like refinancing any other type of real property. Lenders review income, credit and asset documents, and verify the value of your home with an appraisal. The following programs allow you to refinance a manufactured home loan if the home is considered real property:
Conventional loans. Fannie Mae and Freddie Mac, government-sponsored enterprises that fuel the conventional mortgage market, set the guidelines for conventional loans. Conventional loans are popular for borrowers with good credit scores and low debt-to-income (DTI) ratios, and typically cost less than government-backed programs. An added benefit: If you have 20% or more equity in your home, conventional loans don’t require mortgage insurance, which repays the lender if you default on your loan.
Regular FHA loans. Insured by the Federal Housing Administration (FHA), FHA loans provide flexibility for borrowers with low credit scores and high debt ratios. FHA-approved lenders offset that risk by charging FHA mortgage insurance regardless of how much equity you have.
FHA Title I loans. If you’re happy with your current mortgage, but need extra money for home improvement projects, you can borrow up to $25,090 if your home is real property. If your manufactured home sits on leased land, you can get up to $7,500.
VA loans. The U.S. Department of Veterans Affairs (VA) backs loans to active-duty and veteran military borrowers and eligible surviving spouses. One drawback to VA loans for manufactured homes: The maximum term is 25 years and 32 days if you’re refinancing a mobile home and land package.
USDA loans. Meant for low-income borrowers to buy homes in rural areas, the U.S. Department of Agriculture (USDA) guarantees loans made by USDA-approved lenders. You can’t cash out any extra equity with a USDA manufactured home loan.
There are significant differences in the guidelines for refinancing a manufactured home with a conventional loan versus a government-backed loan. The table below provides a breakdown of the basic qualifying requirements for each type of manufactured home refinance program.
|Loan program||Maximum LTV ratio||Minimum credit score||Maximum DTI ratio||Special requirements|
|Fannie Mae limited cash-out refinance||97%||620||45% with exceptions to 50%||MH Advantage® sticker|
|Fannie Mae cash-out||65%||620||45% with exceptions to 50%||Maximum term of 20 years|
|Freddie Mac limited cash-out refinance||95% (20-year loan)
90% (30-year loan)
|620||45% with exceptions to 50%||Terms of up to 30 years|
|Freddie Mac cash-out||65%||620||45% with exceptions to 50%||Maximum term of 20 years|
|FHA limited cash-out refinance||97.75%||580||43% with exceptions possible||Maximum term of 25 years and 32 days for home and land|
|FHA cash-out refinance||80%||500||50%||Maximum term of 25 years and 32 days for home and land|
|FHA Title I||No appraisal required||No minimum||45%||The home can sit on leased land.
Can’t be delinquent on federal debt
|VA limited cash-out refinance||95%||620 standard*||41% with exceptions possible||Maximum term of 25 years and 32 days for home and land|
|VA cash-out refinance||90%||620 standard*||41% with exceptions possible||Maximum term of 25 years and 32 days for home and land|
|USDA limited cash-out refinance||100%||640 standard*||41% with exceptions possible||Loan term must be fixed for 30 years|
*VA and USDA guidelines don’t set a credit score minimum, but most lenders use 620 for VA and 640 for USDA as a standard.
Step 5: Shop for the best manufactured loan rates and terms
Contact at least three to five different lenders and make sure you choose “manufactured home” for the property type if you’re using an online comparison rate tool. You’ll pay higher interest rates for manufactured homes than for non-manufactured homes, and not all lenders offer mobile home refinance options.
Once you choose a lender, stay in touch with your loan officer and provide your paperwork quickly to keep the process moving smoothly. If you’re refinancing to convert your manufactured home to real property, make sure you lock your rate in long enough to cover the time it takes to attach your home to the new foundation.