Mobile Home Refinancing: Property Requirements
There are several reasons homeowners refinance mobile and manufactured homes, but the most popular rationale is the quest for a lower mortgage payment. If, for example, a homeowner can refinance their current mortgage into a new loan with a lower rate and better terms, they could save money every month.
Other reasons an owner of a manufactured home might consider refinancing their mortgage include:
- Private mortgage insurance (PMI): If they have built up at least 20 percent equity in their home since they bought it, refinancing could help them get rid of PMI — another way to save money.
- Repayment timeline: For example, they may want to move from a 30-year loan to a 15-year mortgage.
- Cash-out refinance: Homeowners occasionally refinance in order to take advantage of rising home values to get cash back.
Corey Vandenberg, a mortgage broker for Platinum Home Mortgage in Lafayette, Ind., said this last scenario is rare because cash-out refinancing for manufactured homes is severely limited with most loans. Homeowners may be able to get up to $2,000 in cash out, he said, and they often use that money to consolidate other debt.
Mobile homes or manufactured homes: What’s the difference?
Before we dive any further into this topic, it’s important to note that mobile homes and manufactured homes aren’t one and the same, even though the terms are often used interchangeably. The word “mobile” implies that a home is on wheels, whereas manufactured homes are permanently affixed homes built to meet the Manufactured Home Construction and Safety Standards (HUD Code).
Also keep in mind that true “mobile” homes on wheels are usually acquired with different types of financing than manufactured homes — for example, one might use an RV loan or a personal loan to purchase a mobile home. In the case of a motor home, you could also purchase with an auto loan. This is due to the fact that homes on wheels are typically considered personal property, whereas a traditional manufactured home is considered real property. Real property includes land and, usually, the items that are affixed to land, while personal property includes items that can be moved.
Refinancing a mobile home
According to Vandenberg, not all manufactured homes are eligible for refinancing. Lenders have a limit on the age of the residence, with the cutoff being June 15, 1976. Homes built prior to this date do not meet HUD standards and cannot be accepted as compliant with the HUD Code — a code created by the U.S. Department of Housing and Urban Development to set quality standards for the construction of manufactured housing. Even if you’ve made modifications and considerable improvements to a home before that date, it’s still not compliant. The FHA does not insure mortgages on manufactured homes built prior to this date, and most mortgage insurance firms also follow this policy.
In addition, any manufactured home secured with traditional financing “must be permanently attached to a foundation on real property owned by the borrower,” said Vandenberg. An exception may be made for VA loans, which don’t always require the homeowner to own the property their manufactured home sits on. We’ll talk more about VA loans for manufactured homes in a minute.
What are the Fannie Mae guidelines to financing mobile homes?
In order for a lender to be able to sell a manufactured home mortgage (purchase or refinance) to Fannie Mae, the home for which the loan was granted must meet a long list of requirements. These requirements apply to all loan types you can access to refinance manufactured homes, including FHA loans, VA loans and conventional loans, Vandenberg said. These requirements include:
- The manufactured home must be built on a permanent chassis and attached to a permanent foundation system.
- The manufactured home must be built after June 15, 1976 and in compliance with the HUD Code.
- Compliance with HUD Code standards must be presented on the HUD Data Plate and the HUD Certification Label, both of which are displayed within the manufactured home.
- In the absence of the original HUD Certification Label, the lender may be able to obtain a verification letter with the same information from the Institute for Building Technology and Safety (IBTS). Anyone can request a manufactured home certification from the IBTS on their website.
- The manufactured home cannot have been installed elsewhere, except for its original factory or dealer lot.
- The unit must be classified as real property.
- The manufactured home must be a one-unit dwelling.
- The manufactured home cannot have a towing hitch, wheels or axles.
- The borrower must own the land on which the manufactured home sits, unless the property is located in a co-op or condo project.
- Co-op and condo development projects must be pre-approved by Fannie Mae for manufactured homes on these properties to qualify.
- Manufactured homes must be located in a Fannie Mae-approved subdivision, co-op, condo or PUD (planned unit development) if they are single-width.
- Manufactured homes must be at least 12 feet wide. They must also have at least 600 square feet of living area.
- Site preparation for delivery of the home must be complete.
- The manufactured home must be affixed to a permanent foundation.
- The foundation of the home must be appropriate for local soil conditions.
- The manufactured home must be connected to a sewage system or a septic tank, as well as other utilities.
- If the manufactured home is not on a public street, it must be located on a street that is privately maintained or maintained by the community.
- The property must have adequate vehicular access.
- Mortgages on manufactured homes with incomplete items, such as an ongoing renovation or addition, are not eligible for purchase until the work is completed.
- Manufactured homes with an addition or modification may be eligible, but the modifications need to be approved by a state agency and the lender. If a state does not supply an agency for this purpose, the modifications must be inspected by a licensed professional engineer. The engineer must certify that any changes are in compliance with the HUD Code and provide an inspection report for the mortgage loan file.
Loan types for manufactured housing
There are different types of mortgages to consider if you want to refinance your manufactured home, each of which comes with its own requirements. Loans for manufactured homes can include:
FHA loans are available for manufactured homes that meet standards set by the HUD Code. These loans are available to buyers who also own or are purchasing the land their manufactured home sits on, notes Vandenberg.
- The FHA allows borrowers to refinance up to 97.75% of the manufactured home’s value, and you are allowed to roll closing costs into the new loan. Cash-out refinances are possible, although they are typically offered on a case-by-case basis.
- You need a credit score of at least 500 to qualify for an FHA loan, but such a low score will require you to retain at least 10% equity in your property after the refinance. Otherwise, your credit score should be at least 580.
- FHA loans come with an upfront refinancing fee of 1.75% that can be rolled into the loan.
- Mortgage insurance of 0.45% to 1.05% is also charged on FHA loans for manufactured homes.
- Loan limits often top out at $294,515, and you can refinance for up to 30 years.
- The house must be considered real property; you must be the owner of the lot it sits on. The manufactured home must also have at least 400 square feet of living space.
Borrowers may also want to consider a conventional mortgage when refinancing a manufactured home. Once again, a conventional mortgage is available when the borrower owns the land the manufactured home sits on.
- Conventional loans can offer limited cash-out refinances of up to $2,000, said Vandenberg.
- You can refinance up to 95% of your home’s value with a conventional mortgage, or up to 90% of the home’s value if the manufactured home is a second residence. Vandenberg said it is fairly common for people to own a manufactured home as a second home — for example, they may live somewhere in the northern U.S. for the summer and move to a manufactured home in Florida for the winter.
- You need a credit score of at least 640 to refinance a manufactured home with a conventional mortgage.
- You will need to include private mortgage insurance (PMI) in your loan if you have less than 20% equity. PMI on a manufactured home will cost approximately 0.5% of the purchase price of the home annually.
- Loan amounts are typically limited to $453,100.
- You can refinance for up to 30 years.
- Your manufactured home must be on a permanent foundation and be at least 600 square feet of living space.
VA loans are available for military members, veterans, and spouses who meet criteria set by the VA. These loans are available for the purchase of a manufactured home, or a manufactured home and a lot. For manufactured homes affixed to the lot and considered real estate, the following requirements apply:
- VA loans for manufactured homes allow borrowers to refinance up to 90% of their home’s value. Borrowers can also get more than $2,000 in cash back provided they stay under the 90% loan-to-value (LTV) limit.
- According to Vandenberg, you will need a score of 660 or higher to refinance a manufactured home with a VA loan. The VA doesn’t set a minimum credit score requirement, but lenders will have their own guidelines — going into a VA loan with at least a 660 credit score is a good rule of thumb.
- You’ll pay an upfront funding fee of approximately 1% on VA refinancing for manufactured homes.
- When refinancing a manufactured home and the lot to which it will be affixed, the amount is limited to the lesser of: “the balance of the loan being refinanced plus the purchase price of the lot, not to exceed its reasonable value plus the costs of the necessary site preparation as determined by VA plus a reasonable discount on that portion of the loan used to refinance the existing loan on the manufactured home plus authorized closing costs,” or the approximate value of the home, the lot and property improvements plus the VA funding fee. In the case of an Interest Rate Reduction Refinance Loan (IRRRL), a VA loan intended to help veterans refinance their home loan to secure a lower interest rate, the loan amount is limited to the cost of the home and the lot plus two discount points and the VA funding fee. With an IRRRL, you can roll closing costs into your loan, but you cannot receive any cash back at closing.
- The loan term cannot exceed 20 years and 32 days for a single-wide unit or a combination single-wide unit and lot. The limit is 23 years and 32 days for a double-wide unit only, and 25 years and 32 days for a combination double-wide unit and lot. For a lot only, the maximum term limit is 15 years and 32 days.
- The home must have at least 400 square feet of living space if it is single wide or 700 square feet of living space if it is double wide. The foundation must anchor to a permanent foundation, although the home itself may be movable.
In addition to these loan options, there are also loans called chattel loans. These loans are personal property loans for real property (mobile homes) that are not permanently fixed to a foundation. According to Vandenberg, while chattel loans can be used to purchase a mobile home on a rented lot or land you already own, they are not traditional mortgages and thus are not eligible for traditional refinancing.
Required safety certification
Randy Yates, who heads the training program at National Property Inspections, said that a HUD safety certification check involves certification that the manufactured home’s site and systems are safe and compliant. As mentioned already, manufactured homes must be compliant with the HUD Code in order to qualify for a FHA loan and most other types of home loans.
According to Yates, the safety certification for manufactured homes involves the inspection of the following ten items:
- site location with respect to home design and construction
- consideration of site-specific conditions
- site preparation and grading for drainage
- foundation construction
- optional features, like skirting
- completion of ductwork, plumbing and fuel supply systems
- completion of electrical systems
- exterior and interior close-up
- completion of operational checks and adjustments
What is the HUD Data Plate?
Yates notes that every manufactured home must receive a HUD label certifying that it was built in accordance with the Federal Manufactured Housing Construction and Safety Standards. This label, often called a “HUD tag,” is actually a metal plate that is affixed outside of the manufactured home. This label is approximately 2 inches by 4 inches and is permanently affixed with rivets, screws and other permanent means.
The HUD Data Plate is another piece of documentation that is affixed inside the home. This paper label is approximately the size of a standard sheet of paper and is often kept in a kitchen cabinet, electrical panel or closet. The Data Plate includes details such as the name and address of the manufacturing plant where the manufactured home was built, its serial number and model of the unit, the date the manufactured home was built and a statement that says the manufactured home was built to comply with the Federal Manufactured Home Construction and Safety Standards.
The Data Plate will also include a list of certification label numbers that are affixed to each transportable section, a list of major factory-installed equipment with each manufacturer’s name and model designation, information on the roof load zone, information on the wind load zone for the home, and possibly information on the home’s heating and cooling certification and insulation zone map.
The Wind Zone Map on the HUD Data Plate must also include the following statements:
This home has not been designed for the higher wind pressures and anchoring provisions required for ocean/coastal areas and should not be located within 1500′ of the coastline in Wind Zones II and III, unless the home and its anchoring and foundation system have been designed for the increased requirements specified for Exposure D in ANSI/ASCE 7–88.
This home has—has not—(appropriate blank to be checked by manufacturer) been equipped with storm shutters or other protective coverings for windows and exterior door openings. For homes designed to be located in Wind Zones II and III, which have not been provided with shutters or equivalent covering devices, it is strongly recommended that the home be made ready to be equipped with these devices in accordance with the method recommended in the manufacturers printed instructions.
‘‘Design Approval by’’, followed by the name of the agency that approved the design
What cannot be attached to the mobile home?
Vandenberg notes that permanent additions cannot be attached to a manufactured home for it to qualify for refinancing, unless the additions were permitted and inspected. For a loan to qualify for Fannie Mae, the additions or modifications must be approved by a state agency or inspected and certified by a licensed professional engineer in the case a state agency is not available.
According to Yates, adding attachments to a mobile home poses many safety concerns, as well as the potential for building code violations, which vary by state.
“It’s best to check your city or county’s codes to determine what can and cannot be attached to mobile homes in your area,” he said. “Once you’ve determined the measures you should take to adhere to code and preserve the value of your home, we recommend hiring a professional for the project.”
Property ownership requirements
In order to purchase or refinance a manufactured home, you almost always have to own or purchase the land the manufactured home will sit on. One big exception is with VA loans, because they can be offered for the manufactured home only and sit on leased land.
The VA considers mobile homes and manufactured housing as eligible for financing. However, the home must be permanently affixed to a foundation.
Other lender requirements
While the details listed above cover many of the requirements for refinancing a manufactured home, there are still lender requirements that must be met. For example:
- Debt-to-income ratio (your gross monthly debt payments divided by your gross monthly income): Most lenders require a debt-to-income ratio (DTI) of 43 percent or below when refinancing a manufactured home, said Vandenberg. Keep in mind, however, that refinancing your home can actually help reduce your DTI if your housing payment goes down in the process.
- Credit score requirements: Credit score requirements can vary slightly by lender for refinances, said Vandenberg. However, the basic requirements for manufactured housing are 500 for an FHA loan with at least 10 percent equity and 580 for any other FHA loan. Conventional loans generally require a score of 640, while 660 is a guideline for VA loans; however, this may ultimately vary by lender.
- Proof of income: For most refinances on manufactured homes, you’ll need to be able to prove you can repay the loan and show proof of your income.
Before you refinance your manufactured home, make sure you have a goal. Ask yourself what you are trying to accomplish by refinancing and if a new home loan will help. Generally speaking, according to Vandenberg, refinancing can be a smart move if it helps you reach a specific objective, like saving money or reducing your loan length.
In addition, make sure you shop around and compare loan terms and rates among the different loan programs for manufactured homes. By comparing all your options, you can make sure you’re getting the best loan for your needs.