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How to Get a Reverse Mortgage on a Mobile Home

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If you’re 62 or older and live in a mobile or manufactured home, a reverse mortgage might allow you to convert part of the equity you’ve built in your home into retirement income while staying put in your home. However, mobile homes are not the same as manufactured homes. To see if you qualify for a reverse mortgage, you’ll first have to check the date when your home was built.

Can you get a reverse mortgage on a mobile home?

No, it’s not possible to get a reverse mortgage on a mobile home, but you may be able to qualify for a reverse mortgage if you live in a manufactured home built after June 15, 1976. That date is key: While the terms “manufactured home” and “mobile home” are often used interchangeably, the U.S. Department of Housing and Urban Development (HUD) didn’t begin regulating factory-built homes until 1976. As a result, mobile homes built before then may not qualify for financing because they don’t meet construction and safety guidelines established by HUD for manufactured homes.

Meeting these guidelines is especially important if you’re hoping to obtain the most common type of reverse mortgage for a manufactured home, a Home Equity Conversion Mortgage (HECM) backed by the Federal Housing Administration (FHA) to protect both lenders and consumers.

How to get a reverse mortgage manufactured home

The FHA and the HUD set the criteria for obtaining a HECM loan. For a manufactured home to be eligible, borrowers will need to make sure their home meets the following standards:

Have a floor area that is at least 400 square feet

Was built after June 15, 1976

Bears an HUD tag to show it meets federal safety and construction standards for manufactured homes

Be classified and taxed as real estate

Was moved from where it was made directly to the property site

Besides meeting specific criteria for manufactured homes, you also need to meet the basic eligibility requirements for a reverse mortgage, like the following:

Be 62 years old or older

Fully own the property or have significant equity in it, typically 50%

Use the property as your principal residence

Not be delinquent on any federal debt

Have the financial resources to afford ongoing charges like property taxes, insurance and homeowners association (HOA) fees

Participate in counseling with a HUD-approved HECM counselor

How to apply for a reverse mortgage on a manufactured home

To get a reverse mortgage on a manufactured home, take the following steps:

  1. Meet eligibility and property requirements: Your property will need to meet certain FHA requirements that cover how and when it was built, like after June 15, 1976. As the borrower, you’ll also need to meet certain age, equity, financial and residency requirements.
  2. Meet with a HUD approved counselor: Your counselor will explain to you how much the loan costs and how a reverse mortgage might affect your finances. By law, your counselor is also required to walk you through any potential alternatives to a HECM, as well as help you compare the costs of different reverse mortgages, like those offered by private lenders, or certain state and local government agencies.
  3. Find a HUD-approved lender: You’ll need to work with an HUD-approved lender in order to qualify for the HECM reverse mortgage.
  4. Have a home appraisal: A home appraisal from a licensed real estate appraiser will give you an unbiased opinion of your manufactured home’s value and ensure you’re not borrowing more than the home is worth. The appraisal also determines how much you’ll pay in lender fees.
  5. Decide how you want to receive payment: Because you’re tapping into your home’s equity instead of borrowing money to pay for the home, you’ll receive payments, instead of making them. You can choose to have this payment come as a lump sum, a monthly distribution, or paid across a certain term (like a set number of months) or through a line of credit.

Like any type of major financial decision, you’ll want to carefully weigh the pros and cons of a reverse mortgage before proceeding with one for your manufactured home.

Pros

  Can help fund retirement. Even if you own your home outright, you may find it’s a struggle affording living expenses during retirement. A reverse mortgage can help provide cash for expenses like health care, paying for a grandchild’s education, or for travel while living on a fixed income.

  Puts existing home equity to work. If you have heirs, you may worry that a reverse mortgage might shortchange their inheritance. However, a reverse mortgage can also let you tap into the valuable equity you have in your home to use now.

  An affordable alternative to a HELOC. A home equity line of credit (HELOC) lets you tap into the equity you own in your home, but it still requires making monthly payments on the borrowed money, an expense that some retirees may not be able to afford.

Cons

  Upfront and ongoing fees. Just like a traditional mortgage, your reverse mortgage will come with additional costs, like lender and servicing fees and mortgage insurance.

  Insurance premiums apply. You’ll also need to pay an initial mortgage insurance premium that is 2% of your home’s value in addition to an annual mortgage insurance premium (MIP) that is 0.5% of the loan amount.

  Varying interest charges. A reverse mortgage usually comes with an adjustable interest rate, which means that the interest rate added to your loan balance each month can fluctuate. If rates go up, you’ll be left with less equity in your home.

  No immediate tax deduction. Unlike traditional mortgage interest, the interest you pay on a reverse mortgage can’t be deducted on your annual tax return until you fully pay off  the loan.

  Repayment may be required early. If the homeowner moves, dies or fails to pay homeowners insurance or property tax, the loan may need to be repaid sooner than expected, possibly putting a financial strain on the homeowner or on heirs. In a worst case scenario, it might lead to a reverse mortgage foreclosure.

 

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