The Best Manufactured Home Loans
Manufactured Home Loans
Manufactured Home Loans
First things first, so let’s start defining manufactured homes. A manufactured home or for short an MH is a housing unit built mostly off-site. Then the owner must transport the MH to a piece of property where it is to remain.
Manufactured houses are considerably less expensive when compared with on-site homes and even modular homes, but most of the time not inexpensive enough to purchase them with cash only so as usual, people wanting a manufactured home would like to have access to a mortgage loan.
Lenders do not consider manufactured homes as real estate but rather personal property. As a consequence, they do not qualify for conventional mortgage loans. The loans available for manufactured houses are chattel mortgage loans.
Chattel loans are by definition loan secured by a property that is portable, such as a boat, RV or in our case a manufactured home. Chattel loans have a down payment requirement between 5 and 20 percent and a typical repayment period between 15 to 20 years. The interest rates are usually 3-4% higher than the traditional mortgage loan. So, at a first glance what you gain because of the low price you lose because in terms of interest rate and high down payment.
Wouldn’t be better if you can access a traditional mortgage loan by using manufactured home loans?
The Uniform Manufactured Housing Act rules
This is possible, for manufactured homes if you reclassify them following the UMHA rules.
- If not already done so, place the manufactured house on your own land. If not your own land, then on a piece property for which you have a 40+ year land lease. Or on a piece of property where you have with the landlord a common interest community agreement
- Permanently affix the home to this particular parcel of land. I.e. remove the towing hitch, wheels, and axles and connect the home to a base. Making sure it has access to electricity, either from a utility or from a solar panel or a gas-powered generator.
- File a certificate of location with the land records office of the jurisdiction where you will locate the home.
- Make sure the home was built after 1976.
The UMHA also stipulates that “reclassification of a manufactured home as a real property will not affect manufacturer’s warranties, or the landlord and tenant rights under a lease if the home is located on the leased property, and does not subject the property to the law of fixtures”.
If you reclassify the manufactured house from a personal property into a real property you can access traditional mortgage loans like FHA insured and VA home loans
. To access these mortgage loans, you have to follow the regular qualification conditions for such manufactured home loans.
FHA for Manufactured Home Loans
- Credit score of 580 points and above
- Maximum LTV of 96.5 percent
- This means a down payment as low as 3.5 percent
- Required debt to income ratio can vary based on past credit history. As well as how much of the total income is dedicated to housing, residual income calculations, and other factors.
Because FHA insures the manufactured home loans, there are certain rules and requirements, for the house itself:
- The manufactured home must be built after June 15, 1976.
- The red HUD label must be affixed to each section.
- Minimum size financable is 400 square feet.
- Must affix the home to a permanent foundation that meets FHA standards.
- The home must meet the Model Manufactured Home Installation Standards.
- Must designate & approve the lot where the manufactured home will be set.
- The manufactured home has to be the primary residence.
VA Loans for Manufactured Home Loans
- Credit score of 580 or higher.
- Maximum LTV of 80 percent
- Required debt to income ration debt to income ratio required for approval can vary based on a number of criteria
- No mortgage insurance fees
- The manufactured home has to be the primary residence
Consumer protection laws apply to these mortgage loans that also apply to traditional mortgages. This includes various state foreclosure and repossession laws that don’t apply to portable property loans.
Some lenders have a 15-year rule, meaning manufactured homes older than 15 years cannot obtain financing. So, pay attention when you intend to purchase old manufactured homes and not brand-new ones.