Financing for Manufactured Homes
Manufactured homes have come a long way in terms of luxury and quality of construction. Because of this, they can be a wonderful living option for people who are looking for affordable, convenient and comfortable homeownership. However, established federal lending requirements and FHA guidelines can create potential complications when it comes to obtaining financing for manufactured homes.
As a company that has helped many clients find the perfect living space for their needs, San Diego Purchase Loans is no stranger to manufactured homes. We are happy to share our knowledge to help you understand the complexities of financing for manufactured homes. This way you can make an informed, educated decision as to whether or not a manufactured home is the right investment for you to make. Let’s discuss financing for manufactured homes by starting with the difference between personal and real property….
The Difference Between Personal and Real Property
How could the difference between personal and real property affect your decision to purchase a manufactured home? Well, in order to qualify for a traditional mortgage loan, a manufactured home must be considered real estate (or “real property”) and not personal property.
Unfortunately, not all manufactured housing is considered real estate. This should be an important consideration when you are looking to purchase a home. The legal distinction of the difference between personal and real property separates items that are owned by an individual. Of course, said distinction can determine whether certain forms of financing are available.
The biggest difference between real and personal property is mobility. If something can be moved from one place to another, it is considered personal property. This includes cars, jewelry, equipment and furniture. As long as the item is movable and owned by someone, it falls under the legal distinction of personal property. Personal property can also include “intangible items,” which is property that can’t be felt of touched but can still be moved. Intangible items include stocks, bonds, retirement accounts and personal savings.
Conversely, real property is considered to be permanent. In other words, real property is fixed to a single location and therefore cannot move from one place to another. Real property includes a plot of land, as well as anything that is built on top of that land. It can also include anything that is growing on that land, such as trees or crops. However, and just for context, harvested crops go from real to personal property, because they can be transported off of that land. Real property also includes land, buildings, and even mineral rights.
Is a Manufactured Home Real Property or Personal Property?
This explanation brings us to a bit of a gray area…. namely, is a manufactured home real property or personal property? Since a manufactured home is mobile and can be moved, then it must be personal, right? Well, lest we forget a manufactured home is also fixed to its current location. Therefore, moving it would take significant effort, because you can’t just load it on a trailer like a garden tractor. This means it must be real property then, right?
Actually, manufactured (or mobile) homes can technically fall under either legal category depending on many different factors. Some details might seem trivial, but they can make a world of difference in financing. This is because a home determined to be personal property is not eligible for FHA-backed financing. However, if a home is determined to be real property, then it is eligible for financing supported by the FHA.
So, once again then, is a manufactured home real property or personal property? Well, the best way to determine whether or not a specific home is real property is taxes. If the location is taxed as real properly, then it should be eligible for FHA-backed financing. However, even if a manufactured home is considered real property, it still needs to pass a few checks before it can be considered for FHA-backed lending.
A Loan for Real Property vs. a Loan for Personal Property
There are many advantages to financing property as real estate and thus, obtaining a loan for real property versus a loan for personal property. A loan for real property allows you to get better rates, largely because the lender can foreclose on the home if a problem should occur. Although lenders have ways of recovering a personal property loan, the foreclosure option may not be available on a loan for personal property.
Because of this difference, a loan for personal property usually comes in at three to four percentage points higher than a loan for real property. However seemingly-small, this higher rate can actually result in tens of thousands of dollars in additional interest over the life of a typical loan. Also, greater lender risk means the borrower will likely need a higher credit score for a loan for personal property, which can potentially create problems for many borrowers.
FHA Guidelines for Manufactured Homes
There are various established FHA guidelines for manufactured homes. In order to qualify for FHA-backed lending, the home must be greater than 400 square feet, and it must have a Manufactured Housing Indicator on the Appraisal Logging Screen. Single-wide, double-wide and triple-wide units are all permitted, as long as the home has an engineering certification verifying that the home meets the specific HUD requirements.
FHA guidelines for manufactured homes also include basic requirements for when and how the home was built. For example, it must have been built after June 15, 1976, and the date must be verified with a specific label. Double-wides require two labels, one for each movable section.
Additionally, the home in question cannot have ever been moved from one site to another. This means if the manufactured home was installed at one location and then moved to a different location at any point, it is not eligible for FHA-backed financing.
FHA guidelines for manufactured homes even extend to the foundation. In order to qualify for FHA loans, the home must be permanently affixed to a foundation that meets the organization’s specific standards. What is more, the foundation must comply with HUD guidelines. HUD guidelines state the wheels and axles of mobile homes must have been removed, and that the property itself must have a certification of occupancy. The home’s engineering certificate should verify this information.
Finally, the manufactured home also has to meet location standards. These include being at or above the 100-year floodplain, as well as having a ventilated crawl space. The home should also have permanently-installed utilities, including sewage removal and running water.
FHA Loan Requirements for Manufactured Homes
FHA loan requirements for manufactured homes require borrowers to meet specific guidelines. Borrowers have to prove that they have enough money to afford their loan payments. This requires verifying income and debts against that income. If the borrower has a good debt-to-income ratio, he or she will likely be eligible for financing. Borrowers will also likely have their credit scores checked, but the specific score requirements vary depending on other factors.
In addition, FHA loan requirements for manufactured homes state that the home purchased must be the borrower’s primary residence. This means a borrower cannot use FHA-backed financing to purchase a second (or vacation) home. FHA-backed financing also cannot be used to purchase investment or rental properties. Rather, and without exception, the manufactured home must be the residence the borrower intends to live in full time.
San Diego Purchase Loans for Manufactured Homes
At San Diego Purchase Loans, we are dedicated to helping our clients find the financing option that best suits their unique needs and individual situations. This includes helping you get the best rates and terms on loans for manufactured homes.
If you would like to obtain more information on loans for manufactured homes, we welcome you to contact the financing experts at San Diego Purchase Loans, and we’ll happily help you navigate all of the complexities of home financing. From FHA-backed loans for manufactured homes to jumbo loans for large houses, we can help you get the right loan to secure your perfect living space and financial future.