Manufactured Housing Loans: What You Need to Know

If you are looking to purchase a manufactured home as your residence, you have many options available.

Understanding the different organizations, as well as the eligibility requirements, can help you get the right loan for your specific needs. In the end, this can mean a better loan for you, your budget, and your family…

Before we discuss the loan options for manufactured housing, we need to establish what manufactured housing actually is, and what it is not. Essentially, a manufactured home is a house designed for year-round occupancy that has been mostly manufactured in a factory. It must conform with national building codes defined by the Department of Housing and Urban Development, often called “HUD.”

A manufactured home will consist of one or more transportable pieces, including interior or exterior walls, flooring, roofing, or ceilings. The home is assembled in a factory on a permanent steel base and transported to the site, where it is permanently attached to a foundation.

To be eligible as “property” in the legal sense of real estate, a manufactured home must meet certain requirements. It must be built after June 15th, 1976 and must be classified as real estate. It must be built and remain on a permanent chassis, and must be designed for use as a permanent dwelling. It should also be built with a finished grade at or above flood elevation.

It cannot have been installed at a previous location, and will be ineligible if the home resides in a leasehold estate or trailer park.

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Manufactured Homes vs. Mobile Homes: What’s the Difference?

Two terms that are often interchanged, but have important differences, are “manufactured homes” and “mobile homes.” While they are similar, understanding the differences is important if you are going to take out a loan.

Here’s a brief history: In the early 20th century, people started pulling camping “trailers” behind their vehicles for vacation, but eventually these trailers were parked and used for primary residency. The public perception of trailers diminished, so they eventually were called “mobile homes.” These were situated on property and often had the wheels left on. The process of buying, selling, and financing mobile homes had more in common with vehicles than real estate property.

In 1976, the federal government created stricter standards for mobile homes and started using the term “manufactured homes.” Essentially, a mobile home was built before July 15th and does not adhere to the current standards, while a “manufactured home” is built on or after this date and meets all the requirements of the HUD codes.

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Manufactured Housing Loans

FHA Loans

One of the most important types of loans for manufactured housing comes from the FHA, or Federal Housing Administration. The FHA has many different types of loan programs available for manufactured housing, including traditional mortgage loans (203b), repair escrows, streamlined refinance packages, $100-down loans, and one-time close options.

To be eligible for an FHA loan, the dwelling must be greater than 400 square feet and have specific two-digit ID codes. The home must be taxed as a real property, and an Engineer Certification is required. For the FHA’s One-Time Close programs, the home cannot be a single-wide unit.

VA Loans

The Veteran’s Administration, or “VA,” provides many different services to men and women who have served our country. This includes health care, job placement, and mortgage loans. Manufactured housing is available through the VA, but it must meet very specific requirements.

The home must be permanently fixed to a foundation and taxed as real property, and single through triple-wide units are eligible. The borrower must occupy the residency as his or her permanent residence, and an Engineer’s Certification is required if the home has been moved. The house must also follow FHA Manufactured Housing Guidelines for property requirements.

Manufactured homes will be ineligible for VA loans if it is located in a leasehold estate or trailer park, or if the property is under construction. Certain areas, such as the Coastal Barrier Resources System, are not eligible for VA loans.

USDA

When most people think of the USDA, for United States Department of Agriculture, they likely think of labeling on meat, dairy, and produce. However, the USDA participates in many other programs, including rural development and home loans for rural and suburban areas. (You don’t have to work in agriculture to qualify for USDA loans.)

USDA loans follow the same guidelines as the FHA, but property must be located in an eligible rural area. Single, double, and triple-wide units are eligible, but the loans must include the site as well as a manufactured home that is less that 12 months old and has never been occupied. There is a pilot program testing loans for manufactured homes built since January of 2006, but this is only available in eight select states.

The only significant ineligibility for USDA loans is for cash-out refinances. Essentially, you can’t use a USDA loan to refinance your existing mortgage for the purpose of generating cash.

Fannie Mae

The Federal National Mortgage Association (FNMA), which is often referred to as “Fannie Mae,” has been providing financial and mortgage services since it was founded by President Franklin Roosevelt in 1938.

Manufactured homes are available for Fannie Mae mortgages, but they must be at least 12 feet wide and have a minimum of 600 square feet of living space. Manufactured homes must be a single-unit dwelling (no duplexes) and be legally classified as real property. It must be permanently connected to the septic and sewer systems, and to other utilities with local requirements. In certain conditions, the borrower must own the property where the manufactured home will be placed.

Fannie Mae can be most strict on available housing. Single-wide units and housing in a condo project are not eligible. Trade equity and traded units are not eligible for loans, and you can’t take an FNMA loan for an investment property. If the unit has been moved from it’s original location or is located on a leasehold estate, it won’t be eligible.

Freddie Mac

Another important government institution is the Federal Home Loan Mortgage Corporation (FHLMC) or “Freddie Mac.” This is actually a government-sponsored enterprise created in 1970 that works to increase the availability of mortgage lending.

For a Freddie Mac loan, your manufactured home must have been built after June 14th, 1976 and must be on a permanent chassis. Only double and triple-wide units are eligible, and the home must be a one-unit dwelling. The anchoring system must meet HUD codes, and the permanent foundation must meet manufacturer’s instructions.

Home located in leasehold estates are not eligible, and you can’t use Freddie Mac loans for investment properties. Trade equity loans are also ineligible.

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Chad Baker is Regional Manager for RPM Mortgage. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2016.
Got a question for Chad? Call (858) 353-8331 or submit your question online