Mobile home, manufactured home, and modular home are terms that are frequently used interchangeably. However, there are differences that you should be aware of.
Mobile Homes and Manufactured Homes. In 1974, Congress passed the Mobile Home Construction and Safety Standards Act (the Act), which directed the U.S. Department of Housing and Urban Development (HUD) to put forth federal construction standards for mobile homes. (Prior to the Act, mobile homes were built with little uniformity regarding construction or safety standards.)
All mobile home units constructed after the effective date of the HUD standards (June 16, 1976) must have a HUD label certifying that the home has been inspected and constructed in compliance with the Act. On October 8, 1980, Congress enacted public law 96-399, which officially changed the name of this type of home from “mobile home” to “manufactured home.” The term “manufactured home” typically means a unit that is constructed pursuant to the HUD construction and safety standards, whereas a “mobile home” refers to homes built before June 15, 1976, when the federal standards took effect.
A manufactured home is structurally complete when it leaves the factory, and is transported in one or more sections. Manufactured homes are constructed on a permanent chassis, with a tongue, axles, and wheels for transport.
Modular Homes. Modular homes, on the other hand, are constructed to the same state, local, or regional building codes as site-built homes. Sections of a modular home are transported to the building site on truck beds, where they are then connected together by local contractors.
Initially, a manufactured home is considered personal property, like an automobile. In most states, parties convey ownership of manufactured homes by a certificate of title, with security interests noted on the title. In states that do not use a certificate of title, a security interest in a manufactured home is perfected (made) through a UCC filing.
Though a manufactured home is considered personal property to begin with, a homeowner can usually take steps to change the classification from personal property to real property.
Many states have statutes that provide procedures for converting a manufactured home to real property, while a few states have statutes that specify whether a manufactured home is considered personal property or real estate in credit transactions. Other states have a statutory scheme that establishes criteria for taxing the home as real property and certain other states have no statute on topic.
Generally, to be classified as real property, a manufactured home must be permanently affixed to the land.
In some states, a manufactured home can be converted to real property if it is permanently affixed to leased land, while other states require that the manufactured home owner must also own the land. (Sometimes manufactured homeowners own the land on which the home is situated, but in other cases, the manufactured home may be located on rented land or on a leased space in a manufactured home park.)
Typically, the requirements for a manufactured home to become real property may include:
Manufactured homes that are not permanently affixed to the land, or where proper procedures have not been following to convert the manufactured home to real property, will remain classified as personal property.
If the borrower defaults on loan payments for a manufactured home, the creditor can take the manufactured home. How the creditor does this depends on whether the home is classified as personal or real property. If the home is personal property, the creditor repossesses the home. If the property is real property, the creditor forecloses on the manufactured home.
If the property is considered personal property, then the creditor can repossess it.
Replevin. To do this, creditors often use a judicial process called replevin. A replevin is similar to a judicial foreclosure in that a creditor files a lawsuit in court and asks the court to grant an order for repossession.
Self-help repossession. With self-help repossession, the creditor retakes possession without the use of judicial process, like when a repo agent comes and takes a car away. his process is available in most states, but it is not especially practical for manufactured homes. It would difficult, if not impossible, to take the home without breaching the peace (a requirement for self-help repossession) or taking the borrower’s other belongings, like furniture or other personal property located in the home. Moreover, a few states prohibit self-help repossession for manufactured homes.
If a manufactured home is part of the real property, then the home is treated as real estate and the lender must use state foreclosure procedures. (Learn more about foreclosure, options to avoid it, defenses to foreclosure, and more, in Nolo's Foreclosure topic area. Also, see our Summary of State Foreclosure Laws for more information about the foreclosure procedures in your state.)
In states that do not use a certificate of title, the security interest in the manufactured home is usually perfected through a UCC filing. Then, the manufactured home is considered a fixture. In this case, the creditor can retake possession of the manufactured home through self-help repossession or replevin (if available in the state), or through state foreclosure law.
he problem with a number of mainstream media reports on the topic of financing is that they really don’t understand manufactured housing, and so their reports are often flawed – hit-and-miss accurate – as a result.
For example. Perhaps you’ve heard stuff in the media that make it sound like financing a factory-built home is harder or more costly. For those who know the ropes, how accurate are those reports? Or you might read or hear news media and writers often use the words “mobile home” or “manufactured home” or “modular home” interchangeably, yet that’s flat wrong.
Modular Home Mortgages
As we’ve previously reported, modular homes are built largely indoors to state or local building codes, while manufactured homes are built to the only federally preemptive performance-based building code (to learn more about the differences between manufactured and modular homes, click here).
So financing a modular home should be the same as getting a mortgage on any conventional housing. While there are lenders that specifically advertise doing modular home loans, any informed lender should finance a modular home and have it appraised for the same mortgage terms you’d get on an on-site-built (aka “stick built”) conventional housing.
When you buy a modular home and have it financed, it’s permanently installed on the property it will be located on, and thus will be considered “real property” or real estate. Some who do factory-built home sales refer to these transactions as ‘land/home’ package deals.
“Trailers,” “Mobile Homes” and Manufactured Homes
These three names represent three eras for factory-built houses built on frames, and each are DIFFERENT. The video at top and other articles linked at the end of this column will give more information about those differences. Briefly, there have been no mobile homes built in the U.S. since June 15, 1976.
So when you see a journalist or writer refer to a HUD Code manufactured home as “trailer house” (sic), or as a “mobile home” (sic), that report is already inaccurate and could have other errors in it too.
A home built to the federally regulated and preemptive HUD Code for manufactured homes is by definition built on or since that date in June 1976.
“Home Only” Lending – about 2 of 3 Manufactured Home Loans
Many buyers pay cash for a manufactured home. But for those who are financing, unlike conventional housing or modular homes, broadly speaking, manufactured homes have two different ways to be financed. One method is via a “land/home package,” which means it will be financed as real estate.
Manufactured homes financed and appraised as real property can quality for FHA Title II, VA, USDA and other conventional mortgage loans.
What makes manufactured homes unique in American home lending is that they can be – and often are — financed as chattel — also known as a personal property or “home only” loan – instead of as real property mortgage.
Those who own or purchase property for a manufactured home thus have two options,
That process has some variations between states, which your lender or manufactured home retailer can provide guidance on.
The majority of the estimated 8.8 million pre-HUD Code mobile and post-code manufactured homes (MH) are located on privately owned, individual parcels of land.
But perhaps 3 million of those homes in the U.S. are located in a land-lease setting, what is commonly called a “mobile home park,” but is better known today as a manufactured home community or a land-lease community.
For those who live in parts of Chicagoland, Hawaii or other parts of the U.S., conventional housing may also be built on a land-lease. A significant part of commercial real estate buildings are on a land-lease too. Without going into those details today, we’ll simply note that there can be advantages to leasing land vs. buying it. Those advantages can include:
There have been a limited number of mortgages made in land-lease manufactured home communities, but this is generally not readily available today. There is a significant debate and discussion in Washington, DC and beyond exploring expanding options for getting Fannie Mae, Freddie Mac or other mortgages for manufactured homes on land-lease, but those are not yet settled.
So for those who are thinking about buying a home on a land-lease, odds are that you’ll be getting a personal property – “chattel” or “home only” – loan.
Home-Only Loans Can Be Competitive
Other than on FHA Title I loans, which are available for home-only manufactured home loans, there are generally no federal loan guarantees.
So because a lender keeps that loan on their books, the rates on manufactured home loans will commonly be a few points higher than a conventional housing loan. But keep in mind that buyers routinely save on closing costs, appraisals or fees, and your home may be taxed at a far lower rate than real estate is.
Also, if you go long-form on your income tax, you can deduct the interest on your home loan the same as you do on a house mortgage. So when you look at the total picture, the personal property loan can be quite competitive to mortgage lending.
The key for most buyers comes down to two numbers – how much money down, and how much are the monthly payments.
Because manufactured homes are a fraction of the price, payments on manufactured homes are routinely the most affordable kind of housing payment, as the two payment charts on this page reveal.
Triad Financial Services, CU Factory Built Lending and 21st Mortgage are the primary personal property MH finance sources here in the U.S.
While some local banks make manufactured home loans, it is more common to find that a credit union will make such loans.
While there are close to 9 million pre-HUD Code mobile homes and post-code manufactured homes in the U.S., that’s only about 7% of the 124 million households living in all other types of housing. So bankers often have limited or no experience in manufactured home lending. Bankers will often understandably shy away from what they don’t know. So if you don’t already have a good relationship with a local bank or credit union, or if they aren’t experts in manufactured home lending, often the easiest way to obtain competitive financing is to go with one of those lenders noted above.
Ignorance can be costly, and knowledge can pay! You may get a wide range of well-meaning advice from people who truly aren’t experts in manufactured housing, much less about manufactured home financing. Lenders like those linked above have toll-free numbers, and employ licensed staff that can answer questions and process applications, originate and service loans.
Big Brother Made Getting Facts and Advice Harder
Lamentable CPFB implementation of regulations has effectively gagged unlicensed retailers or communities. So even if the seller knows a lot about lending, unless they hold an MLO license, they may not be able to give you a lot of guidance beyond handing you brochures or pointing to a list names of the lenders in your area that make manufactured home loans. You can learn more about the that harmful part of the impact of Dodd-Frank and the CFPB’s regulations at the articles linked below.
Timing and the Bottom Line
All lending has been slowed since CFPB regulations went into effect. An NAR study revealed that one of the biggest surprises for any home buyer is that it takes longer than they thought to get a home loan.
So try to avoid unnecessary stress by planning ahead when you are ready to buy a home. The more time you allow for financing, the more pleasant your home buying experience will likely be. If you plan to custom order a home, you should be thinking a few months in advance. Whenever available, getting pre-approved for manufactured home financing can be a good idea when you are getting ready to go shopping for your home. Good, reputable home retailers in your area can give you a good idea on how long the financing process can be.
Depending on your credit and down payment, comparing your options between the lenders in your market will lead you to the best terms. With typically lower monthly payments than other forms of housing, because manufactured homes are born greener and more energy saving by design, buying a manufactured or modular home can be a great choice for you, as it has been for millions of others.
A manufactured home is a factory-built home which is constructed on a permanent chassis so that it can be easily moved, even though most manufactured homes are not moved from where they’re first installed.
Sometimes manufactured homes are confused with modular homes or prefab homes, but they are different things. Modular homes can be built “on-frame” — with the chassis, or “off-frame” modular, which means that the chassis is removable. Usually, modular homes are attached to private land.
Manufactured homes also differ from mobile homes because they follow a uniform construction code outlined by the U.S. Department of Housing and Urban Development Title 6 standards, also known as “HUD code.” A home that was built following this HUD code will have documentation called the Certification Label and the Data Plate. This information is important and irreplaceable as it can impact the selling, financing and insuring of the manufactured home.
Mobile home financing can be tricky, but it’s not impossible. The one thing that will increase the chances of a homebuyer getting approved is owning the home site on which the mobile residence will be located. If, on the other hand, the buyer plans on living in a mobile home park and paying space rent to the owner of that land, then the chances of getting financing through a bank are reduced.
The same type of logic goes for people who want to finance a manufactured home — whether or not that home is already attached to land can make or break the approval of a loan. In both scenarios, having good credit will help your chances of getting approved for financing or a more competitive interest rate.
Although it’s not impossible to get a conventional loan for a manufactured home, it can be tougher than getting financing with a Federal Housing Administration Insured Loan. Fannie Mae and Freddie Mac lenders do make conventional loans on manufactured homes, but the specific lender you want to use must meet specific requirements.
For example, Freddie Mac requires loan originators to comply with their Single-Family Seller/Servicer Guide Chapter 5703. This guide sets out several rules including requiring a minimum down payment of 5 percent, which has to be paid for out of the borrower’s personal funds, for all purchase transactions.
Additionally, Freddie Mac requires originators to consider the added collateral risk a manufactured home poses and, in conjunction with credit reputation, capacity and collateral of the borrower, use that added risk consideration to assess the overall risk of the mortgage loan.
One advantage Freddie Mac does offer is to borrowers who own the land on which the manufactured home will be attached. This land might be used as an equity contribution.
The difference between borrowers who own land and those who don’t is that the manufactured home is considered “real property” in the former circumstance and, in the latter, it’s considered “personal property.”
For borrowers who are leasing the land on which the manufactured home will be located, a common option is chattel mortgage loans. The drawbacks of a chattel mortgage loan are that the interest rates are higher and the terms are usually shorter than conventional or FHA loans, so monthly payments will be higher.
Borrowers who have good credit, which by today’s standards is around a 720, might land a loan with rates in the high 6-percent range. People with lower scores might be facing higher interest rates of 10 percent or more.
If you plan on living in the home for several years or more, your best bet might be to also buy the property along with the home. Buying both the property and the home will most likely expand your interest rate options, leading to a better deal in the long term. Whatever you choose, be sure to research loan options before committing to an expensive loan or one with terms you’re not completely comfortable with.
The FHA is in the business of insuring, not making, loans. By backing loans, the FHA encourages lenders to loan money to would-be homeowners. What that means is if the borrower stops making payments and ends up defaulting on the loan, the FHA would make a payment to the lender.
FHA loans fall under the Title I program which includes manufactured homes. One major benefit to these loans is that the FHA guidelines require them to be fixed throughout the full mortgage term, which is usually twenty years. Adjustable rate mortgages, therefore, would not be eligible for FHA backing.
Another important benefit, especially for people who will lease the land on which their manufactured home will be located, is that the FHA does not require the borrower to own the land. One stipulation to this is that the lessor must lease the land to the borrower for a minimum of three years in order to qualify for a loan.
The maximum loan amounts for Title I insured loans are as follows:
To be approved for a Title I insured loan the applicant’s credit history is reviewed and considered, the borrower must be deemed able to make monthly payments and this must be the primary residence of the borrower.
Like FHA loans, Veterans Affairs loan guarantees offered by the Department of Veterans Affairs are insurance for lenders in case the borrower defaults on the loans. Manufactured homes — both with owned and leased lots — might get VA loan guarantees, however, the amount the VA will cover differs for each setup.
For manufactured homes that will not be put on a permanent foundation, borrowers can get a loan for up to 95 percent of the home’s purchase price. VA will guarantee 40 percent of the manufactured home loan amount or the veteran’s available entitlement, up to a maximum amount of $20,000.
Eligible parties — service members, veterans, spouses, and other eligible beneficiaries who are eligible for a VA loan — must present a certificate of eligibility or COE to qualify for VA-guaranteed manufactured home loans and they must reside in the home.
These COE requirements vary, but include specifications like minimum active duty service requirements and marriage status, in the case of an eligible spouse. Along with a COE, the borrower must also meet other requirements including a good credit rating and enough income to make the monthly mortgage payments.
FHA modular and manufactured home loans represent a popular option for home buyers who currently have the ability to repay a mortgage, but may have had some credit challenges in the past. FHA loan products also carry lower down payment requirements. These products are a great vehicle to help individuals who have a not-so-perfect financial history achieve the dream of home ownership.
FHA modular and manufactured home loans are made by private lenders but are insured by the FHA in the case of default. In many cases, these loans have lower credit score requirements than conventional loan products. So don’t assume that past credit challenges, or no established credit, will automatically deter you from obtaining a home loan. Contact MHM today and let us make that determination.
To qualify for a FHA modular or manufactured home loan, you must make a small down payment. MHM FHA modular and manufactured home loans require as little as 3.5% down or land equity in lieu of this amount.
As with any loan, you must prove you have enough income to afford the payments. The debt to income ratio required for approval can vary based on a number of factors including past credit history, how much of the total income is dedicated to housing, residual income calculations, and other factors. As part of the loan application process, a representative at MHM can help you understand debt to income ratios and work with you to determine the appropriate loan amount for your unique circumstances.
Because FHA manufactured home loans are insured by the FHA, there are certain rules and requirements that must be met. These include but are not limited to:
While there are many rules for FHA modular and manufactured home loans, MHM is an expert in making sure homes are FHA compliant. We understand every case is different, and throughout our history of offering FHA modular and manufactured home loans, we have worked with all sorts of borrowers.
We have dedicated loan officers who are experts in their field and want to help you qualify for the modular or manufactured home loan you need. Our goal is to help you achieve your dream of home ownership so we offer a range of extra benefits including rock bottom interest rates, 30 year loan terms to make payments smaller, and a qualified pool of appraisers that will appraise your home fairly. When you choose MHM for your FHA modular or manufactured home loan, you can expect the highest level of service from the first day you contact us all the way through closing and for as long as you have a loan with us. Get started on your modular or manufactured home loan by calling 916-861-2292 or completing an online application today!
Manufactured Home Mortgage offers a range of manufactured and modular home financing options to meet the needs of all types of home buyers. This includes conventional loans for top qualifying applicants as well as a wide range of other loan programs which include opportunities for prospective buyers who can afford a home today, but have had some credit challenges in the past. The following information will provide details about our modular and manufactured home financing options so you can find the best financing for you.
FHA loans are insured by the FHA and best suited for borrowers who don’t have a large down payment and that have less than perfect credit. Through our FHA loan programs, we can often qualify individuals who have had past credit challenges. We also can often assist buyers with higher debt to income ratios who have other strong compensating factors to help justify their ability to apply a higher percentage of their monthly income toward their housing payment. To be eligible for FHA financing, the manufactured home you are purchasing must have been built after June 15, 1976 and be permanently fixed to a foundation. If you are purchasing an existing manufactured home that is not currently affixed to a foundation, we may be able to structure a loan for you that will allow the foundation to be upgraded to FHA standards. Some of the perks of this program include a low 3.5% down payment, 30 year loan terms, and low interest rates. Learn more about our FHA loans for modular and manufactured homes.
We have special VA loans for veterans in need of financing for manufactured and modular homes. While many manufactured home financing companies do not offer VA loans, MHM offers these loans to qualifying veterans with a credit score of 620 or higher. Our VA loans can cover 100% of the loan cost, meaning $0 down payment. Most VA manufactured and modular home loans require a VA funding fee that can be financed; however, all VA loans we offer are exempt from monthly mortgage insurance fees. Learn more about our VA loans for modular and manufactures homes.
MHM is one of only a few manufactured home financing companies that offers conventional loans for manufactured and modular homes with terms that are similar to site-built home mortgages. At MHM, these loans do require a debt to income ratio below 43% and credit score of 680 or more. The maximum loan limit is currently $417,000; no upfront or monthly mortgage insurance premiums apply on loan to values of 80% or less; and unlike the other manufactured home financing options, conventional loans can be used for second homes. Conventional homes can also be used to finance modular homes as investment properties. Learn more about ourconventional loans for modular and manufactured homes.
When it comes to financing manufactured homes, MHM is one of the top rated manufactured home financing companies in the country. We have a long history of customer satisfaction and offer financing for manufactured and modular homes in California.
Although MHM is an industry leader in financing manufactured homes, it is not just our knowledge and great loan programs that make us the top choice for manufactured home financing. We deliver personalized service to each and every one of our loan applicants that far exceeds other manufactured home financing companies. We understand that every situation is different, so we take the time to understand your circumstances and craft the right loan for your situation. We are also friendly, understanding, and eager to help. We will go out of our way to answer your questions about manufactured home financing while promptly answering your emails and calls to explain the loan process and put your mind at ease.
We are confident we have the right manufactured home financing option for you. It all begins either with a simple call to us at 916-861-2292 or by completing an online application so we can determine your eligibility and match you with the perfect modular or manufactured home loan for your situation. Contact us today, and take a big step forward on the path to home ownership!
Trying to get a loan for a mobile home? You may be surprised to learn there are financing options available for non-single-family residence houses. Here’s what you need to know.
Your property type holds all the cards when it comes to whether or not you’ll be able to obtain competitive loan terms. (Your financing will also depend on your credit score, with good ones qualifying you for better rates. You can see where you credit stands by viewing your two free credit scores each month on Credit.com.) For starters, you need to own the land. If you own the structure, but you don’t own the land, your options become very limited andpricey.
The classic scenario is you own a unit in a mobile home park where one entity owns land and all of the people who reside in the complex pay a housing obligation called “space rent.” Bank lenders consider this scenario to be a more risky type of lending. And most will not dabble in it, though there are a few exceptions.
Other financing scenarios in this space include the purchase of manufactured homes or modular/prefabricated homes.
Manufactured homes are bought at a dealership and moved on a flatbed truck to the final destination and affixed to the earth with a permanent foundation. The key here is that the property was already built in its entirety someplace else, then simply moved and subsequently attached.
Another unique way to identify a manufactured home is by its 433A form — this is a form filed with the county signifying the property is on a permanent foundation. These properties also have HUD tags, further supporting that the property is indeed, manufactured.
If you are looking for financing for this property type, you should know that your options will be limited when the manufactured home is not yet attached to earth. The lender is much more likely to finance the properties already attached to the land — meaning the dwelling and land transfers in the sale when buying the home.
Fannie Mae and Freddie Mac do make conventional loans on manufactured homes — if you can find a lender who will do so. More lenders will finance this type of property with a Federal Housing Administration Insured Loan, as the FHA is much more forgiving in their underwriting standards and the lender has far less buy-back risk (a situation where a new loan goes bad and the originating lender is forced to buy back the bad loan for a steep loss). FHA loans pack in more insurance against lending risk, making the FHA a far more likely financing vehicle for manufactured home transactions. Here are four unique FHA Manufactured Home Requirements:
Modular homes are built on site at the property with a permanent foundation. These homes do not have HUD tags — or the strong lending restrictions, generally, that apply to manufactured homes. Financing options for modular homes are similar to single-family home options.
If you are looking purchase one of these unique property types, make sure you arepre-approved upfront and provide your lender all of the details. The tiny details left undisclosed are the ones that cause home transactions to go awry.
Do not assume a unique property type that is anything other than single-family 1-4 unit home is automatically going to be a slam-dunk. Not sure if your property type is unique? It is always a best practice to bring any and all pertinent information to your lender and real estate agent as early on in the process as possible.