According to a report issued by the Consumer Financial Protection Bureau (CFPB), manufactured homes account for 6% of all occupied housing, but a much smaller percentage of home loan originations. Many people still refer to this type of housing as a mobile home, a term that actually refers to structures built before HUD code standards were established in 1976.
Before taking out a loan on a manufactured home, it’s important to know what your options are and make sure you apply for the most favorable type of financing. Never accept a loan offer before researching your choices, especially if you’re putting the home on a piece of property that you own.
There are only two types of manufactured home financing:
- Traditional mortgage
- Chattel mortgage
Most people understand a traditional mortgage. You find an existing home (or build one), apply for a typical fixed or adjustable rate mortgage, then lock in a decent interest rate.
When a structure is permanently affixed to land it is considered real estate, and all the protections that come with conventional mortgages apply. The borrower can get an FHA-insured mortgage, a VA home loan, or one backed by Fannie Mae, which also backs loans on manufactured housing. The loan will also be covered by all consumer protection laws that apply to traditional mortgages, including various state foreclosure and repossession laws.
Chattel mortgage is a legal term used to describe a loan arrangement in which an item of movable personal property is used as security for the loan. This differs from a conventional mortgage in which the loan is secured by a lien on real property (land).
If a manufactured home is not permanently affixed to the land on which it sits, or if the homeowner just leases the land on which the manufactured home is located, the building is considered personal property instead of real estate. In this case, the borrower should consider a chattel mortgage. A chattel loan allows the lender to hold a lien against the movable property (the home) until the loan is satisfied.
As the owner of a manufactured home, be sure to apply for the right kind of mortgage. The CFPB estimates that at least 65% of manufactured home owners who also own their land took out a chattel loan.
Some of these owners may have valid reasons for choosing a chattel loan, but the more likely reason is not knowing that a traditional mortgage is available to them.
If you live in a manufactured home that is permanently affixed to the land on which it’s located — and if you own that land or are considering buying it — you probably qualify for a traditional mortgage, complete with interest rates that could be half that of a chattel loan. Make sure you consider both options carefully.
To qualify for a traditional mortgage on a manufactured home, your structure and property must satisfy a few requirements:
- Property must be classified and taxed as real property, on a permanent foundation system and the owner owns both the land and manufactured home.
- Must have been manufactured after June 15, 1976 to be in compliance with Federal Mnufactured Home Construction and Safety Standards.
- Manufactured home must not have been installed or occupied previously at any other location or site (re-siting).
- Manufactured home must not have any additions or structural modifications to the original structure. Decks, porches, carports and garages must not be attached.
- Manufactured homes must be multi-width (no single-wides).
If a manufactured home meets the criteria above, we can arrange financing for purchase or refinance at the following loan-to-value (LTV) ratios:
- Conventional loans
- Purchase or refinance: Up to 95%
- Cash out refinance: Up to 65%
- Veterans Affairs (VA) loans: 100%
- Federal Housing Administration (FHA) loans: 96.5%
We can help
Finding the right loan for a manufactured home can get confusing. Even for many established lenders they can be tough to navigate. To make matters worse, there’s a lot of misinformation and just plain bad advice out there. If you’d like to speak with some smart folks who can clear away the jargon and explain these loans in simple terms, you’ve come to the right place.