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Manufactured Home Financing

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Manufactured homes can offer an affordable path to homeownership, but financing them is different from financing a traditional site-built home.  Depending on the property, buyers may be able to use conventional financing through Fannie Mae or Freddie Mac, or FHA financing. Manufactured homes may also qualify when located on certain leasehold properties, provided the land lease and property meet the applicable loan-program requirements.

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Understanding these differences before making an offer can help prevent financing problems later in the transaction.

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What Is Considered a Manufactured Home?

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A manufactured home is a factory-built residence constructed according to federal HUD Manufactured Home Construction and Safety Standards.  For most conventional and FHA mortgage programs, the home generally must have been manufactured on or after June 15, 1976.

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Manufactured homes are different from modular homes. Modular homes are generally built to state or local building codes rather than the federal HUD manufactured-home code and are typically financed more like traditional site-built homes.

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Manufactured homes may be:

  • Single-wide

  • Double-wide

  • Triple-wide or larger multi-section homes

 

The number of sections can affect which financing programs are available.

 

Does the Buyer Have to Own the Land?

 

Not always.

 

A manufactured home may be located on land owned by the borrower or, under certain loan programs, on an eligible leasehold estate or leased lot.  The rules are different for conventional and FHA financing.

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Conventional Financing on Leased Land

 

Conventional financing is generally more restrictive when the borrower does not own the underlying land.

Fannie Mae generally requires the manufactured home and the borrower's interest in the land to be classified as real property. A manufactured home located on leased land is generally eligible only under limited circumstances, such as an eligible Fannie Mae-approved condominium or PUD project.

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Freddie Mac may also allow certain manufactured homes on leasehold estates, but additional requirements apply. Freddie generally requires prior approval for these transactions, and standard leasehold eligibility is more restrictive for single-wide properties.

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Because of these restrictions, borrowers purchasing a manufactured home on leased land should have the leasehold structure reviewed by their lender before assuming the property will qualify for conventional financing.

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FHA Manufactured Home Financing on Leased Land

 

FHA offers more flexibility for manufactured homes located on leased land.  Depending on the type of FHA financing and property structure, a borrower may be able to finance a manufactured home even though the land underneath the home is leased rather than owned.  The lease or leasehold interest must meet HUD requirements.

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For certain FHA manufactured-home programs involving leased lots, HUD generally requires provisions such as:

  • An initial lease term of at least three years

  • Renewal provisions

  • Required advance written notice before certain lease terminations

  • Identification of the property

  • The amount of monthly lot rent

  • Signatures from the borrower and landowner

  • Disclosure of potential increases in lot rent when applicable

 

The lender must review the land lease to determine whether it satisfies the applicable FHA program requirements.

Because FHA has different manufactured-home programs, it is important to distinguish between FHA Title II mortgage financing and FHA Title I manufactured-home financing.

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FHA Title II Manufactured Home Loans

 

FHA Title II is the FHA mortgage program most borrowers are familiar with when purchasing residential real estate.

An eligible manufactured home may qualify for FHA Title II financing if the home and property meet HUD requirements.

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The manufactured home generally must:

  • Have been built on or after June 15, 1976

  • Contain at least 400 square feet

  • Be designed as a one-family residence

  • Meet applicable HUD manufactured-home standards

  • Be permanently installed on an acceptable foundation

  • Meet applicable title and real-property requirements

  • Be used as the borrower's primary residence

 

FHA Title II can also involve an eligible leasehold interest, provided the leasehold meets FHA requirements and the lender can obtain the required mortgage and title interest.  FHA leasehold transactions therefore should not automatically be declined simply because the borrower does not own the land.  The specific lease terms and title structure must be reviewed.

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FHA Title I Manufactured Home Loans

 

FHA Title I is a separate manufactured-home financing program.  Title I may be used to finance:

  • A manufactured home

  • A manufactured-home lot

  • A manufactured home and lot together

 

Title I specifically allows manufactured homes to be placed on certain leased lots, including sites within manufactured-home communities or mobile-home parks, provided the lease meets HUD requirements.  These loans are different from standard FHA Title II mortgages and are offered by a more limited group of lenders.

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How Much Down Payment Is Required?

 

Conventional Financing

Standard conventional manufactured-home financing may allow financing up to approximately 95% of the property's value or purchase price, depending on the transaction and program.  That means qualifying buyers may be able to purchase with approximately 5% down.  Certain manufactured homes meeting enhanced construction standards may qualify for more favorable financing.    Depending on the program and borrower qualifications, financing may be available with as little as 3% down.

 

FHA Financing

Eligible FHA borrowers may generally purchase a qualifying manufactured home with as little as:

3.5% down.  The borrower must still meet FHA requirements for:

  • Credit

  • Income

  • Employment

  • Assets

  • Debt-to-income ratio

  • Occupancy

 

Permanent Foundation Requirements

 

One of the most important areas of manufactured-home financing is the foundation.  Manufactured homes financed as real estate generally must be permanently installed on an acceptable foundation.  For FHA transactions, a lender may require an inspection or certification from a licensed professional engineer or other qualified professional confirming that the foundation complies with applicable HUD requirements.  The foundation review is separate from the regular appraisal.

 

The engineer may review items such as:

  • Foundation construction

  • Anchoring

  • Tie-downs

  • Support systems

  • Crawl space

  • Drainage

  • Structural connections

  • Additions to the manufactured home

 

Foundation problems can delay or prevent financing, so it is beneficial to identify them early.

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HUD Certification Labels and Data Plate

 

Manufactured homes generally have HUD certification labels attached to the exterior of the home.  Each manufactured-home section typically has its own certification label.  For example, a double-wide will normally have two HUD labels.  The home should also have a HUD Data Plate located somewhere inside the property. Common locations include:

  • Electrical panel

  • Utility room

  • Bedroom closet

  • Kitchen cabinet

  • Interior cabinet door

 

The Data Plate contains important information about the home's manufacturer and construction standards.

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What If the HUD Tags Are Missing?

Missing HUD labels do not necessarily mean the home cannot be financed.  Depending on the loan program, the lender may be able to obtain verification of the manufactured home's HUD certification through an approved verification source.  This should be addressed early in the transaction rather than waiting until the appraisal or final underwriting.

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Real Property and Manufactured Home Title

 

Manufactured homes may originally be titled similarly to vehicles or other personal property.  For many conventional and FHA real-estate mortgage transactions, the manufactured-home title must be properly converted, surrendered, canceled, or otherwise handled according to state law so that the manufactured home is treated as part of the real estate securing the mortgage.  The lender and title company will generally verify that the lender can obtain an enforceable first lien against the appropriate real-estate or leasehold interest.

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In California, manufactured-home transactions can involve additional documentation through the state's manufactured-housing title and registration system, so title review should begin early.

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Single-Wide vs. Double-Wide Financing

 

Both conventional and FHA programs may allow financing on eligible single-wide and multi-wide manufactured homes.  However, single-wide properties can have additional restrictions.

 

For example, conventional agency rules may differ regarding:

  • Occupancy

  • Refinancing

  • Cash-out transactions

  • Leasehold properties

  • Automated underwriting requirements

 

Freddie Mac, for example, generally does not allow standard single-wide manufactured homes on leasehold estates, while eligible multi-wide manufactured homes may qualify subject to additional requirements and Freddie Mac approval.  Because of these differences, borrowers should tell their lender immediately whether the property is a single-wide or multi-wide home.

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Can a Manufactured Home Have Been Moved?

 

A manufactured home's relocation history can affect financing.  Lenders will want to know whether the home was originally delivered from the manufacturer or dealer directly to its current property or whether it was previously installed somewhere else and later moved.  Some FHA and conventional programs have restrictions involving previously relocated manufactured homes.  Because of this, one of the first questions a lender should ask is:

Has this manufactured home ever been located on another property?

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Additions and Modifications

 

Additions to manufactured homes can create additional underwriting requirements.

 

Examples include:

  • Additional bedrooms

  • Family rooms

  • Enclosed patios

  • Porches

  • Decks

  • Garages

  • Carports

  • Roof structures

 

The lender may need to determine whether the improvement:

  • Was properly permitted

  • Meets local building requirements

  • Affects the structural integrity of the manufactured home

  • Is independently supported where required

  • Needs to be reviewed by an engineer

 

An unpermitted or improperly attached addition does not automatically mean financing is impossible, but it may need to be corrected or further evaluated.

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Manufactured Home Appraisals

 

Manufactured homes require an appraisal just like traditional homes, but the appraiser must consider factors specific to manufactured housing.

 

These can include:

  • Single-wide or multi-wide construction

  • Age of the home

  • Condition

  • Square footage

  • Foundation

  • Land or leasehold interest

  • Location

  • Site improvements

  • Additions

  • Comparable manufactured-home sales

 

Comparable sales can sometimes be one of the biggest challenges.  In areas where there are relatively few manufactured-home sales, the appraiser may need to make additional adjustments or expand the search area to develop a supported opinion of value.

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Manufactured Homes in Condominiums and PUDs

 

Manufactured homes can sometimes be located within:

  • Planned Unit Developments

  • Condominium projects

  • Manufactured-home subdivisions

  • Resident-owned communities

 

In these situations, the lender may need to review both:  The manufactured home itself and the condominium, PUD, leasehold, or project structure.

 

A property may satisfy manufactured-home requirements but still have an issue with project eligibility, or vice versa.

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What If the Buyer Already Owns the Land?

 

Borrowers who already own their land may have additional financing options.  Depending on the loan program, the borrower's existing equity in the land may potentially contribute toward the required equity or down payment.

 

Financing may also be available for costs associated with placing a new manufactured home on the property, including:

  • Purchase of the manufactured home

  • Transportation

  • Site preparation

  • Foundation installation

  • Utility connections

  • Installation and setup

  • Other eligible site improvements

 

Certain conventional programs may also offer construction-to-permanent financing for manufactured homes.

 

Common Manufactured Home Financing Problems

 

Many manufactured-home loans run into problems because of the property rather than the borrower's credit or income.

 

Common issues include:

  • Home built before June 15, 1976

  • Ineligible land-lease terms

  • Manufactured home not properly classified or titled

  • Foundation problems

  • Missing HUD documentation

  • Previously relocated home

  • Unpermitted additions

  • Structural modifications

  • Inadequate comparable sales

  • Single-wide program restrictions

  • Property located in an ineligible project

  • Title problems involving the manufactured home or leasehold interest

 

Identifying these issues before ordering an appraisal can save both time and money.

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Questions to Ask Before Financing a Manufactured Home

 

Before applying for financing, buyers should be prepared to answer the following questions:

  1. What year was the home manufactured?

  2. Is it a single-wide, double-wide, or larger multi-section home?

  3. Does the borrower own the land or lease it?

  4. If the land is leased, what are the terms of the land lease?

  5. Is the lease or leasehold interest recorded when required?

  6. Is the manufactured home permanently installed?

  7. How is the home currently titled?

  8. Are the HUD certification labels available?

  9. Is the HUD Data Plate available?

  10. Has the home ever been moved from another property?

  11. Have any additions or structural modifications been made?

  12. Were those improvements properly permitted?

  13. Is the home located in a manufactured-home park, condominium, PUD, or subdivision?

  14. Will the home be a primary residence, second home, or investment property?

 

Getting answers to these questions early can make the financing process much smoother.

 

Conventional vs. FHA: Which Is Better?

 

The right loan depends on both the borrower and the property.

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Conventional Financing May Be a Good Fit When:

  • The borrower has stronger credit

  • The property meets Fannie Mae or Freddie Mac requirements

  • The borrower owns the land or has an eligible conventional leasehold

  • The borrower wants the possibility of eventually removing private mortgage insurance

 

FHA Financing May Be a Good Fit When:

  • The borrower wants a lower down-payment option

  • More flexible credit qualification is helpful

  • The manufactured home meets FHA requirements

  • The home is located on eligible leased land

  • The borrower has an acceptable FHA leasehold interest

 

The fact that a manufactured home is located on leased land does not automatically make it ineligible for FHA financing.  The important question is whether the home, leasehold interest, foundation, title structure, borrower, and land lease satisfy the applicable FHA requirements.

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The Bottom Line

 

Manufactured homes can qualify for conventional and FHA mortgage financing, but there are additional property and title requirements that do not typically apply to traditional site-built homes.

 

The most important factors include:

  • When the home was manufactured

  • Whether it is single-wide or multi-wide

  • Whether the land is owned or leased

  • Whether an existing leasehold meets loan-program requirements

  • Whether the home is properly installed on an acceptable foundation

  • Whether the home is properly titled

  • Whether HUD certification information can be verified

  • Whether the home has been previously moved or modified

 

For borrowers purchasing a manufactured home on leased land, FHA may provide financing options that are not available under standard conventional guidelines.  The best approach is to have the manufactured home, title, and any land-lease documents reviewed by a knowledgeable mortgage professional before making an offer or paying for an appraisal.

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