Can I get a mortgage on a manufactured home?
Manufactured homes can provide an affordable housing option, but getting financing can be tricky.
You may need to convert the manufactured home from personal property to ‘real property’ to get a mortgage. And you may need to work through issues like titling and how to pay your property taxes.
If you’re depending on a mortgage loan to purchase one of these homes, do your research first and make sure you understand what’s involved. Requirements can vary based on the type, age, and location of the home.
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Mobile vs. modular vs. manufactured homes
It’s easy to get confused between the terms ‘manufactured home,’ ‘modular home,’ and ‘mobile home.’ But it’s important to know the difference if you want to get a mortgage.
Manufactured housing has multiple components constructed off-site in a factory; later, these components are assembled on a lot of your choosing using a rectangular ‘chassis’ (metal frame) instead of a permanent foundation.
The home is usually installed permanently at that location, and the land the manufactured home sits on can either be:
- Owned by the buyer, making it “real property” and therefore eligible for mortgage financing
- Placed on a lot that is leased, making the home “personal property,” which is not eligible for mortgage financing
Modular homes are similar to manufactured homes in that they’re partially constructed in factories.
But, unlike manufactured housing, modular homes are put together on-site, attached to a permanent foundation, and automatically titled as ‘real property.’ This means they’re typically eligible for home loans.
By comparison, “The term ‘mobile home’ refers to a home that is also factory-built but never permanently installed at a location. These homes are considered personal property,” says Christopher Guerin, vice president of origination for eLEND.
“A home on leased land is not classified as real estate or real property, as the buyer would not own both the land and the home,” explains Guerin.
“This is no different than taking out a loan on a car, in which case the lien is tied to the vehicle but not the land underneath it.”
Both mobile homes and manufactured homes are typically sold by a distributor or factory, directly to the buyer/homeowner, says attorney and Realtor Bruce Ailion.
“The buyer may have a piece of land in advance on which to attach a manufactured home. The seller normally helps find the contractor who can place a slab the home can be affixed to. If the buyer does not have a piece of land, the seller can likely suggest where to find one,” Ailion explains.
Requirements to finance a manufactured home
To qualify for mortgage financing on a manufactured home, most lenders will require that this home be:
- On land that you own
- Affixed to a permanent foundation that conforms to HUD Code: building standards set by the Department of Housing and Urban Development
- HUD-compliant: It should have a HUD tag (metal plate certification label found outside the home) and data plate (paper label found inside the home)
- Titled as real property (real estate)
- Built after June 15, 1976
- Without axles, wheels, or a towing hitch
- A minimum size (for example, 400 square feet)
Be aware that a manufactured home financed with a mortgage cannot be moved from the land it sits on without the permission of the lender, according to Guerin.
Is my home ‘real property’?
Attorney Rajeh Saadeh says it’s easy to determine if manufactured housing is real property or not.
“The property should be adequately and clearly defined in the purchase contract. Your attorney should also ensure this so that you know exactly what the seller is selling and what you are buying,” he says.
“If real property is involved, it typically includes a reference to a lot and block number per tax records or a surveyor’s description.”
Also, you would pay property taxes on the structure and the land if you owned real property.
“If your manufactured or mobile home were on a rented site, you would pay personal property taxes instead,” notes Ailion.
Still not sure if a home is real property? You can enlist an appraiser to find out.
Or, contact your local tax authority (typically the county assessor’s office) and ask if the property is being taxed as real property or as vacant land.
“If the home is being taxed as vacant land, but the home has been installed on the land for over 12 months, you may still be able to get a mortgage loan,” adds Guerin.
“The mortgage lender will perform a closing and request that the settlement agent update the tax records to reflect the home as real property.
“If the home is on leased land or located on owner-financed property that is secured with an unrecorded land contract,” he continues, “it would not be eligible for financing as real property.”
How to convert a manufactured home to real property
There are a few steps involved in converting a manufactured home to real property so you can obtain mortgage financing.
“First, you would need to obtain the manufacturer’s certificate of origin or the previous certificate of title if you are not the original owner of the home,” Guerin says.
Next, in most states, you would go to the Department of Motor Vehicles (DMV) and have the home “de-titled.” This step essentially changes the legal status of the home from a vehicle to a structure. This would allow you to re-record the land and home on a new title listing it as real property.
Once the home has been attached to its foundation, you’ll also need to obtain an ‘Affidavit of Affixture.’ This document certifies the home is permanently affixed to the land. If one already exists, a copy of the affidavit should be recorded at the county assessor’s or county recorder’s office.
“I would suggest contacting a settlement or title company to guide you through this process,” advises Guerin.
Contact a settlement or title company to guide you through the process of converting a manufactured home to real property.
Raymond Brousseau with River City Mortgage says a few other things may be involved, too.
“Typically, a manufactured home requires a foundation certification to be performed by a licensed structural engineer who needs to inspect that the home is properly secured on a permanent foundation,” he says.
The engineer will check the footings used to lift the home off the ground and confirm they are happily tied down to the ground.
The report generated from the engineer’s findings typically averages around $375, says Guerin.
“Your mortgage lender may also require that a second inspection report be completed through the Institute of Building Technology and Safety,” notes Guerin.
If so, he says, this government organization will certify your home’s:
- HUD label number
- Serial number or VIN (vehicle identification number)
- When the home was built
- Name of the manufacturer and plant location
- Where the home was originally delivered
This second report may set you back around $100.
Be forewarned: Affixing a manufactured home to a foundation may be expensive.
“It’s difficult to determine a specific cost to affix a home to a foundation. It will depend on the size of the home and the scope of work needed,” says Guerin.
“Note that if the manufactured home was moved from its original location to a new foundation in another location, that can limit your financing options.”
Types of loans to finance a manufactured home
Fortunately, plenty of financing options are available to purchase or refinance a manufactured home that’s been converted to real property, if you qualify. These include:
“The majority of these loan program offerings have the same income, credit, and down payment qualifications as required for traditional stick-built homes,” says Guerin.
Ailion says the application process is the same as borrowing for a traditional home loan, as well.
“Alternatively, the manufactured home seller may offer owner financing for borrowers who can’t get financing in other ways,” says Ailion.
Lastly, expect possible complications in the appraisal process.
“Appraisers are required to find comparable homes that were listed on the multiple listing service. Newer manufactured homes that are built and installed on land or placed on leased land may not be used when valuing a property,” cautions Guerin.
“If you’re using a real estate agent, it’s a good idea to have them check for comparable property sales when making an offer.”
Check your mortgage eligibility
Mortgage interest rates are resting at historic lows.
If you and your new home are mortgage-eligible, financing a manufactured home at today’s rates could be incredibly affordable.
Check your eligibility with a few different lenders to see what type of financing you may qualify for.