There are many reasons why someone might want to refinance a manufactured home, formerly known as a mobile home. For one, if you have more than 20% equity in your home, you may want to get rid of a pesky PMI requirement. For another, even though interest rates are rising, they’re still relatively low from a historical perspective. Depending on when you originally financed your manufactured home, you may want to take advantage of these low rates while they last.Whatever your reason, refinancing a manufactured home is a bit different than refinancing a traditional site-built home. Read on to get a sense of the options available and how the process works.
Refinancing a mobile home
Unfortunately, you’ll be hard-pressed to find a lender that’s willing to refinance a true mobile home. In the world of manufactured housing, the term “mobile home” is outdated. It refers to any manufactured home that was built before June 15, 1976.
On that date, the Department of Housing and Urban Development (HUD) released the National Mobile Home Construction and Safety Standards Act, a code that regulated the construction of manufactured housing. Mobile homes built before that date were entirely unregulated.
Today, in order to receive financing on a manufactured home, the vast majority of lenders require that the home be compliant with the HUD code. For its part, HUD will not issue stickers signifying compliance to any mobile home, even if modifications have been made to meet HUD standards.
Fannie Mae requirements for manufactured homes
Regardless of the type of loan you end up getting, there’s a high probability that it will eventually be sold to Fannie Mae, a government-sponsored enterprise that buys loans from mortgage lenders and sells them as mortgage-backed securities on the open market. In order for their loans to be eligible for resale in this manner, manufactured homes must meet the following criteria:
- The home must be built after June 15, 1976 and must be in compliance with all HUD regulations
- The home must display an HUD data plate and HUD certification label
- The home must never have been moved from its original location
- The home must be a one-unit dwelling and classified as real property
- The dwelling must assume the characteristics of a site-built home, meaning that the towing hitch, wheels and axles must be removed
- The borrower must own the land on which the manufactured home is placed, unless it is a condo or co-op
- Multi-width manufactured homes may be located on either an individual lot or project development
- Single-width manufactured homes must be located in a Fannie Mae–approved condo, co-op, or Planned Unit Development lot
- The home must be at least 12-feet wide and have a minimum of 600 square feet
- Site preparation for delivery must be completed
- The home must be attached to a permanent foundation
- The home must be permanently connected to a septic tank or sewage system and to other utilities
- If the home is not situated on a publically-maintained street, then it must be situated on either a community-maintained or privately-maintained street
- Homes that need extensive repairs or have incomplete renovations or additions are not eligible
- Structural modifications must be inspected in order to be deemed eligible
Refinancing a manufactured home
When you go to refinance your manufactured home, there are a few different loan types you can choose from. Below is a list of the requirements for each. Read them over to get a sense of which type will ultimately work best for you.
Conventional loans generally fall in line with Fannie Mae guidelines. In addition to the requirements listed above, Fannie Mae has the following guidelines specific to refinancing:
- You’ll need at least 5% equity in the home, which means a 95% loan-to-value ratio (LTV)
- Private mortgage insurance (PMI) is required if you have less than 20% equity in the property
- The refi must meet the standard conventional loan limit of $484,350, or $726,525 in high-cost areas
- Your credit score may need to be at least 620, though that requirement can vary by lender
- Loan terms are available for up to 30 years
The Department of Veterans Affairs guarantees two separate refinance loans for eligible veterans, active servicemembers and surviving spouses: an Interest Rate Reduction Refinance Loan, and a VA cash-out option. In general, a cash-out refinance is for homeowners who want to borrow a lump sum of cash from their home equity for a big expense such as home repairs or college tuition.
Both VA refinance loans must be made by approved lenders.
Interest Rate Reduction Refinance Loan
- No credit underwriting package or appraisal is required
- The closing costs can be rolled into the new loan
- You may not receive cash back from this type of refinance
- The VA does not set limits on how much money you can borrow
- There is a VA funding fee of 0.5%, which increases to 1% if the manufactured home is not affixed to the land
VA Cash-Out Refinance
- Can be used to refinance up to 95% of the property’s value
- No PMI is required
FHA loan refinances are popular because these loans are insured by the Federal Housing Administration (FHA). Since the lender has reassurance that it will be made whole if you default on the loan, it’s willing to take a bigger risk. As a result, FHA loans often have less strict qualifying requirements than other loan types.
FHA Cash-Out Refinance
- Your credit score must be 580 or higher
- Your debt-to-income ratio (DTI) cannot be more than 43%. (More about DTIs below.)
- The maximum loan-to-value (LTV) ratio, the value of the loan divided by the property value, of allowed is 85%.
- You must be current on mortgage payments for the last 12 months
FHA Streamline and FHA Simple Refinance
These two loan programs conform to the same criteria as a traditional FHA mortgage. This means that all the usual borrower requirements apply:
- Your DTI cannot be more than 43%
- If you have a credit score of 580 or higher, you can put as little as 3.5% down
- If you have a credit score between 500 and 579, you must put at least 10% down
- The home must be your primary residence
- You must carry FHA mortgage insurance (MIP)
- You must be able to provide proof of employment
- The home must be in its original location (it cannot have been moved)
Required safety certification
As mentioned earlier, every manufactured home needs to be in compliance with HUD code. In order to comply, the home must pass a required safety inspection. The HUD Installation Certification and Verification Report requires inspectors to use a checklist covering the following areas:
- Site location with respect to home design and construction
- Consideration for site-specific conditions
- Site preparation and grading for drainage
- Foundation construction
- Optional features (skirting, etc)
- Completion of ductwork, plumbing and fuel supply systems
- Completion of electrical systems
- Exterior and interior close-up
- Completion of operational checks and adjustments
What are the HUD tag and data plate?
In order to be considered compliant, each manufactured home has to have two pieces of documentation affixed to it: an HUD tag and a data plate.
The HUD tag, sometimes called the certification label, is a metal plate that is secured to the outside of the home. It’s approximately two inches by four inches and is etched with two separate numbers. There’s a three-digit number that identifies the primary inspection agency and a sequential six-digit number furnished by the label supplier.
“The dealer, the manufacturer, the title report all have this number so the home can be easily identified,” said Alberto Pina, co-founder of Braustin Mobile Homes in San Antonio, Texas.
The data plate is a paper label that can be found inside the home, usually inside a kitchen cabinet, the electrical panel or a bedroom closet. It shows a map of the United States and lists the wind zone, snow load and roof load of the home. It also includes the name and address of the manufacturing plant, and the serial number and model designation of the unit.
Be careful about additions to the home
If you’re looking to refinance, unfortunately, you can’t have made any permanent additions to the home that leans on or puts weight on the home. Those could stress the structure of the home. Any such addition that was added after the home received its safety certification can cause the home to fall out of compliance with the HUD code, rendering it ineligible for financing.
One possible exception, however, are decks and patios, which are regulated by states. If you’ve already added one, check your state’s requirements to see if you’re in compliance.
Property ownership requirements
“If you’re going with an FHA loan, the land has to be yours,” said Pina.
The same can be said for many conventional loans, which hold to many of the same, if not stricter, requirements. VA loans, however, are a different story.
With a VA loan, you have the option to finance just the manufactured home and not the land. With other loan types, you have to finance the home and the land it sits on. Additionally, VA says the only requirements for the property are that it be “safe, sanitary, and sound.”
Other lender requirements
No matter what type of loan you’re after, when you go to refinance your manufactured home, you’re going to be subject to some financial benchmarks. For the most part, these are similar to the ones you had to meet when you first applied for a mortgage:
- Debt-to-income ratio: Your debt-to-income ratio (DTI) is the way that lenders measure your ability to pay back a loan. It’s determined by the sum of all your monthly debts divided by your gross monthly income. In general, 45% or less is considered an acceptable DTI for a refinance on all loans being sold to Fannie Mae.
- Credit score: Generally, the acceptable credit score for a refinance will vary by lender. FHA loans tend to require a minimum credit score of 580, while conventional loans tend to follow the Fannie Mae guidelines and require a credit score of 620. VA loans, on the other hand, have no official minimum and leave that guideline up to the individual lender.
- Proof of income: You’ll likely have to provide proof of income to prove that you have the ability to pay back the loan. Typically, this comes in the form of two years of W-2’s, or tax returns if you’re self-employed.
- Loan-to-value ratio: In a refinance, your loan-to-value ratio (LTV) is the loan amount you’re asking for (usually the amount you have left to pay off on your mortgage) compared to the appraised value of your home.
- FHA refinances require an LTV of no more than 85%.
- Fannie Mae’s guidelines are 90%-95% for a limited cash-out refinance or 60%-65% for a standard cash-out refinance
- The VA does not set limits on how much you can borrow.
Whether your goal is to save money by getting a better interest rate or to change the term of your mortgage, there are lots of options to choose from when you’re ready to refinance your loan on your manufactured home. Your best bet is to shop around and talk to a variety of lenders to see who can offer the loan that is the best fit for you.