Helpful Tips for Modular and Manufactured Home Loans and Refinancing

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What are the challenges finding a mortgage refinance for a manufacture and modular home loan? If you want to live in a home of your own, one of the most affordable ways to do it is to buy a modular or manufactured home. These homes are less expensive than a site-built home, and some of them have the advantage of being able to be moved from site to site at a reasonable cost. However, you will usually need to pay a higher interest rate on these properties because they are considered to be a higher risk loan for the mortgage lender in reference to modular or mobile home refinancing. When speaking with most local banks, you will find that refinancing manufactured homes is not as easy as traditional single-family homes that are fixed to a permanent foundation.

  • Learn How to to Finance a Modular Home with a Great Rate
  • Shop Affordable Mortgage Loans for Manufactured Homes 

manufactured home refinance

Today’s Mortgage Rates on Manufactured, Mobile and Modular Home Loans Makes Refinancing Very Attractive

Fortunately, you can make a big difference in your monthly payments by doing a mortgage refinance on a modular or manufactured home. Many owners of these types of homes will often do personal property loans or chattel loans when they first buy them. This will have a much higher interest rate. Some manufactured home owners can often refinance their chattel loan into a regular mortgage, which will reduce their monthly costs. In some instances, the rates for mobile home refinancing can be slighter higher than the rates offered on manufactured or modular housing. Did you know that millions of homeowners have refinanced a manufacture home loan over the last decade?

How to Qualify for Modular and Manufactured Home Loans in 2019

For your modular or manufactured home to qualify for a mortgage loan, it is important to qualify with the following:

  • The home has to be situated on a permanent foundation that meets all standards of HUD.
  • The home has to have a title as real estate and not as your personal property.
  • The owner of the home has to own the land that the home sits on.

How Big a Difference in Interest Rates?

In 2012, almost 70% of all manufactured and mobile home purchases were thought to be higher priced loans. Many of these were actually chattel loans, according to the CFPB. Interest rates on these types of personal loans are from 7-12%, so this is a very expensive way to own a home. Most of the loans are for 10 to 20 years. On the other hand, most 30-year mortgage loans as of 2016 can be had for less than 4% interest. Most chattel loans have interest rates that are entirely risk based and are based only on the credit of the borrower. That is why they are much higher an interest rate. Chattel loans are still the ones that are usually used for many of these homes because most mobile homes are not set on a permanent foundation. To refinance a manufactured home you need to meet the requirements outlined by lenders and banks. In most cases mobile home refinancing is available at a competitive interest rate. In 2018, mobile home refinancing is typically more difficult to find, as most lenders and brokers are sticking to manufactured and modular home refinance programs.

How to Convert to Another Title

Some states are making it easier today to convert personal property titles into real estate titles. This will make it easier to get a mobile home refinance done. Not every state has this type of legislation, so you may need to check the regulations in your area. Verify rates and fees as mobile home mortgage rates may be higher than conventional loans for real estate property.

How to Get a Real Estate Title

Many real estate attorneys or title companies can help you to convert a title when you want to refinance. As the owner of a modular or manufactured home, you will need to have the following items:

  • Title to the home or the copy of the certificate of origin for the home
  • Deed to land where the home with a personal foundation is situated

When you as the owner of the home has the real estate title, you will next need to find lenders that offer mortgages on a modular home or a manufactured home. Then, getting a loan is pretty much the same as getting a mortgage on a typical residential property.

What If You Are Borrowing on Leased Land?

Under limited circumstances, the owner of a manufactured home that is leasing a lot may be able to get a mortgage, even if they do not actually own the land. One option for refinancing your mortgage is through the FHA; this is called the Title I program. It is made for property owners who have mobile homes on permanent foundations but exist inside of a manufactured housing community. If you want a Title I mortgage, you need to meet the following qualifications:

  • The mobile home needs to be your primary residence.
  • The home also has to be on a rental site in a home park that completely conforms to all FHA standards for refinancing manufactured homes.
  • The lease agreement has to abide by all FHA credit requirements.

You should know that it is difficult to find a mobile home park that meets these tough FHA refinance guidelines. The Title I program is a lot of paperwork hassle, so not many landlords participate.

What Does Switching Title Cost?

When you have your mobile home titled as a personal property, you will pay personal property taxes. But when you have it titled as real estate, you then need to pay real estate taxes. For many states, property taxes will be more costly. You should do the calculations to determine how much you are going to be able to save by having a lower interest rate, compared with the taxes that they might pay and what your closing costs will be.

There are some options to do a refinance on a manufactured home or modular home if you currently have a chattel home loan. You may need to do some shopping around to find a lender who will work with you. Also, we recommend that you get your credit score up as high as you can; a manufactured or modular home is a higher risk investment for the mortgage lender. If you can show that you have a solid credit score of 680 or so, you may be able to find more potential borrowers.

Highlights for Refinancing Modular and Manufactured Homes

Many people who own a mobile home or modular home find that it one of the most affordable ways to own your own home. One thing that can make a big difference on your payment each month is whether you choose to refinance the mobile or modular home with a personal loan or a mortgage loan.

While a mobile home refinance may be difficult, refinancing a modular or manufactured house is very obtainable in 2018. The interest rates on manufactured homes is competitive and affordable when considering pricing for the last 15 years.

Many homeowners of these types of properties are unable to get a refinance-mortgage loan, so they get a personal property or chattel loan. They carry interest rates that are much higher than mortgages. If you have a chattel loan, being able to refinance it into a mortgage loan can make a big difference in your payments every month.

How to Refinance Your Mobile or Manufactured Home

To qualify for a manufactured or mobile home refinance on your property, it must meet these standards:

  • The home has to be set on a permanent foundation that meets HUD standards (the Department of Housing and Urban Development).
  • The home must be titled as real estate and not as personal property.
  • You must own the land that your home is one.

Interest Rates on Manufactured Home Loans

In 2012, almost 70% of manufactured housing loans were higher priced mortgages, and a lot of them were chattel loans. These loans in 2012 had interest rates of 7-13%, and were from 15-20 years in length.

As of 2018, a conventional mortgage loan for a borrower with 700 credit is in the 4% range.

The interest rates on chattel loans are always risk based and they will always carry higher interest for those with poor or no credit. Chattel loans are the only option for owners of mobile and manufactured homes that are not on permanent foundations.

We suggest you shop and review mortgage lenders that offer qualified manufactured home loan rates so that you can make a sound decision on whether refinancing is right for you in 2018.

How to Convert to New Title

Some states are making it easier to convert your personal property title to a real estate title. There have been changes to the rules in this area in LA, MD, MO, NE, ND, TN, and VA. The new legislation in these states had made it clearer about what home is actually real estate and what is not. This is making it easier to get titles converted.

A good real estate attorney or title company and attorney should be able to assist you with getting your title converted. That is the first step to getting your loan refinanced into a lower rate.

To accomplish this, you must provide:

  • Certificate of title to the house or a copy of the certificate of origin of the home
  • Deed to the land where the home with a permanent foundation is situated

When you have the real estate title in your hand, you then will need to find a mortgage lender that will give you a loan on a manufactured or mobile home. Once you do, the process to do the loan is just like with a regular house.

Lease Land

Under limited circumstances, manufactured home owners can get a mortgage on a house with a leased lot. The FHA now offers the Title I program. It is made for owners who have homes on a permanent foundation but the home is located in a manufactured housing community.

To qualify under this program:

  • The mobile home has to be your primary residence
  • The home must be on a rental property site that means all FHA standards
  • The lease agreement must be to standards set by the FHA

You should know that it is difficult to find mobile home parks that meet FHA mortgage standards. There are few landlords that will deal with the Title I program. And few lenders deal in Title 1 mortgages, but more are becoming involved year by year.

How Much Does it Cost to Switch Title?

If the mobile or manufactured home is titled as your personal property, you have to pay personal property taxes. When it is titled as real estate property, you will pay real estate taxes. In most states, it is more expensive to pay personal property taxes.

You will need to do the math in your state to see how much you would save with a lower interest rate with a mortgage loan. You then need to compare how much more of a tax bill you might have by paying real estate taxes, or it could be less. Also, you need to figure in closing costs, which can be 3-4% of the loan amount.

Also, if you must have a permanent foundation to refinance your chattel loan, this could cost you as much as $15,000.

Fannie Mae Offering 30-Year Manufactured Loans

According to the National Mortgage News, Fannie Mae announced a new product offering “30-year mortgage financing for manufactured homes in New Hampshire.” If this test goes well, we can expect Fannie to extend the program to the other 49 states as well. Fannie Mae has a long history of backing modular and manufactured home loans with affordable interest rates and terms.

modular loan

You may be surprised at how competitive manufactured home loans are today, so talk to a lender and see if this is is wise financial choice for you.

Key Factors When Shopping for Manufactured Home Loans

Financing is always challenging for most home buyers, and that is even more true for mobile homes and manufactured homes. These home mortgages are less common than regular home loans, but you can still get them from several sources. Plus, government-backed loan programs for manufactured and mobile homes makes it easier for many to qualify and to keep costs down.

Some people with limited budgets often opt for buying a mobile home or manufactured home because they are more affordable than site built homes. They are especially common options for people with lower incomes in rural areas.

More About Mobile, Manufactured and Modular Homes

A manufactured home is a factory-built home that was constructed after June 15, 1976. These homes are regulated by the National Manufactured Housing Construction and Safety Standards Act of 1974. They are required to adhere to safety standards that are set by HUD. These rules are usually referred to as the HUD Code. A manufactured home is built on a metal chassis that is permanent and can be moved after it has been installed. But note that moving the home after it has been installed can cause problems with your financing.

A modular home is a factory-built home that is assembled on site and is required to meet the same local building codes as homes built on site. They are usually installed to a permanent concrete foundation. Like a site-built home, modular homes usually hold their value and appreciate more than a mobile home or manufactured home. It is usually easier to get a loan for a modular home.

Where to Get Loans for Manufactured and Modular Houses

There are several options to get loans for manufactured and mobile homes. As with any home loan, it pays to shop around. You should compare features, interest rates, closing costs and fees of every loan you look at. Especially with a mobile home loan, the type of loan you get is important.

The first place to get a loan for a manufactured home is the retailer or builder that built the home. In some situations, your builder’s relationships could be the best option to get funding when buying one of these homes. But you should still ask your build for several other lenders that could offer you a loan.

Another type is a specialized lender that offers loans for mobile and manufactured homes. Specialized lenders are more knowledgeable with the many aspects of a manufactured home purchase. They may be more willing to take applications for these loans. You will probably need to work with a lender that is concentrated on the manufactured home market exclusively in these situations:

  • You do not own the land.
  • You are not permanently attaching the home to a foundation.
  • You are buying a home that is not new.
  • You want to do a refinance of current manufactured home debt.

Another option is a regular mortgage lender, if you are buying a home and the land on which it resides, and the home is on a permanent foundation. Many local credit unions, banks and mortgage brokers can help you with these loans.

For best results, get references from people in the community that you trust. If you are not sure, start with your real estate agent and employees and residents at mobile home parks.

Why You Should Consider a Chattel Loan for a Manufactured Home

Another type of loan that is used for manufactured and mobile homes is a chattel loan. This is when the home is going into a mobile home park or manufactured home subdivision. This is a home only loan and they are actually personal property loans and not a real estate loan.

When you shop different lenders, determine if you are getting quotes for a chattel loan or a real estate loan. Rates on chattel loans will be higher than real estate loans. But loan amounts and processing fees on chattel loans are 50% lower than mortgage loans. That said, the APR on a chattel loan can be 1.5% higher.

The good things about chattel loans is you do not have to own the real estate and keep the loan smaller. Processing costs are lower than closing costs on a regular real estate loan. Also, the closing process is often faster and less complex than on a real estate loan.

The bad things about a chattel loan is the rate is higher. Repayment terms also are shorter, usually 15 or 20 years. You will have higher monthly payments but paying back the debt faster lowers your interests costs.

As you can see, there are many options to fund the purchase of your manufactured home. Work with a real estate agent and lender to determine what your best options are for the particular type of home you are purchasing.

The Bottom Line with Manufactured and Modular Home Financing

Refinancing a mobile home or manufactured home into a real estate mortgage is a good move for most people. You will usually be able to save considerably on both your monthly payment and your long term interest costs.

However, we recommend that you run the numbers carefully to see if you will save substantially or not. Also, to qualify for good mortgage rates, you will need to have credit of at least 680, and the higher the better.

Hopefully, you will be able to get into a real estate loan in 2019 and save big on your payments.

References: Fannie Mae Tests Manufactured Home Loans with 30-Year Terms https://www.nationalmortgagenews.com/news/fannie-taps-nh-law-to-test-30-year-loans-for-manufactured-housing

 

About Tom Murphy

Tom Murphy grew up in La Jolla, California surfing and carving his niche in the local real estate market. Mr Murphy has a stellar record as a loan officer with over a decade of experience helping people secure the right home loan.