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.
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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.
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.
To qualify for mortgage financing on a manufactured home, most lenders will require that this home be:
Attorney Rajeh Saadeh says it’s easy to determine if manufactured housing is real property or not.
There are a few steps involved in converting a manufactured home to real property so you can obtain mortgage financing.
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:
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.”
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.”
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.