Manufactured home loans can be a great option for many home buyers. Several options exist for manufactured home financing.
Affordable Housing Solutions
Since 1934, the FHA or Federal Housing Administration has existed to aide Americans of lower to middle income to secure a home through helping them secure a mortgage loan. Using the stability of government backing, this has facilitated the use of loans with lower interest rates than would be available on the open market while still using the efficiency of private enterprises. Another benefit to the FHA’s existence is the use of federal funds to lend on manufactured homes. Since many private lenders have traditionally been hesitant to issue loans for manufactured homes, the FHA has become a dominant lender in this sphere. Some of the loan types available in manufactured homes include:
- Established manufactured homes already sitting on a permanent lot
- New manufactured homes on lots already owned
- Purchasing both a new manufactured home and the land it sits upon
Since many individuals who are intent on purchasing a manufactured home are of an income bracket that would not befit purchasing a traditional home, this is an excellent compromise versus continuing to rent or attempting to over-extend their means. An FHA loan can dramatically change the cash flow opportunities of a lower income individual who might otherwise be forced to pay exorbitantly priced rent for lower quality housing.
To Lend Under FHA Regulations
There is a set of minimal standards that are necessary for lending under the FHA. While a lender can always enact more stringent guidelines than the FHA requires, this does not mean that a lender can disqualify a type of housing out of hand. Manufactured homes must be given the same level of scrutiny based on their intrinsic value as traditional homes, and must be considered equally for lending requirements under FHA rules.
Basic Manufactured Housing Requirements
The FHA has set forth guidelines for borrowing against a manufactured home. To receive a loan under FHA guidelines, your manufactured home must possess at least 400 livable square feet of space, which invalidates single wide manufactured homes from being eligible for this type of loan. Further, you may not finance a manufactured home for investment purposes because in order to receive a loan of this type, you must use your manufactured home as your primary residence with full owner occupancy. The use of a manufactured home as a rental property of any kind is prohibited.
Other Physical and Legal Requirements
There are several physical requirements for receiving a manufactured home loan. Your manufactured home must qualify as real property, and this requires a permanent foundation and full connection to utilities. As well, you must permanently strap your manufactured home to concrete pylons or anchors or bolt it to a concrete foundation. There is no requirement for removing the home’s wheels, however. Prior to a loan being issued, the home must pass the inspection of a professional structural engineer. Finally, the foundation of the home must be higher than the 100 year flood mark to ensure that the property is unlikely to be affected by flood waters. In some states, the requirements for your home may be even more stringent.
Differences Between Manufactured and Traditional Homes
Manufactured homes typically don’t appreciate in value as quickly as traditional homes. Only a manufactured home that possesses an identification number that signifies conformity to federal safety standards may have a loan backed by the FHA attached to it. As well, only a manufactured home that was built after June 15th, 1976 may be considered for an FHA loan.
Guaranteed Vs. Non-guaranteed Loans
A guaranteed loan is one where a guarantor agrees to make the required payments if the original borrower defaults. Many loans are not guaranteed, which imposes a higher interest rate and potentially more points if you are borrowing for a manufactured home. The FHA is a major guarantor of loans, so its standards are generally the industry standard.