Loan Modification

FHA Financing and Mobile Homes

By Gina Pogol

Mobile or manufactured homes predominate in many communities (don’t call these upgraded developments trailer parks!). However, financing them can be tough, especially in today’s harsher underwriting climate. Manufactured home builders say that the difficulty folks encounter when trying to finance these affordable homes has curtailed the industry severely. The average manufactured home interest rate is nearly 4% higher than the average rate for traditional homes, according to financier Warren Buffet. Fannie Mae and Freddie Mac do finance manufactured homes, but there are pricing add-ons, and mortgage insurers won’t touch these properties, so you’d have to come up with at least 20% down. So FHA may be your best bet for mobile home financing.

FHA Still Finances Manufactured Housing

Manufactured home loans for consumers come in two guises: real property mortgages and personal property loans, and FHA insures both.

FHA Real Property Loans for Mobile Homes

Real property mortgages are available to borrowers who wish to finance their manufactured home and land together.  Real property loans carry much lower interest rates than personal property loans. To get an FHA real property loan (called Title II financing) your home must:

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• have a floor area of not less than 400 square feet
• be constructed after June 15, 1976 and meet safety standards
• be classified and subject to taxation as real estate
• the mortgage must cover both the home and land
• the mortgage term cannot exceed 30 years
• the home must be a permanent foundation built to FHA criteria
• the home cannot be in a flood zone

FHA Personal Property Loans for Mobile Homes

Title I manufactured home loans are not Federal Government loans or grants. The interest rate, which is negotiated between the borrower and the lender (you have to do the shopping yourself), is required to be fixed for the entire term of the loan, which is generally 20 years.

A Title I loan may be used for the purchase or refinancing of a manufactured home, a developed lot on which to place a manufactured home, or a manufactured home and lot in combination. The home must be used as the principal residence of the borrower.

There are maximum loan amounts for Title 1 loans.

• Manufactured home only - $69,678
• Manufactured home lot - $23,226
• Manufactured home & lot - $92,904

There are also maximum loan terms.

• 20 years for a loan on a manufactured home or on a single-section manufactured home and lot.
• 15 years for a manufactured home lot loan.
• 25 years for a loan on a multi-section manufactured home and lot.

Personal property loans are used when the borrower is financing the home only or the home is not on a permanent foundation. In that case, the land is typically leased (in mobile home communities, for instance) or the home is sited on land like a family farm that is already owned by the borrower.

Full post as published by FHA Mortgage Guide on July 23, 2010 (boomark / email).