According to the National Consumer Law Center, more than 17 million Americans live in manufactured homes. While these homes, also known as mobile homes, come with wheels and trailer hitches so they can be moved, the Fannie Mae Foundation says that only about one percent of these homes are moved once they have been sited on a foundation.
The mobility of manufactured homes influences how you can pay for one. Mobile homes that are used to travel from one location to another must be financed as personal property like a van or an RV. If you own a manufactured home that is permanently fixed to a foundation, you may be able to finance it or refinance it with a conventional mortgage loan or an FHA home loan.
There are two main reasons to convert your manufactured home financing into a mortgage rather than a personal loan:
- You can take advantage of the lowest mortgage rates. The best mortgage rates are typically half of the interest rates charged for personal property loans.
- You can stop paying personal property taxes, vehicle taxes and fees on the home and switch to paying property taxes which are deductible on your federal income taxes.
Manufactured home refinancing options
If you're interested in refinancing, you'll first need to take some steps to make sure your home is eligible for a mortgage loan. The most important requirement for refinancing a manufactured home is that your home must be permanently attached to a foundation with utilities in place. The Department of Housing and Urban Development (HUD) has specific, detailed requirements for establishing a permanent foundation, but generally this means removing the wheels and placing concrete blocks and underpinning under the manufactured home.
If you own the lot where your manufactured home is located, you can generally refinance into a mortgage loan even if you initially financed your home with a personal loan. If your manufactured home sits on leased land, your ability to take out a mortgage loan depends on your state's laws and the length of your loan. Sixteen states allow you to convert your manufactured home to real property even if it is on leased land, but each state has a different requirement for the lease.
FHA loans - FHA-insured financing is available for manufactured homes, the home lot, or a combination of the two as long as the amount of the loan conforms to FHA lending limits in your area. You can use the loan for built-in appliances and equipment for the home, but not for furniture. A down payment or home equity of 3.5 percent is required and the loan terms range from 15 to 25 years. Your manufactured home must be your primary residence.
Conventional loans - Conventional loans for manufactured homes are available for both primary residences and second homes. You can get a 15-, 20-, or 30-year fixed-rate home loan; but you'll usually need 20 percent in equity and you may have a risk surcharge for this property type that could result in a higher interest rate.
As with any other refinance, you will be required to pay or finance your closing costs. You should consult with a reliable lender to discuss your refinancing options for your manufactured home.