How to Refinance a Manufactured, Modular or Mobile Home

According to manufacturedhousing.org, the manufactured housing industry produced almost 95,000 new homes in 2019. Approximately 10% are new single-family starter residences. About 63% of new manufactured homes are placed on private property, and 37% are in manufactured home communities. The average sales price of a new manufactured home without land is $78,500.

There were 4.06 million mobile homes in the United States, according to statista.com, and that is set to fall to 1.72 million by 2023. Manufactured housing industry trends and statistics show that 22 million people in the U.S. live in a manufactured or mobile home. If you are one of the 22 million who want to save some money and think of mobile home refinancing, read on.

Can I Refinance My Mobile Home Loan?

Yes, but there are some stringent requirements for mobile home refinancing, and you’ll need to have a good credit score and jump through extra hoops before you close. Some lenders offer a wide variety of mobile home refinancing options for manufactured homeowners. It’s worth exploring your options, whether you want to lower your interest rate, shorten your mortgage term, cash out some of your equity, or meet your financial goals.

The Consumer Financial Protection Bureau (CFPB) estimates two-thirds of mobile home refinancing is done with high-interest chattel loans, even if affixed to owned land. If you own the land, save yourself some cash, and the unit is attached to the land.

First, Figure Out What Kind of Home You Own

Manufactured Home

Manufactured homes are entirely built in a factory. Traditional homes are built onsite. Once completed, manufactured homes are moved to their final destinations on a truck and placed onto foundations, making them permanent. You will need to own the land on which the manufactured home foundation is built. It comes in both single-wide and double-wide. Most homes will fall in this category.

Modular Home

Modular homes are primarily constructed in a factory, but the house is transported in pieces to the home site, where construction is finished. Once built, a modular home can’t be moved, Like a manufactured home, it also comes in single-wide and double-wide.

Mobile Home

Most true mobile homes were built before June 15, 1976. Anything constructed after that date is usually considered a manufactured home, but will still often be referred to as a mobile home. A true mobile home was also built in a factory but on a permanently attached chassis. It was then transported to the site by towing or on a trailer. They are often left permanently or semi-permanently in one place but can be moved. You can rent mobile home space or own it. It is titled a motor vehicle.

Requirements to Refinance a Manufactured Home

  • The home has to be attached to land you own and not rented in a mobile home park
  • The home must have at least 400-600 square feet of living space, depending on the loan program
  • A “double-wide” manufactured home must be a minimum of 20 feet wide with at least 600 square feet of living space.
  • The home must be secured to a permanent foundation that meets standards set by the U.S. Department of Housing and Urban Development (HUD) 
  • You must have the home titled as “real property” (real estate)
  • The home must be taxed as “real property”
  • You must ensure that the home was constructed after June 15, 1976
  • You must ensure that the home is without axles, wheels, or a towing hitch

The home must have a HUD tag and a metal plate certification label placed on the home’s exterior. It must also have a data plate and a paper label that you’ll find inside the home.

Assuming the home is permanently affixed to land you own and meets property requirements, you may be able to refinance using any of the major loan programs.

Title documents have an “affidavit of affixture,” meaning they are attached to the land and meet all building requirements. You can get the most favorable manufactured home loan rates with stellar credit if your mobile home is considered “real property.”

If you can do manufactured or mobile home refinancing, you can rollover the cost of affixing it into the land and turning it into real property.

Manufactured Home Loans and Refinancing

Many of the same mortgage loan options are available for mobile home refinancing that is deemed real property for traditionally built homes. 

This includes:

Conventional Loans

Fannie Mae and Freddie Mac back these conventional loans, but to qualify, most borrowers will need a minimum credit score of 620, low debt-to-income ratios, and at least 5% equity in the home. If you have more than 20% equity in the home, lenders won’t require private mortgage insurance, saving you some cash every month. Conventional loans can be fixed-rate or adjustable, and you can get cash-out refinancing in some cases. Loan terms are up to 30 years.

VA loans

Backed by the U.S. Department of Veterans Affairs, these loans offer ultra-low interest rates, but they’re only available for military veterans, service members, and eligible surviving spouses. In addition to military service, you’ll typically need a minimum credit score of 620. The maximum loan term is 25 years and 32 days if you do a land and home package refinance.

What Is A VA Cash-Out Refinance?

VA cash-out refinancing allows borrowers to qualify for a loan amount (or cash out) equivalent to 100% of the appraised value of their home, with a maximum 41% debt to income ratio with possible exemptions and a 620 minimum score. You can then use the money for debt consolidation.

The VA cash-out refinance allows you to replace your current mortgage with a government-backed loan, but qualification is limited. These are only available to veterans, active-duty service members, Reserve and National Guard members, and surviving spouses.

USDA Loans

USDA loans are backed by the U.S. Department of Agriculture and are for low-income borrowers. They are designed to promote homeownership in under-developed parts of the U.S., so they’re only available in designated rural areas. The mobile home must be less than one year old. They require a minimum 640 credit score, and you can’t cash out any extra equity on a USDA manufactured home loan.

FHA Loans

The Federal Housing Administration guarantees FHA loans. They offer flexible guidelines and low-down-payment options. They’re a good option for first-time homebuyers, but they’re also available to repeat home buyers.

The program requires a minimum credit score of 580. Loan terms range from 20-25 years. You can borrow up to $25,090 if you own the land and $7,500 if your mobile home sits on leased land.

Loan Options If You Don’t Own the Land on Which the Home is Located

If you rent the land your mobile home is on, you still have a couple of options.

FHA Title 1 Loans

To qualify, you must:

  • Use the manufactured or mobile home as your primary residence
  • Have the manufactured or mobile home must be set on a permanent foundation
  • Lease from an FHA-compliant site
  • Have an FHA-eligible lease
  • Have no delinquent federal debt
  • No minimum credit score and no appraisals are required
  • Have a maximum of 45% debt-to-income ratio

Personal Loans

Because mobile homes are usually much cheaper than traditional homes, you might be able to refinance using a personal loan. Many lenders will advance up to $100,000 to good buyers, which is more than enough to purchase or refinance a manufactured home.

The catch: Personal loans have higher interest rates than other loans. But you don’t have to provide any collateral, so your home won’t be at risk if you default, the paperwork is usually more straightforward, and you won’t have to pay closing costs. These types of loans also have shorter terms of repayment.

Manufactured Home Refinancing Interest Rates

Interest rates are rising, and mobile home refinancing rates are no different. You’ll be more likely to save money if you can refinance a shorter loan term. But with a shorter loan term comes a larger monthly payment. So, make sure you have enough cash flow to cover this shorter termed loan.

Conventional and FHA loans

Depending on your qualifications, FHA loan rates can be comparable to a traditional mortgage loan and will offer the most competitive rates. Fannie Mae and Freddie Mac loans are similar to conventional mortgages, but the minimum credit score is higher, at around 620. Both fixed rates and variable rates are available.

Chattel Loans

In mobile home refinancing, a chattel loan finances a mobile home as personal property, not real estate or real property. Because of this, interest rates are often much higher than what you’d pay a mortgage lender. The result is a higher monthly payment. If you have a chattel loan, mobile homeowners could save a significant amount of money by refinancing into a traditional mortgage.

This movable property acts as the collateral for the loan, and if you default on your loan, the lender can take your property and sell it to pay off the loan. You could lose your home, but you also have the option to pay off the chattel loan to retrieve your property.

These mobile home rates are significantly higher than the other options and range from 7.75% to 10%. Terms are up to 20 years.

To learn more about chattel loans, check out this video:

Personal Loans

A personal loan typically comes from a bank, credit union, or online lender. These loans are issued in a lump sum and deposited into your bank account. They are considered a form of installment credit. It is repaid in fixed monthly payments.

These loans can range anywhere from 3% to more than 30%, depending on your credit score. You will need a credit score of around 600 to qualify. Terms can last up to a maximum of 12 years.

What Does ‘Real Property’ Mean?

If your mobile home is permanently affixed to a foundation, it will be easier to refinance. That’s because they’re considered “real property.” The owner of real property has all of the rights of ownership, including the right to possess, sell, lease, and enjoy the land, also known as the bundle of rights.

Mobile homes not permanently affixed to a foundation are considered “personal property.” If this is the case, your primary option is a chattel loan.

Refinancing Steps

  • Step 1: Determine what type of mobile home you own
  • Step 2: Determine if your home is “real property”
  • Step 3: Check your credit score
  • Step 4: Get your loan paperwork in order
  • Step 5: Choose the purpose of refinancing for your manufactured home
  • Step 6: Choose the right loan program for your refinance
  • Step 7: Shop for the best loan rates and terms
  • Step 8: Submit your application

When Does Refinancing Make Sense?

Unless you opt for a personal loan, you’ll have to pay closing costs to refinance your original loan. Mobile home refinancing closing costs can be significant. You will need to make sure your new loan costs less than the current one. You will want to use a mortgage refinance calculator to figure out whether you’ll be saving money on the mobile home refinance.

Why is Refinancing Manufactured Housing So Tricky?

Many lenders will avoid mobile home refinancing because manufactured homes and modular homes depreciate more quickly than traditional homes. Aside from the fact that some manufactured homes may age more rapidly than their site-built counterparts, the loans also aren’t as profitable to refinance due to the low loan amounts. 

In short, the two main reasons loans on manufactured homes are less likely to refinance than their site-built counterparts are smaller loans and more considerable fees, thereby producing fewer cost savings. And most manufactured homeowners with chattel loans rarely do mobile home refinancing because they have fewer options. 

Because of the lower cost of materials and faster build timeline than traditionally built homes, manufactured homes are cost-effective for buyers on a very tight budget. They are priced between 10% and 35% less per square foot than traditional homes. So, it also boils down to inequitable financing opportunities that widen homeownership gaps and economic divides. 

The Bottom Line

Refinancing a manufactured, mobile or modular home can be difficult, but not impossible. There are several options for mobile home refinancing, but not easy to qualify. Do your due diligence, crunch the numbers and see if it genuinely will save you some money.

FAQs

What is the Difference Between a Personal Loan and a Personal Property Loan?

A personal loan is an unsecured loan with no collateral or property used as security and is typically deposited in one lump sum into your account and paid in installments. A mortgage or property loan is a long-term loan of up to 30 years, and a personal loan typically is repaid in one to seven years. A personal property loan is also a loan secured against an immovable asset like a traditional home, and hence the borrower can secure a more significant loan amount.

What is a Loan-to-Value Ratio?

The loan-to-value (LTV) ratio compares the amount of your mortgage with the appraised value of the property. Lenders use this to determine how much risk they are taking on with a secured loan and describe the ratio of the property’s value to the outstanding mortgage balance.
You generally want a loan-to-value (LTV) ratio of 80% or lower for the most favorable mortgage terms. Most borrowers put a 20% down payment on a property. If you have less than 20% equity in the home, lenders will require you to purchase private mortgage insurance, which will cost you .58% to 1.86% of the original loan amount per year. But the benefit is that it could put you in a house sooner and out of the rental abyss and on the road to gaining tens of thousands in building equity wealth.
PMI cancellation should happen automatically when your loan-to-value ratio (LTV) falls to 78% of your original balance. You also can cancel PMI once your LTV ratio drops to 80%.

How Can I Find a Loan Officer to Help Me Refinance My Manufactured Home?

Financing a manufactured home is more complex than funding a conventional home, but getting a loan for your mobile home is still feasible. 
The web is a great place to start with no shortage of direct lenders to shop around from. Contacting a mortgage broker is another great option since they have access to a broader range of options and lenders than a traditional bank, and the mortgage broker can streamline the process. And because mortgage brokers have access to multiple loan programs, they can easily compare rates, details, and closing costs to find you the best fit for your mobile home refinancing.