Manufactured Home Red Flags — What Buyers and Agents Need to Know

Financing a manufactured home can be more complicated than financing a traditional site-built home.

The problem isn't necessarily the manufactured home itself. The bigger issue is that manufactured homes have additional property, foundation, appraisal and documentation requirements—and lender guidelines can vary considerably.

Not every lender finances manufactured homes, and some lenders that offer these loans have limited experience with them. A small issue discovered late in the transaction can create delays or, in some cases, make the property ineligible for financing.

I've financed hundreds of manufactured homes during my decades in the mortgage business. Here are some of the biggest manufactured home red flags buyers and real estate agents should look for before getting too far into a transaction.

1. Missing HUD Tags or Data Plate

Manufactured homes built under the federal HUD construction standards were originally issued identifying information that can be important when obtaining financing.

This typically includes:

• HUD certification labels (HUD tags) attached to the exterior of the home.
• A data plate located somewhere inside the home.

If the labels or data plate are missing, don't automatically assume the home can't be financed. There may be ways to obtain verification of the home's manufacturing information.

However, this should be investigated early in the transaction, rather than waiting until underwriting or appraisal.

2. The Home's Age Matters

For most traditional manufactured-home mortgage programs, the home generally needs to have been constructed on or after June 15, 1976, when the federal HUD Manufactured Home Construction and Safety Standards became effective.

Some lenders impose additional restrictions and may decline to finance manufactured homes beyond a certain age.

The loan program and the individual lender's underwriting overlays both matter.

3. Foundation Problems Can Stop a Loan

The manufactured home generally must be permanently installed on an acceptable foundation system.

Depending on the loan program and lender, a foundation certification from a licensed professional engineer may be required.

The engineer may need to verify that the home's foundation and installation comply with the applicable requirements.

This is another item worth investigating early.

4. Watch for Improper Foundation Skirting

The perimeter enclosure or skirting around the manufactured home can also become an underwriting issue.

Decorative vinyl skirting by itself may not satisfy certain loan-program requirements.

The enclosure may need to be permanently attached and constructed or supported using acceptable materials while still providing adequate ventilation beneath the home.

If something about the foundation or perimeter enclosure looks questionable, determine what's required before assuming the property will qualify.

5. Has the Manufactured Home Ever Been Moved?

This is one of the most important questions to ask.

A manufactured home that was originally installed at one location and later moved to another property can be extremely difficult to finance through traditional mortgage programs.

A second move can be a deal killer for many loan programs and lenders.

VA financing may provide an exception in certain circumstances, although additional inspections and lender requirements can apply.

Before writing an offer, work with an experienced loan officer to try to establish whether the home is still located at its original installation site.

6. Structural Modifications and Additions

Be careful when a manufactured home has been substantially altered after it was originally built.

Potential concerns include:

• Room additions
• Attached garages
• Porches and decks
• Roof modifications
• Structural alterations
• Other additions attached to the manufactured home

Depending on the modification, permits or an evaluation by a licensed professional engineer may be necessary.

An attractive addition isn't necessarily a problem—but an unpermitted or improperly supported addition can become a financing problem.

7. The Land Usually Needs to Be Part of the Transaction

Traditional manufactured-home mortgage financing generally involves a home that is permanently attached to real property, with the borrower owning the land as part of the transaction.

A manufactured home located in a mobile-home park where the homeowner rents the space is a very different type of transaction and generally isn't eligible for the same conventional FHA, VA or USDA real-estate mortgage programs.

Leasehold properties and manufactured homes located within condominium projects can also be considerably more complicated.

8. Manufactured Home Condo and PUD Issues

Don't assume a manufactured home qualifies simply because other homes in the neighborhood have mortgages.

Manufactured homes located in condominium projects or certain planned unit developments can have additional requirements.

Project eligibility may need to be reviewed, and some lenders won't finance certain manufactured-home project configurations at all.

This is especially important when a development contains single-wide manufactured homes or unusual ownership arrangements.

9. Appraisal Comparable Sales Can Be a Problem

Manufactured-home appraisals have additional requirements.

The appraiser generally needs appropriate manufactured-home comparable sales to support the property's value and marketability.

For a multi-section manufactured home, lenders may require multiple manufactured-home comparable sales. Single-wide homes can be even more challenging because appropriate single-wide comparable sales may be required.

A beautiful property doesn't solve the problem if the appraiser can't find acceptable comparable manufactured-home sales.

This can be particularly important in rural areas where comparable sales are limited.

10. The Tow Hitch and Running Gear

Manufactured homes are transported to their installation site, but components associated with transporting the home generally need to be removed once the home is permanently installed.

Visible towing equipment or running gear can raise questions about whether the property meets permanent-installation requirements.

11. Flood Zones Can Create Additional Problems

Flood-zone properties deserve extra attention when a manufactured home is involved.

Flood insurance, elevation requirements and loan-program restrictions can complicate the transaction.

Depending on the loan program and circumstances, an elevation certificate or flood-map documentation may be necessary.

If you're considering a manufactured home in a flood hazard area, investigate the financing requirements before removing contingencies whenever possible.

12. Repair Escrows May Not Be Available

With a traditional home, certain lenders and programs may allow required repairs to be completed after closing using a repair escrow.

Don't assume that's possible with a manufactured home.

Repair escrows can be more restrictive, particularly with conventional manufactured-home financing. FHA, VA or USDA financing may provide additional options depending on the circumstances and lender.

If the appraisal identifies repairs, determine whether they must be completed before closing.

13. Second/Vacation Homes Have Different Requirements

Manufactured homes may qualify as second or vacation homes under certain conventional programs, but the financing requirements can be different from those for a primary residence.

Expect potentially:

• Larger down-payment requirements
• Different mortgage insurance requirements
• Higher interest rates or loan-level pricing adjustments
• Additional lender restrictions

The property still needs to meet the applicable manufactured-home eligibility requirements.

14. Investment Properties Are Much More Difficult

Manufactured homes purchased strictly as investment properties generally don't fit standard government manufactured-home loan programs, and conventional options can be limited or unavailable depending on the property and program.

Don't assume financing that works for an owner-occupied manufactured home will work for an investment property.

15. Watch for a Second Manufactured Home on the Property

A second dwelling on the property can create another layer of underwriting complexity.

For example, an older manufactured home being used strictly for storage may be treated differently from a functioning second residence.

Underwriters may look at whether the additional unit:

• Has an operating kitchen
• Is connected to utilities
• Is connected to septic or sewer
• Is legally permitted
• Is being used as a residence
• Creates a health or safety concern

The details matter.

16. ADUs Can Be Complicated

Accessory dwelling units are increasingly common, but an ADU combined with a manufactured primary residence requires careful review.

Eligibility varies by loan program, property configuration and lender.

If a manufactured home has a second dwelling or ADU, don't assume it's acceptable just because the ADU itself is legal. Have the entire property configuration reviewed for loan eligibility.

17. Down-Payment Requirements Vary by Loan Program

There isn't one universal down-payment requirement for manufactured homes.

Depending on eligibility and property characteristics, financing may be available through:

Conventional financing — High loan-to-value financing may be possible for an eligible primary residence. Special programs such as Fannie Mae's MH Advantage may provide additional options for manufactured homes constructed with qualifying features.

FHA financing — Low-down-payment financing may be available, subject to FHA manufactured-housing requirements and lender guidelines.

VA financing — Eligible veterans may be able to purchase a qualifying manufactured home with zero down, although individual lenders can impose additional underwriting restrictions.

USDA financing — Zero-down financing may be possible for eligible borrowers and properties, but manufactured-home requirements can be more restrictive and not every USDA lender offers these loans.

Always verify the current program guidelines and lender overlays for the specific property before relying on a particular financing structure.

The Biggest Manufactured Home Mistake

The biggest mistake is waiting until you're already deep into escrow to find out whether the property qualifies.

Manufactured-home financing problems are usually much easier to deal with when they're identified before the appraisal, before underwriting and ideally before the buyer writes the offer.

A few questions at the beginning can save everyone a lot of frustration later.

Before Making an Offer, Find Out:

• When was the manufactured home built?
• Is it still at its original installation location?
• Are the HUD tags and data plate available?
• Is the home permanently attached to an acceptable foundation?
• Are there additions or structural modifications?
• Were additions properly permitted?
• Does the buyer own the land?
• Is the property in a manufactured-home park, condo or unusual PUD?
• Is there another dwelling or manufactured home on the property?
• Is the property located in a flood zone?
• Are appropriate manufactured-home comparable sales likely to be available?

Manufactured Homes Can Be Great Properties—With the Right Financing

None of these red flags automatically means you shouldn't buy a manufactured home.

It means you need to know what you're dealing with before you get too far into the transaction.

Manufactured homes can provide excellent value, especially in areas where traditional site-built housing has become expensive. But these loans require a lender who understands the additional property and underwriting requirements.

If you're buying or selling a manufactured home in California and aren't sure whether the property will qualify, have the property reviewed before you get too far into the transaction.

Catching a potential problem early can mean the difference between a smooth closing and a last-minute loan denial.

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Loan guidelines and lender overlays change. Manufactured-home eligibility depends on the loan program, lender, borrower and individual property. Information above is educational and should not be considered a loan approval, commitment to lend or legal advice.