Manufactured homes and ADUs

Manufactured homes and ADUs - loan type rules

Manufactured homes and ADUs can present financing complications depending on various factors with each loan type having different requirements

What are ADUs?

The physical features of a 2-unit property and a 1-unit property with an accessory unit can be very similar. For example, both 2-unit properties and a 1-unit property with an accessory unit contain two independent units that may also have separate utilities, unique postal addresses, or be rented. Typically, 2-unit properties are constructed simultaneously and are similar in size and layout. By contrast, an accessory unit is usually inferior in size to the primary unit.

Examples of ADUs include (but are not limited to) a living area over a garage, a living area in a basement, a small addition to the primary dwelling, or a manufactured home (legally classified as real property that meets compliance with Federal Manufactured Home Construction & Safety Standards built on or after 6/15/1976).   

What are the rules for ADUs when manufactured homes are present?

Very Important -- Check the local building department for permits on the property to confirm both the primary home and/or the ADU are permitted and taxed as real property.  Typically a recorded HCD433 will serve as evidence of the permit having been finaled for each manufactured unit being valued as residential.  

Lack of HCD433s, HUD tags, foundation issues and unpermitted modifications are often the biggest Manufactured loan obstacles, especially on older homes, since aged local building records can be sketchy.  Observe all manufactured homes for modifications that may require a permit--see my blog article Manufactured Home Red Flags for more info by clicking here.

Keep in mind the existence of an HCD433 doesn't automatically guarantee the foundation is acceptable.  Each foundation must meet the loan type requirements.  If a HCD433 does not exist, that will be a major loan complication.  A loan officer with experience in manufactured home lending can lay out potential fixes.

Fannie Mae and Freddie Mac (conventional)  

• An ADU can be a single or multi-width manufactured house. The Lender must verify that the property was built in compliance with the 1976 HUD code and attached to a permanent foundation.
• On Fannie If an ADU is present, the primary dwelling must be site-built or a modular home. It cannot be a Manufactured Home.  Freddie will allow both a primary manufactured and the ADU to be manufactured with the primary multi wide --but--many lenders have an overlay (special rules) and will not allow
• if the manufactured homes are built as MH Advantage (few are) the rules may be a bit more relaxed.  Consult a manufactured home experienced loan officer for more details

• A manufactured ADU is permitted when the subject property is not a manufactured home. The standard VA guidance for accessory dwelling units must be followed including the VA appraiser commenting the manufactured foundation meets requirements.

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