Manufactured Loan Tips

The manufactured home loan process is more complex than financing a traditional site-built home.

Manufactured Home Loan Tips — What Buyers and Agents Need to Know

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

The biggest issue isn't necessarily the manufactured home itself—it's finding a lender and loan officer who understands the guidelines.

Not every lender offers manufactured home financing, and even among those that do, lender requirements and underwriting “overlays” can vary considerably. A seemingly minor issue involving the foundation, HUD labels, additions, appraisal or previous movement of the home can become a major loan problem.

Here are some of the most important manufactured home loan guidelines and potential trouble spots to understand before you get too far into the transaction.

How Much Down Payment Is Required?

For a manufactured home being purchased as a primary residence, financing may be available through Conventional, FHA, VA and USDA loan programs.

Conventional Loans

Conventional financing may generally allow financing up to 95% of the home's value, which means a minimum down payment of approximately 5%.

Certain specially designed manufactured homes may qualify for financing up to 97% under programs such as MH Advantage®, subject to program requirements.

FHA Loans

FHA financing may allow up to 96.5% financing, requiring a minimum down payment of 3.5%.

VA Loans

Eligible veterans may be able to finance 100% of the purchase price with no down payment.

Keep in mind that individual lenders can impose requirements that are more restrictive than VA's basic guidelines.

USDA Loans

For eligible borrowers and properties, USDA financing may provide 100% financing with no down payment required.

Second Homes

Conventional financing may be available on qualifying multi-width manufactured homes used as second homes, generally with at least 10% down.

Investment Properties

Traditional Conventional, FHA, VA and USDA manufactured home programs generally aren't designed for investment properties.

Some Non-QM lenders may offer manufactured home investment-property financing, but these programs can be harder to find and typically have higher rates, larger down-payment requirements or other restrictions.

Additions and Structural Modifications Can Cause Problems

This is one of the first things I look for when evaluating a manufactured home.

Room additions, attached garages, decks, porches and other modifications may affect loan eligibility—especially if the work wasn't properly permitted or engineered.

For most traditional loan programs, structural modifications may need to be inspected and approved by a licensed professional engineer or the appropriate local, state or federal authority.

USDA has particularly restrictive requirements concerning additions. Certain porches, decks and similar structures may be acceptable when constructed according to engineered designs and properly inspected and approved.

Important tip: If the home has been modified, investigate the addition early. Don't wait until you're deep into escrow to discover that additional engineering or documentation is required.

Will You Need a Foundation Certification?

Foundation requirements vary depending on the loan program.

• Conventional: A foundation certification isn't always required on an existing home unless the appraiser identifies a concern. Additional requirements can apply to new construction.
• FHA: A foundation certification is generally required. In some situations, an acceptable certification from a previous FHA-insured mortgage may be usable when there have been no subsequent alterations or observable foundation damage.
• VA: A foundation certification may be required when the VA appraiser identifies concerns.
• USDA: A foundation certification is generally required.

Because lender overlays vary, always verify the exact foundation requirements with the lender handling the loan.

Don't Overlook the Foundation Skirting

Manufactured homes financed through traditional agency loan programs must meet applicable HUD requirements.

Non-load-bearing skirting generally needs to be permanently attached to an appropriate backing such as concrete, masonry or wood and provide adequate ventilation underneath the home.

Skirting may seem like a cosmetic issue, but deficiencies can become an appraisal or underwriting condition.

HUD Certification Labels and the Data Plate

These are extremely important when financing a manufactured home.

HUD Certification Labels

A manufactured home normally has a HUD Certification Label—often called a HUD tag or HUD seal—attached to the exterior of each manufactured section.

A multi-section home should therefore have a certification label for each section.

The appraiser typically identifies the HUD label numbers and photographs the labels for the appraisal report.

HUD Data Plate

Don't confuse the exterior HUD Certification Label with the HUD Data Plate.

The Data Plate is normally located somewhere inside the home and contains important manufacturing and certification information.

If required HUD information is missing or illegible, financing can become considerably more complicated. Depending on the circumstances and loan program, verification may be obtainable through the Institute for Building Technology and Safety (IBTS).

Missing HUD labels are especially important to identify early with FHA, VA and USDA financing because lender requirements can be restrictive.

Buyer and agent tip: Check for the HUD labels and Data Plate as early as possible. Finding out they're missing a few days before closing is not when you want to discover the problem.

When Was the Home Manufactured?

The date of manufacture matters.

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

USDA has additional age requirements. The manufactured home generally must meet USDA's applicable age and construction requirements at the time of loan closing.

The manufacturing date can normally be found on the home's Data Plate.

Minimum Home Size

Minimum size requirements depend on the loan program.

Conventional

A manufactured home generally must have at least 400 square feet of living area and be at least 12 feet wide.

Both single- and multi-width homes may potentially qualify, although single-wide manufactured homes can have additional lender restrictions.

FHA and USDA

Manufactured homes generally need at least 400 square feet.

Single-, double- and triple-wide homes may potentially qualify, subject to individual program and lender requirements.

VA

VA requirements generally call for at least:

• 400 square feet for a single-wide
• 700 square feet for a double-wide

Again, single-wide financing can be more difficult because individual lenders frequently impose additional restrictions.

Has the Manufactured Home Ever Been Moved?

This is another potential deal killer.

Under most traditional manufactured home loan programs, the home generally needs to have been transported from the factory directly to its current permanent site.

If the home was previously installed somewhere else and later moved to its present location, financing options can become extremely limited.

VA guidelines may provide more flexibility for a previously moved manufactured home, subject to additional inspections and requirements. However, individual lenders may still decline these properties.

Always determine whether the home has been moved before ordering the appraisal or getting too far into the transaction.

The Appraisal Requires Manufactured Home Comparables

Manufactured home appraisals can be more challenging, particularly in rural areas where comparable sales are limited.

For Conventional and FHA financing, the appraiser generally needs manufactured home comparable sales.

VA and USDA requirements may differ, but individual lenders often have their own comparable-sale requirements.

If the appraiser can't locate enough suitable manufactured home sales, the appraisal—and potentially the loan—can become difficult.

This is one reason manufactured home lending can be particularly challenging in areas with relatively few recent sales.

What About Multiple Homes or an ADU?

Properties containing multiple dwellings can create additional underwriting issues when either the primary residence or an Accessory Dwelling Unit (ADU) is manufactured housing.

These properties aren't automatically impossible to finance, but lender overlays can vary substantially.

If you're considering a property with a manufactured home plus another dwelling, ADU or second manufactured home, have the property configuration reviewed before assuming it will qualify for conventional financing.

The Biggest Manufactured Home Loan Tip: Check the Property Early

With manufactured homes, identifying potential problems before the appraisal and underwriting process begins can save a tremendous amount of time and frustration.

Before getting too far into the transaction, try to determine:

• Is the home legally classified as real property?
• Was it manufactured after the applicable HUD cut off date?
• Are the HUD Certification Labels present?
• Is the Data Plate available?
• Has the home ever been moved?
• Are there additions or structural modifications?
• Were additions properly permitted and approved?
• Does the foundation meet the applicable loan-program requirements?
• Is the skirting acceptable?
• Are adequate manufactured home comparable sales available?
• Is it a single-wide or multi-width home?
• Are there multiple dwellings or an ADU on the property?

Finding one of these issues doesn't necessarily mean the home can't be financed.

It means you need to determine which loan program and lender will accept the property—and what documentation will be required—before the issue becomes a last-minute surprise.

Manufactured Home Loans Require Experience

Manufactured home financing isn't necessarily difficult when the property fits the guidelines and the lender knows what they're doing.

The problems usually begin when property-specific issues aren't identified until after the buyer is already in escrow.

I've worked with home loans for more than three decades, and my approach with manufactured homes is simple: look for potential problems early, determine the applicable guideline, and address the issue before it threatens the closing.

If you're buying or refinancing a manufactured home in California and aren't sure whether the property will qualify, I'm happy to take a look.

No sales pressure. Just straightforward answers about the property, your financing options and what it will take to get the loan closed.

Manufactured home lending guidelines can change, and individual lenders may impose requirements beyond the basic agency guidelines. Always verify current requirements for your specific property, borrower and loan program.