5 Steps for a Successful Mobile Home Refinance
You can use a mobile home refinance to reduce your monthly payments or tap your home equity, but the process can be a little more complicated than refinancing a traditional, site-built home. For instance, you’ll need to know your home’s legal classification (real property or chattel) and make sure that it meets size guidelines.
The following five steps can help you navigate the path to a refinance, whether you own a mobile home, manufactured home or modular home.
Step 1: Determine what type of mobile home you own
The term “mobile home” is often used interchangeably with “manufactured home,” but there are important differences for lenders:
- Manufactured homes (often called MH for short) are built in a factory and moved to a site (typically land you own) where the sections are assembled on a permanent foundation.
- Mobile homes are similar structures, but were built in factories before June 15, 1976. In the mortgage lending world, the term “manufactured home” usually refers to a mobile home built after this date.
- Modular homes, also called “systems-built homes,” are constructed in a controlled environment before being shipped to your land. They are put together following the same building codes as site-built homes and permanently attached to land you own.
To refinance a manufactured home with a traditional mortgage Traditional mortgages are conventional loans, and must abide by the rules set by Fannie Mae and Freddie Mac. , the home must:
- Be at least 12 feet wide with 400 square feet of living area
- Be permanently affixed to a foundation and taxed as real property
- Have the U.S. Department of Housing and Urban Development (HUD) certification label and a HUD data plate. These confirm that the home has features similar to site-built homes and/or meets HUD’s safety and livability standards.
Step 2: Determine if your home is “real property”
Lenders typically offer the most competitive mobile home refinance options on homes that are considered real property. The table below shows the difference between a structure that’s considered real property versus personal property, also known as “chattel.”
Difference between real property and personal property in lending
| Real property | Personal property |
|---|---|
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How to convert personal property to real property
It’s possible to take steps so that your mobile home and land officially become real property. The exact process to achieve this varies by state, but you can find the details for your location online at Fannie Mae’s website.
Many mobile home refinance programs, including those from Fannie Mae, won’t finance a home that isn’t legally considered real property. Typically, if your home isn’t real property you’ll need to get a chattel loan, which is similar to financing on a car or boat.
Step 3: Choose the refinance type for your manufactured home
If you own a manufactured home on a permanent foundation, you have three loan options:
- Limited cash-out refinances. A limited cash-out refinance allows you to pay off your current mortgage and roll in your closing costs and the construction fees charged to attach your home to your land. Another perk: You can pocket 2% of the balance of the new mortgage or $2,000, whichever is less.
- Cash-out refinances. If you’ve owned your current home and land for at least 12 months, you can borrow more than you currently owe with a new mortgage and pocket the difference. In most cases, you can’t borrow as much of your home’s value with a cash-out refinance on a manufactured home as you can with a site-built home.
- Streamline refinances. Manufactured homeowners with a loan backed by the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA) may qualify for a streamline refinance. These programs usually don’t require income documentation or an appraisal. Some popular streamline programs include the FHA streamline refinance and the VA interest rate reduction refinance loan (IRRRL).
Step 4: Choose the right loan program for your mobile home refinance
To qualify for a mobile home refinance, you’ll need to document your income, assets and credit, and in most cases you’ll also need a home appraisal to verify your home’s value. If your home is considered real property, you can choose from the following programs to refinance a manufactured home:
Conventional loans. Fannie Mae and Freddie Mac set the guidelines for conventional loans, which are popular for borrowers with good credit scores and low debt-to-income (DTI) ratios. You’ll typically pay lower closing costs than you would with a government-backed refinance program. Plus, if you have at least 20% home equity, conventional refinance loans don’t require mortgage insurance, which repays the lender if you default on your loan.
FHA loans. Insured by the Federal Housing Administration (FHA), FHA loans provide flexibility for borrowers with low credit scores and high DTI ratios. FHA-approved lenders offset that risk by charging FHA mortgage insurance regardless of how much equity you have.
FHA Title I loans. If you’re happy with your current mortgage but need extra money for home improvement projects, you can borrow up to $17,500 with an FHA Title I loan if your home is real property. If your manufactured home sits on leased land, you can get up to $7,500.
FHA streamline refinance. Manufactured homeowners with a current FHA loan may qualify to refinance without income documents or a home appraisal. However, you’ll need to budget for closing costs or consider a no-closing-cost option — this program won’t allow you to roll lender and title fees into the loan amount.
VA loans. The U.S. Department of Veterans Affairs (VA) backs loans to active-duty and veteran military borrowers, as well as eligible surviving spouses. One drawback to VA loans for manufactured homes: The maximum term is 25 years and 32 days if you’re refinancing a mobile home and land package.
VA IRRRL. You can replace an existing VA loan with a new VA loan without income paperwork or an appraisal if you’re eligible for a VA IRRRL. However, unlike the FHA streamline, you can roll your closing costs into the loan.
USDA loans. Meant for low-income borrowers to buy homes in rural areas, the U.S. Department of Agriculture (USDA) guarantees loans made by USDA-approved lenders. You can’t cash out any extra equity with a USDA manufactured home loan.
USDA streamline. Eligible borrowers with a current USDA loan may be able to refinance with the USDA streamlined assist program. Like the other government streamline programs, there’s no income or value verification requirement.
Manufactured home refinancing requirements
Rate-and-term refinances
| Refinance program | Maximum LTV ratio | Minimum credit score | Maximum DTI ratio | Special requirements |
|---|---|---|---|---|
| Conventional | 97% | 620 | 45% to 50% | |
| FHA (standard) | 97.75% | 580 | 43% | |
| FHA Title I | N/A | No minimum | 47% | Maximum term of 25 years and 32 days for home and land |
| FHA streamline | N/A | N/A | N/A | Can’t roll closing costs into loan amount |
| VA IRRRL | N/A | N/A, but must prove benefit of refinance | N/A | Can roll in closing costs as long as they are recouped within 36 months |
| USDA (standard) | 100% | Varies by lender (no USDA-set limit) | Varies by lender (no USDA-set limit) | Loan term must be fixed for 30 years |
| USDA streamline | N/A | N/A | N/A | May need to prove a net tangible benefit of at least $50 per month |
Cash-out refinances
| Loan program | Maximum LTV ratio | Minimum credit score | Maximum DTI ratio | Special requirements |
|---|---|---|---|---|
| Fannie Mae limited cash-out refinance | 97% | 620 | 45% with exceptions to 50% | MH Advantage® sticker |
| Fannie Mae cash-out refinance | 65% | 640 | 45% with exceptions to 50% | Maximum term of 30 years |
| FHA Title 1 cash-out refinance | 95% | 500 | 47% | Maximum term of 25 years and 32 days for home and land |
| VA cash-out refinance | 90% to 100% | Varies by lender (no VA-set limit) | Varies by lender (no VA-set limit) | Maximum term of 25 years and 32 days for home and land |
*VA and USDA guidelines don’t set a credit score minimum, but most lenders use 620 for VA and 640 for USDA as a standard.
Step 5: Shop for the best manufactured loan rate and terms
Contact at least three to five different lenders and make sure you ask each of them for a manufactured home rate quote. If you use an online comparison rate tool, be sure you select “manufactured home” as the property type. Refinance rates for manufactured homes tend to be slightly higher than regular homes, and some lenders don’t offer financing on manufactured homes at all.
If you’re refinancing to convert a manufactured home to real property, lock in your mortgage rate long enough to cover the time it’ll take to attach your home to the foundation.
Pros and cons of a mobile home refinance
| Pros | Cons |
|---|---|
You could lower your monthly payment. A reduced monthly payment amount can free up space in your budget for other financial goals. You could reduce your interest rate. A lower interest rate can save you thousands in interest charges over the long haul. You could pay off your loan sooner. Switching to a shorter repayment term can help you own your home outright much sooner. You can access cash. You can convert some of your home equity into cash if you choose a cash-out refinance option. | You’ll pay closing costs. Refinance closing costs must be paid before you can really start seeing savings. You might not break even. If you move or sell the home before your break-even point, the costs of refinancing outweigh your savings. You may end up with a higher payment. If you choose a cash-out refinance, your payments could get more expensive since you’re borrowing more than you currently owe. |