5 Steps To Refinance a Mobile Home
You can refinance a mobile home to save money but need to be prepared to jump through some hoops before you close. Follow the five steps below to navigate the path to the best mobile home refinance whether you own a mobile home, manufactured home or a modular home.
Step 1: Determine what type of mobile home you own
The term mobile home is often used interchangeably with manufactured home, but for lenders there are important differences:
- Manufactured homes (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, for lending purposes, are structures built in factories before June 15, 1976 with axles and wheels removed before being placed on rented land. The term “manufactured home” usually refers to a mobile home built after June 15, 1976 in the mortgage lending world.
- 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, the lender must verify the following:
- The home is at least 12 feet wide with 400 square feet of living area, depending on the program
- The home is permanently affixed to a foundation and taxed as real property
- The structure has the Department of Housing and Urban Development (HUD) certification label, a HUD data plate, a HUD seal or MH Advantage® sticker confirming the home has features similar to site-built homes and/or meets safety and livability standards set by HUD
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 or personal property (also called chattel in the manufactured home lending world).
| Real property | Personal property |
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THINGS TO KNOW Your mobile home and land officially becomes real property when the title company records an “affidavit of affixture” which creates a public record that your home meets local building guidelines. Standard mobile home refinance programs require this document to offer you the lowest refinance rates and terms. If this can’t be provided, you’ll need to get a “chattel” loan, which is similar to financing on a car.
Step 3: Choose the type of refinance for your manufactured home
If you own a manufactured home on a permanent foundation, or you’re refinancing to convert your home to real property, you have three options:
Limited cash-out refinances. A limited cash-out refinance allows you to pay off your current mortgage, roll in your closing costs and add the construction fees charged to attach your home to your land. Another perk: You can pocket an extra $2,000 or 2% of the balance of the new mortgage, 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, or “cash out,” the difference. In most cases, you can’t borrow as much of your home’s value (also known as your “loan-to-value (LTV) ratio”) with a cash-out refinance on a manufactured home as you can with a non-manufactured home.
WARNING: Conventional cash-out refinance update: Fannie Mae is changing the adjustments lenders use to price mortgage refinance rates on conventional loans effective after May 1, 2023, and cash-out refinances will be significantly more expensive.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 and the VA interest rate reduction refinance loan (IRRRL).
Step 4: Choose the right loan program for your mobile home refinance
You’ll need to document your income, assets and credit and in most cases you’ll need an appraisal to verify your home’s value. If your home is considered real property, you can choose from the following program 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. Closing costs are usually less than government-backed programs and if you have 20% or more equity in your home, conventional refinance loans don’t require mortgage insurance, which repays the lender if you default on your loan.
Regular FHA loans. Insured by the Federal Housing Administration (FHA), FHA loans provide flexibility for borrowers with low credit scores and high debt 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 $25,090 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 — you can’t roll lender and title fees into the loan amount on this program.
VA loans. The U.S. Department of Veterans Affairs (VA) backs loans to active-duty and veteran military borrowers and 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 streamline assist program. Like the other government streamline programs, there is no income or value verification requirement.
| 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 | 65% | 620 | 45% with exceptions to 50% | Maximum term of 20 years |
| Freddie Mac limited cash-out refinance | 95% (20-year loan) 90% (30-year loan) | 620 | 45% with exceptions to 50% | Terms of up to 30 years |
| Freddie Mac cash-out | 65% | 620 | 45% with exceptions to 50% | Maximum term of 20 years |
| FHA limited cash-out refinance | 97.75% | 580 | 43% with exceptions possible | Maximum term of 25 years and 32 days for home and land |
| FHA cash-out refinance | 80% | 500 | 50% | Maximum term of 25 years and 32 days for home and land |
| FHA Title I | No appraisal required | No minimum | 45% | The home can sit on leased land. Can’t be delinquent on federal debt |
| FHA streamline | N/A | N/A | N/A | Can’t roll closing cost into loan amount |
| VA limited cash-out refinance | 95% | 620 standard | 41% with exceptions possible | Maximum term of 25 years and 32 days for home and land |
| VA cash-out refinance | 90% | 620 standard | 41% with exceptions possible | Maximum term of 25 years and 32 days for home and land |
| VA IRRRL | N/A | N/A but must prove benefit of refinance | N/A | Can roll costs in as long as they are recouped within 36 months |
| USDA limited cash-out refinance | 100% | 640 standard | 41% with exceptions possible | Loan term must be fixed for 30 years |
| USDA streamline refinance | N/A | N/A but must prove benefit of refinance | N/A | Loan term must be fixed for 30 years |
*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.
Once you choose a lender, stay in touch with your loan officer and be ready with paperwork related to your manufactured home in case the home appraiser needs it. If you’re refinancing to convert a manufactured home to real property, lock in your mortgage rate long enough to cover the time it will take to attach your home to the foundation.
WARNING: In addition to the cash-out refinance changes, your credit score and DTI ratio will also have an impact on the refinance rate you are offered. To get the best refinance rate under the new guidelines:
- You’ll need a credit score of 780 or higher
- You’ll need a DTI ratio of 40% of less
Some good news: If your credit score is between 620 and 700, you’ll get a slightly better rate when the new changes kick in. These changes don’t affect government refinance loan programs (FHA, VA and USDA).