How to get cash out of your manufactured home and have a low rate of interest to boot
If you own and/or are buying a manufactured home with land, it is very likely you have accumulated equity you can access.
In today’s market, there is a manufactured home friendly low rate mortgage program that allows you to borrow up to 95% of your home’s value. You can utilize the money for home improvement, debt consolidation, college tuition etc.
This type of refinance is termed a “cash-out” refinance.
The mortgage program is the FHA single family loan or 203B for short. FHA (Federal Housing Administration) is a part of Housing and urban Development (HUD). A part of HUD’s mission is to facilitate homeownership, particularly affordable homeownership. As such, the FHA mortgage does not have different credit standards, loan terms and loan to value ratios for standard site/stick built homes and manufactured homes. This is significant because all other mortgage programs for manufactured homes and land have stricter credit standards and much more restrictive loan terms and loan to value ratios. As an example, the other mortgage programs restrict the “cash-out” refinance to 65% of the value of the home as opposed to 95% for FHA.
If you have a manufactured home and land and are interested in getting cash out of your home, there are a few requirements that must be met for your home to be eligible:
• Home must be a multi-section/Doublewide or larger, and
• Home must have been placed on the property as a new home, and
• Home must be a 1976 model year or newer, and
• Home must have a foundation (perimeter wall, piers and anchors) that meet HUD’s foundation requirements. Many manufactured homes when initially sited were set-up to local codes. The vast majority of the local codes do not comply with the requirements set-forth by HUD. However, there are solutions in the market today that will retrofit a home and bring it into compliance with the HUD requirements and thus make the home eligible for FHA financing. The retrofit solutions are both cost effective and can generally be installed in less than one day with no disruption to the homeowner.
In addition to the ability to get up to 95% of your home value in a cash-out refinance, there are numerous other benefits if your home is eligible for FHA mortgage financing:
• Should you decide to sell your home, the pool of buyers who can purchase your home is increased significantly because the credit standards for FHA loans are less stringent than conventional mortgages and the down payment required to purchase the home is significantly less. FHA requires a minimum down payment/investment of 2.25%/3% (2.25% is the minimum down payment and the remaining .75% can be applied towards closing cost) whereas the requirement for conventional mortgage loans range from 5%-10%. As an example specific to the credit standards: A customer with a credit score of 620 has a good chance of purchasing the manufactured home and land utilizing a FHA loan. However, they would have no opportunity to purchase the home utilizing a conventional mortgage loan as their credit score would be significantly less than the minimum requirement of 660. This one example can give you a good indication of the difference in number of qualified prospective buyers between the two mortgage programs.
• When either buying or selling a manufactured home that is eligible for FHA financing, the seller can pay up to 6% for closing cost. This will significantly reduce the out-of-pocket investment needed from the buyer and subsequently make both the selling and buying of the home much easier.
• If a home is currently mortgaged with a FHA loan, the loan is assumable for a new buyer should the homeowner decide to sell the home.
