What you need to know about FHA Manufactured Housing Loans
A manufactured home is a home that is transportable in one or more sections. It has to meet Federal Manufactured Design and Safety Guidelines and is labeled to prove this. When erected on a site, the home is:
- At least 400 sq. feet
- Built and remains on a permanent chassis
- Designed to be used as a dwelling and build on a permanent foundation built to FHA criteria
Existing Construction on a manufactured home is defined as a home that has been installed at least one year prior to the date of application. You will need an Engineer Certification to determine if the foundation is considered permanent and requirements for this vary from state to state.
Most lenders require the client to have a debt to income level that is under 50% and a credit score of 620 or higher. Some lenders require a 660 or higher. Often times Down Payment Assistance programs do not allow Manufactured Homes in their programs. Check your state program and also your lender’s overlays. Your state program may allow Manufactured Homes but the Lender will not finance them. If your client is considering “Flipping” the home they will also of another set of rules they need to abide by. Again, check with your lender on their policies.
FHA requirements and general eligibility:
- Floor area has to be at least 400 sq. ft. or more
- Be constructed after June 15, 1976
- Be classified and subject to taxation as real estate
- The home must have only been moved once, from the manufactured building site or dealer’s lot to the home site. If it has been moved or occupied at any other site previously it will not qualify.
- The mortgage must cover both the site and the home
- Be built and remain on a permanent foundation
- Designed to be used as a dwelling and the permanent foundation must meet FHA and HUD criteria
- The finished grade elevation must be at or above the 100 year flood plain
- The site must be served by permanent water and sewer facilities approved by the local municipal authorities, if available at the site
- An all-weather roadway must serve the site
- The entire property must be taxed as real estate
- The towing hitch or running gear must have been removed
- No part of the finished grade elevation under the home shall be below the 100 year flood level
- Structural integrity must have been maintained during transport and sufficient anchoring, support, and stability must be evident
- Each home must have an affixed HUD seal on the outside of the home. If multi wide, each section must have a HUD seal numbered sequentially. If tags are missing the appraiser will need to notify the lender and recommend rejection. An appraiser will take photos of the HUD seals – the HUD certification is required
- The home must be erected on a permanent foundation in compliance with the Permanent Foundation Guide for Manufactured Housing https://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/4930.3G
- All proposed or newly constructed manufactured homes must meet standards set forth in the Permanent Foundation Guide
- A recent Engineer’s certification, specific to the transaction must be obtained from a licensed professional engineer or registered architect ( must be licensed in the state the manufactured home is located)
- An Engineer’s certification must include the following:
o Indication that the engineer personally inspected the home and certifies that the home is erected on a permanent foundation that is in compliance with the PFGMFH
o Certification may not be based on pictures taken by an assistant
o Certification must include the following language: “House is on a permanent foundation is in compliance with the guidelines published in the Permanent Foundation Guide of Manufactured Homes (PFGMFH) dated September 1996”
o The Certification must be on letterhead and contain the Engineer’s or registered architect’s signature, professional seal, and state license number
- The Engineer’s certification must be included in the loan file that is submitted to FHA
- An Engineer’s certification is NOT required if this is an FHA to FHA refinance secured by a manufactured home that has not had any modifications done to the property after the previous Engineer’s certification has been granted at the time of the original FHA financing or FHA/HUD REO Purchase Transaction.
- A manufactured home must have a properly enclosed crawl space with a continuous permanent foundation type construction (i.e. concrete, wood, masonry, or treated wood) separating the crawl space from the backfill
- The perimeter enclosure, if separate from the crawl space must:
o Be designed to resist all forces that might be transmitted to the building super structure (soil movement, frost heave, soil settlement etc.)
o Be adequately secured to the perimeter of the unit to exclude entry of vermin and water
o Allow proper ventilation
o If perimeter is not load bearing or made from light material it will need to be adequate backing such as concrete, masonry, or treated wood to permanently attach and support skirting
HUD Plate and Certification Label (TAG)
- All manufactured home’s compliance with HUD standards are evidenced in two ways:
o By a HUD data plate that includes the manufacturer’s name and model number, this can be located on the interior of the home, typically in a utility closet or kitchen cabinet
o By an affixed HUD Certification label (seal or tags), these are red metal plates attached to the exterior of each section of the home (never detach and reattach)
- If labels are missing, a recent “HUD Certification Verification” letter issued by the Institute for Building Technology and Safety (IBTS) must be on file
- Home modifications can often cause a home that was once FHA qualified to know longer be qualified. The appraiser will note if any modifications have been done on the property. However, the lender can obtain an engineer’s certification to verify that any modifications were made in accordance to HUD Manufactured Home Construction Safety Guidelines and if they were the home will again become eligible.
- Additions or modifications on Manufactured homes are treated just like a stick built home, meaning they must comply with applicable building codes, and some state agencies will require that all modifications had prior approval (often this is a state administrative agency) on all modifications once they leave the factory.
- The appraiser and underwriter of the loan are required to know these state regulations. If the home is located in one of these areas then the property must meet all of these standards or be ineligible for FHA Insurance.
- The home must have a finished grade level beneath a manufactured home that is above the 100 year return frequency elevation to be FHA eligible
- If the site is in a designated flood hazard zone, the lender will order a FEMA Elevation Certificate to determine if the home qualifies for FHA insurance. This will be an additional cost.
Titling & Closing
- All manufactured units and land must be classified as real estate and taxed accordingly. Properties that are still in the conversion process from personal property or chattel status to real estate are not eligible.
- When the land is purchased, exclusive of a manufactured home unit, there may be two deeds, a property deed for the land and a chattel deed or motor vehicle title for the unit. One clear title is required at closing. Evidence must be provided that the title policy specifically states the manufactured home and land are classified as real estate.
- The Preliminary Title Report or Final Title Policy must reflect the commitment or issuance of the appropriate ALTA Endorsement (ALTA 7.1-06) required to validate that the home is treated as real property.
- The Deed of Trust or Mortgage must include a complete legal description that includes the land and manufactured unit details regarding the manufacturer Name, Model, Year, Serial #, Size and any other information required by state law to identify a manufactured home.
Ineligible Property Types
- Construction to Perm Loans
- New Construction properties
- Existing construction installed on a site for less than a year
- Condominium Projects
- Manufactured Units in Condominium projects, leasehold estate or in a “park”
- Any manufactured home unit that does not meet HUD requirements
I hope you will find this information useful. If you want to add anything please comment or if you would like to know more about Appraisal Requirements for Manufactured Homes please let me know and I can send you an email regarding what Appraisers look for and how they use comparables.
NMLS # 1452954