It’s possible to get a home equity loan for manufactured homes, but the requirements are more strict than those for a traditional, site-built home. Lenders typically require the home to be permanently placed on a foundation and classified as real estate rather than personal property. Borrowers must also meet specific credit score and debt-to-income ratio requirements to qualify.
Home equity loan options allow homeowners to borrow against their home’s equity, providing a lump sum with fixed or variable interest rates and regular monthly payments. This can be a great option for financing home improvements, consolidating debt, or covering major expenses.
Related Article: Can I Use a Home Equity Loan to Pay Off Debt?
Requirements for Getting Home Equity Loans for Manufactured Homes
Securing a home equity loan for a manufactured home can be more challenging than for a traditional house. Lenders impose specific requirements on both the property and the borrower.
Property Requirements
- Permanent Foundation: The home must be permanently affixed to a foundation and meet HUD standards.
- Land Ownership: The borrower must own the land the home sits on.
- HUD Certification: The manufactured home must comply with HUD’s Manufactured Home Construction and Safety Standards.
- Single Relocation Rule: Homes that have been moved more than once are typically ineligible.
- Age of Home: Most lenders require the home to have been built after 1976.
Borrower Requirements
- Minimum Credit Score: Most lenders require a credit score of at least 620 to 680, with higher scores earning better loan terms.
- Debt-to-Income Ratio (DTI): A DTI below 43% is preferred, though some lenders allow up to 50%.
- Loan Amount Limits: Borrowing limits depend on the home’s appraised value and lender policies, typically up to 80 to 85% of the home’s equity.
- Closing Costs: Borrowers should plan for closing costs, which may include appraisal, origination, and processing fees.
Why Is It Harder to Get a Home Equity Loan for a Manufactured Home?
Lenders consider manufactured homes riskier investments because they depreciate faster than site-built homes. Additionally, many manufactured homes are classified as personal property rather than real estate, limiting available loan options. Homes that are not permanently affixed to a foundation or have been moved more than once are usually ineligible for home equity loans.
Related Article: Can I Get a Home Equity Loan On Investment Property?
Types of Home Equity Loans for Manufactured Homes
Home Equity Loan
A home equity loan provides a fixed amount with a fixed interest rate, making budgeting easier. Borrowers receive a lump sum and repay it in fixed monthly installments over a term of 5 to 30 years.
HELOC (Home Equity Line of Credit)
A HELOC functions like a credit card, allowing homeowners to withdraw funds as needed. These loans typically have variable interest rates, meaning payments can fluctuate. HELOCs are ideal for homeowners who need flexible financing for home improvements or unexpected expenses.
Related Article: HELOC Vs Home Equity Loan: What You Need to Know
Is a Home Equity Loan for a Manufactured Home a Good Idea?
For homeowners with significant equity in their manufactured homes, a home equity loan can be a more affordable borrowing option compared to credit cards or personal loans. The fixed interest rate ensures predictable payments, making it a good choice for planned expenses.
However, borrowers should consider factors like closing costs, potential depreciation of the home’s value, and the risk of foreclosure if they cannot make payments.
How to Get a Home Equity Loans for Manufactured Homes
- Check Eligibility: Ensure your home meets lender requirements, including being on a permanent foundation and having HUD certification.
Review Your Finances: Verify that your credit score and DTI meet lender criteria. - Compare Lenders: Not all lenders offer home equity loans for manufactured homes, so find one specializing in this type of financing. Some of the best home equity and HELOC providers allow you to shop around between lenders on their marketplace platforms without impacting your credit score.
- Choose Between a Loan or HELOC: Decide whether you need a lump sum or a flexible line of credit.
Prepare Documentation: Gather proof of income, property records, and other necessary documents. - Apply and Close: Submit your application, prepare for an appraisal if your lender requires one, and cover closing costs before receiving your funds.
Related Article: How Long Does it Take to Get a Home Equity Loan?
Alternative Financing Options
- FHA Cash-Out Refinance: Replaces your existing mortgage with a new one, allowing you to withdraw cash from your home’s equity.
- Personal Loans: An unsecured option that may work for borrowers with strong credit but typically comes with higher interest rates. The best personal loan providers offer multiple borrowing options, rates, and terms.
- Chattel Loans: Designed for manufactured homes classified as personal property rather than real estate but often have higher interest rates and shorter terms.
