Financing Modular, Mobile and Tiny Homes
By John Leu, Loan Officer
[January 2020 | Montrose CO | San Juan Silver Stage | By John Leu] When it comes to purchasing a modular, mobile, or tiny home, financing can be the most difficult part of the overall decision. Type and style variations between these structures warrant different kinds] of financing, not to mention what a specific borrower may or may not qualify for.
Differences between the styles of homes for financing
• Meets IRC, Uniform Building Code
• Never had wheels, axle, or hitch
• Brought in on a trailer, removed from trailer, and placed on a foundation
• Has a permanent concrete foundation like site-built homes
• Floor joists are wood, not iron I-beams
• Never had a title or VIN number
• Appraised in the same way as a stick-built home (essentially prefabricated elsewhere and assembled on-site)
• Some prefabricated tiny homes are considered modular homes
• Meets HUD guidelines for building, housing, and urban development
• Had wheels, axle, and hitch that have been removed
• Trucked in with the whole trailer set on the foundation
• Had a title (may or may not have been purged) and has VIN numbers like a vehicle
• Most beams under the unit are metal and the center I beam will also be metal
• Will be appraised as a manufactured home and must use manufactured homes as comparable sales
• Will have red metal HUD tags on each half of the house with the VIN numbers and the words “manufactured home” on them.
Tiny homes, as mentioned in Ninah Hunter’s article (pg. 36), can be built using either of the aforementioned styles but can also fall under an RV category. The building style of this type of home with a combination of local zoning is what will allow or deny conforming financing such as FHA, VA, or Conventional lending. Should the home fall under the RV category, your loan program options become limited; on the other hand, these homes can be very affordable.
Modular Loan Products
These homes fall under the same lending options as standard stick-built homes. The lending institutions—Fannie Mae and Freddie Mac—consider this type of home conventionally built and do not require any additional lending overlays. Loan programs under FHA, VA, USDA, and Conventional will carry the same loan-to-value limits and credit requirements whether the home is stick built or modular.
Manufactured Loan Products
Manufactured homes can fall under the same loan programs but will have certain limitations applied. Most of the governmental programs such as FHA, VA, and USDA will share the majority of the same lending requirements as if the home were stick built, while your Conventional programs may limit or place additional restrictions on the loan.
The programs and variations within each specific loan type can be overwhelming. Not only do you have to navigate your personal qualifications through the loan process, but the type of home may have a program that best suits it. Before you buy, make sure you have your financial ducks in a row. What seems best at first glance may not be the right deal for you, depending on variables such as credit score, type of property you are considering, and loan products available to finance it. [Note: avoid use of shock quotes unless absolutely necessary]
The moral of the story is to consult a lending professional to find out what programs would suit your specific needs when looking at these types of homes.