Manufactured Home Loans: What’s the Difference Between a Personal Loan and a Mortgage Loan?

Manufactured homes are an interesting animal to be sure.   It is the only form of housing that can either be classified as Personal Property or Chattel (like a car) or Real Property (like a regular site-built home) and how the distinction is determined can be confusing.

To be considered real property, the owner of the manufactured home must also own the land upon which the home sits.   Even when the homeowner owns the land, he/she may choose to title each separately—the home as personal property and the land as realty.   However, if one wants to secure an FHA-insured mortgage loan, the home and land must be conjoined as a single entity as REAL PROPERTY.

There is the old joke with lenders that you’ll pull your “trailer” out in the middle of the night and haul it down the street and the will be left holding the bag. The truth is that until the home is titled as real property, your manufactured home will be treated just like a car (Chattel) in the eyes of a lender.

What makes it all the more confusing when seeking a loan is that the titling process varies from state to state.   In some cases, the conversion to real property is a simple paper transaction removing the title off the Department of Motor Vehicles (ie Arizona and Oregon).

In other states, the building jurisdictions are involved and require installation of a permanent foundation to detitle the home as personal property and convert it to real property (ie California, Nevada  and New Mexico).   The Fannie-Mae website details the state by state titling procedures and is a valuable resource for both the loan processor and the borrower before they set the stage for a loan.  Fannie Mae.

FHA-Insured Manufactured Home Mortgage Loans on Real Property also need to meet other requirements.    It is critical that the home meets all the criteria or the loan will fail to be processed:

*  The manufactured must be a HUD home, which means it must be manufactured after June 15, 1976. If there are metal plates at the rear of the home that begin with a three Alpha letters like CAL, ARZ, ORE, that’s usually a good sign. If the HUD label is missing, usually a label verification letter from the Institute for Building Technology and Safety (IBTS)  giving the provenance of the home will suffice.
* The foundation system must meet the guidelines published in the Permanent Foundation Guide for Manufactured Housing, dated September 1996. A certification attesting to compliance must be obtained from a licensed professional engineer.
* The manufactured home must be classified and taxed as real estate. A long-term lease may also be acceptable in certain instances. States vary on how the real estate classification is accomplished so this is another important aspect to understand.
* The axles and tongues must be removed from the chassis.
* The manufactured home must have an adequate perimeter enclosure with appropriate ventilation.
* The manufactured home must not have been installed or occupied previously at any other site or location.
* Must have a floor area of not less than 400 square feet.
* Built and remains on a permanent chassis.
* The finished grade elevation beneath the manufactured home shall be at or above the 100-year return frequency flood elevation.

Since manufactured homes are such a special animal, borrowers should deal with specialty performers, lenders that understand and focus on the intricacies of the manufactured home loan process and engineers and contractors that are knowledgeable about the Permanent Foundation Guide for Manufactured Homes, dated September 1996.