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Manufactured Home red flags

Lots of potential minefields need to be navigated during a manufactured home transaction. Below are

some of the potential issues to be aware of.

Appraisal & property condition issues

  • Missing labels and/or data plate can be problematic--more details in my manufactured home loan tips article.

  • Foundation certification by a licensed engineer may be required--see my manufactured home loan tips article for more details.

  • Foundation skirting required-- Non-load bearing skirting must be permanently attached to concrete, masonry or wood backing. Skirting must allow ventilation to the space.

  • FHA require perimeter enclosures to be constructed of concrete, masonry or treated wood. Vinyl skirting alone is not acceptable.

  • Any structural modifications to an existing manufactured home must be approved by a licensed professional engineer or the local, state or Federal authority.

  • Land typically must be owned by the buyer/borrower. Leasehold interest or manufactured condo projects are problematic and many lenders will not touch. Any condo project must be approved by Fannie or FHA

  • Second moves of the manufactured home is usually a deal killer. Homes installed at one location and then relocated and installed at a second location are ineligible for all loan programs except for VA. VA will require additional plumbing, electrical and roof inspections if a second move. FYI --- Only a handful of VA lenders will allow a second move.

  • Flood insurance required on the property. On FHA if the home requires flood insurance it is likely a deal killer.

  • Repair escrows - lender required property repairs to be completed after closing is not allowed on conventional loans. Repair escrows may be allowed on FHA, VA and USDA.

  • USDA does not allow existing manufactured homes to be financed unless the property is in a pilot program state. California is not currently in this USDA pilot program so only newly constructed manufactured homes are eligible for USDA financing.

  • Appraiser must have a minimum of 2 manufactured sold comps in the appraisal report on a multi wide home. For single wide homes--when a lender allows this property type--at least one sold comp must be a single wide home. If an appraiser can't include manufactured sold comps then nearly every lender will not lend on the property.

  • Tow hitch and running gear must be removed from the property.

  • Investment property is not allowed.

  • Second or vacation homes are allowed on conventional with a minimum of 10% down payment.

  • PUDs require a lender to confirm

Second dwelling on the property

  • Additional vacant manufactured housing located on a property being used strictly for storage with a kitchen inoperable may remain if it does not pose a health or safety risk. Financing problems may occur when hooked up to utilities or septic/sewer.

  • ADUs (accessory dwelling unit) are problematic. Fannie does not allow ADUs when the main home is a manufactured. Freddie will allow an ADU when the main home is a manufactured however the ADU cannot be a manufactured. Strict rules apply in this case and are lender by lender.

  • FHA allows ADUs sometimes even a second manufactured however this is a problematic transaction and both manufactured homes must comply with FHA rules.

Cash out refinances are restricted to owner occupied transactions

  • On conventional cash out is restricted to 65% loan to value and a 20 year term max.

  • Cash out refinance is allowed on FHA up to 80% loan to value

  • VA allows cash out up to a 100% loan to value.

  • FYI-some lenders will further restrict cash out loan to value.

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