Mobile Homes: Real Property or Personal Property?
Many manufactured homes are sold as personal property. They have wheels and trailer hitches on them and can be moved to wherever you want to live. Financing them is generally expensive -- personal mobile home loans, often called chattel mortgages, carry interest rates that are twice as high as mortgage interest rates. Manufactured homes designated as "real" property, in contrast, are not moveable. They are fixed to permanent foundations, and can be financed and refinanced like traditional homes.
Best Mortgage Rates and Other Advantages of "Real" Property Titling
According to the National Consumer Law Center, titling your manufactured home as "real" property confers many benefits, including:
- access to more favorable loans,
- possible homestead exemptions,
- increased resale opportunities,
- more consumer protections,
- more favorable tax treatment,
- increased protection in the event of default,
- better titling choices, and
- protection for heirs.
Converting Your Manufactured Home to "Real" Property
If you own the lot that your manufactured home is attached to, you can convert your house to "real" property. In sixteen states, you can convert manufactured homes on leased land to real property. This means you'll stop paying vehicle taxes and fees to your Department of Motor Vehicles (DMV), and start paying property taxes to your county instead. Here is what's involved:
- If you're moving the home to a new site, make sure it's zoned for mobile homes.
- The land should be deeded in your name. If your home is on leased land, the listed states below will still allow you to convert your home to "real" property. You need to have a lease that is recorded with your county clerk or recorder. Below are the states that allow this conversion on leased land as well as their requirements. States not listed don't allow "real" property conversions on leased land:
- Arizona (20-year lease required)
- California (35-year lease required)
- Florida (30-year lease required)
- Idaho (lease must conform to FHA requirements)
- Iowa (home must be in a manufactured housing community)
- Montana (requires permission of the land owner)
- Nebraska (20-year lease required)
- Nevada (lease must conform to FHA requirements)
- New Hampshire (law allows lenders to treat all permanently sited manufactured homes as real property)
- North Carolina (20-year lease required)
- Oregon (20-year lease required)
- South Carolina (35-year lease required)
- Texas (lease must be in compliance with the State Department of Housing and Community Affairs)
- Utah (lease must conform to FHA requirements)
- Washington (35-year lease required)
- Wisconsin (lease must exceed one year)
- Put a permanent foundation on the home. This generally involves removing the axles and wheels, then placing concrete blocks, bracing, and underpinning beneath the home. The house is permanently attached to the foundation, and permanent utilities are in place. The Department of Housing and Urban Development (HUD) has very specific requirements detailed in its publication Permanent Foundations Guide for Manufactured Housing (HUD-4930.3G).
- Inform your finance company of the conversion.
- Surrender the motor vehicle title at your DMV office.
- Complete your local paperwork (usually an affidavit of conversion) and record the deed.
FHA and Conventional Loans for Manufactured Homes
FHA and conventional mortgages are available for manufactured homes that are "real" property. FHA loans are also available for permanently fixed homes on leased land if the lease conforms to HUD's requirements. Conventional financing may not be available for manufactured homes with less than 20% equity, because many mortgage insurers have recently decided not to insure mobile homes. In addition, conventional lenders usually impose risk-based surcharges on owners of manufactured homes. It is probably best to try both conventional and FHA lenders (many mortgage lenders do both kinds of loans) in order to see which has a better deal for you.
FHA Loan Limits and Terms
Loan limits are higher in designated "high-cost" areas of the country. Call 1-800-CALL-FHA for more information.
- Manufactured home only: $69,678
- Manufactured home lot: $23,226
- Manufactured home and lot: $92,904
You can finance a single-wide home on a lot for up to 20 years, or a wider home on a lot for 25 years. Manufactured home lot loans have 15-year terms.
Conventional Home Loan Limits and Terms
Conventional lenders finance manufactured homes at the same limits and terms as "stick-built" houses. In 2010, that limit is $417,000 in most areas for terms of 15 to 30 years. The Manufactured Housing Institute's How to Buy a Manufactured Home and Freddie Mac's manufactured home guidelines can give you an idea of what it takes to get a mobile home loan approved by a conventional lender.
Credit unions, mobile home dealers, banks, mortgage brokers, and other lenders all offer mobile home financing. Talk with several, and compare mortgage rates before choosing a loan. FHA loans must be done though HUD-approved Title 1 mortgage lenders.
So, if you own a mobile or manufactured home and you want to refinance today's lowest mortgage rates, you'll need to consider the costs and benefits of converting your home to "real" property status.
Gina Pogol has been writing about mortgage and finance since 1994. In addition to a decade in mortgage lending, she has worked as a business credit systems consultant for Experian and as an accountant for Deloitte.