Can You Refinance Mobile Homes? A Look at Your Options

Refinancing a mobile home involves replacing an existing loan with a new one. This can lead to more favorable terms, a lower interest rate, or access to built-up equity.

Understanding Mobile Home Eligibility

Mobile home refinancing eligibility depends on its classification as real or personal property. Homes permanently affixed to land and “de-titled” are real property, qualifying for traditional mortgage refinancing. Mobile homes on leased land or not permanently attached are personal property, with limited refinancing options.

Many traditional mortgage programs, including FHA, VA, and conventional loans, require a permanent foundation. This foundation must securely attach the home to the ground, and the home must be without axles, wheels, or a towing hitch to be considered real property.

Lenders also examine the home’s age and condition. Manufactured homes built after June 15, 1976, must adhere to U.S. Department of Housing and Urban Development (HUD) construction and safety standards. They typically need to be at least 12 feet wide and have a minimum living space of 400 square feet. The home must be structurally sound and meet current safety codes, evidenced by a HUD certification label or data plate.

De-titling is necessary to change a mobile home’s classification from personal to real property. This legal procedure combines the home’s title with the land’s deed, making it eligible for real estate financing. De-titling involves submitting documentation, such as the original certificate of title and an affidavit of affixation, to state and county offices. This conversion offers advantages, including lower interest rates and increased property value, as real property appreciates more consistently than personal property.

Borrower and Loan Qualification Criteria

A borrower’s financial standing plays a role in loan qualification. Lenders assess credit scores. Conventional loans often require a minimum FICO score of 620. FHA loans may allow scores as low as 500, with 580 or above qualifying for better terms. VA loans, while not having a strict minimum set by the VA, lenders typically require scores between 580 and 620.

Lenders require proof of stable income and employment history to ensure repayment ability. This involves providing pay stubs, W-2 forms, tax returns, and bank statements. Lenders evaluate the Debt-to-Income (DTI) ratio, comparing monthly debt payments to gross monthly income. Most lenders prefer a DTI ratio of 43% or lower. Government-backed programs like FHA and VA may allow higher ratios, up to 50%.

Equity requirements are important, especially for cash-out refinancing. Lenders require at least 20% equity for cash-out options. For rate-and-term refinances, conventional loans may require a minimum down payment or equity of 3% to 5%.

Available Refinancing Loan Types

Several loan types are available for refinancing mobile homes. FHA loans, insured by the Federal Housing Administration, offer flexible options. FHA Title II loans are for manufactured homes permanently affixed to land and meeting HUD standards, requiring a credit score of at least 580 for a 3.5% equity position, and typically have a maximum DTI ratio around 43%. FHA Title I loans are for home improvements and apply to mobile homes considered personal property, having shorter terms. Streamline refinance options are available for existing FHA loan holders, requiring less documentation and sometimes no appraisal.

VA loans are for eligible veterans, active-duty service members, and surviving spouses. These loans feature no down payment when the borrower has full entitlement. For a VA loan, the manufactured home must be real property, on a permanent foundation, meet HUD standards, and serve as the borrower’s primary residence. While the VA does not set a minimum credit score, lenders typically require 580 to 620. The VA Interest Rate Reduction Refinance Loan (IRRRL) is a streamline option for those with existing VA loans.

Conventional loans, not government-insured, are available for manufactured homes treated as real property. These loans require stricter credit criteria, often a minimum credit score of 620. Equity requirements for conventional loans range from 3% to 5% for a rate-and-term refinance. Cash-out refinances may require at least 35% equity.

Chattel loans are for mobile homes considered personal property and not permanently affixed to land. These loans have higher interest rates, ranging from 5.99% to 14%, and shorter terms, up to 25 years. Despite higher rates, chattel loans offer more flexible qualification requirements, such as a minimum credit score around 575 and a maximum DTI ratio of 50%. They are useful for homes in leased land communities where traditional mortgages are not applicable.

The Mobile Home Refinancing Process

The mobile home refinancing process begins with the initial application. Borrowers gather financial documents, including pay stubs, W-2 forms, tax returns, and bank statements, to verify income and assets. These are submitted to a lender specializing in mobile home financing to assess eligibility and determine loan terms.

Following the application, the loan enters the underwriting phase. The lender reviews submitted documents to verify income, assets, and credit history. Underwriters confirm the borrower meets financial criteria for the chosen loan program.

An appraisal and sometimes an inspection are required to determine the mobile home’s market value and condition. A certified appraiser evaluates the property’s condition, size, features, upgrades, and location, comparing it to similar homes to establish fair market value. The inspection, if required, focuses on the home’s structural integrity and safety standards.

Upon completion of underwriting and appraisal, the loan moves to approval. The borrower receives a loan estimate and a Closing Disclosure, detailing the new loan’s terms, interest rate, monthly payments, and closing costs. Closing costs range from 3% to 6% of the loan amount, including appraisal, title search, and administrative fees. These costs can be paid upfront or rolled into the loan. The final step involves signing documents, paying remaining closing costs, and disbursing funds to pay off the existing loan.