There is a common misconception that any home that has its components built in a factory is a manufactured home. There are three types of homes that have much of their construction done in a factory. They are the manufactured home (formerly called a mobile home), modular home, and panelized home. Because of its lower cost compared to traditionally built homes, called stick built homes, the manufactured home is popular in many areas of the country. This is especially true in areas that have low land costs.
The difference is that the manufactured home is almost entirely built and assembled at the factory, then installed at the site. The modular and panelized homes have their components built in the factory, but are assembled at the site.
Another major difference is that the modular and panelized homes are controlled by local building codes. The manufactured home falls under the federal Manufactured Home Construction and Safety Standards (MHCSS). These are Department of Housing and Urban Development (HUD) rules that went into effect on June 15, 1976. Factory-built homes constructed before that time are called mobile homes.
The HUD rules completely cover the building of the manufactured home, including requirements such as how strong of a wind it will withstand and how much weight the roof will hold. HUD works with state agencies to inspect both factories and their products. Each manufactured home has a certification label and data plate naming its manufacturer and contact information, as well as technical data. For example, the plate could state that the home cannot withstand high winds and should not be located within a certain distance from a coast.
When mortgage financing is involved, there are two factors that make the home eligible. First, it must meet the HUD manufacturing standards, and second, it must be a permanently installed structure. Manufactured homes qualify for FHA and VA loans, as well as RHS loans - those made by the Rural Housing Service (RHS) of the Department of Agriculture. Mortgages on manufactured homes can also be sold to Fannie Mae and Freddie Mac.
The requirements for a manufactured home to be eligible for a mortgage that Freddie Mac will buy are typical of those required by lenders in general. However, Freddie Mac considers mortgages on manufactured homes to have a higher risk than other homes. For this reason, it does not buy all the mortgages that it would from traditionally built homes.
Finding the right mortgage for a manufactured home can be a little more difficult. The best way to get mortgage financing for a manufactured home is to talk with local lenders that are established in the area. In many instances, smaller local banks are better than major banks. This is because the major banks may have policies that are set by people far from your town. These executives may not be located in an area where manufactured homes are common and may know little about them.
Just as Freddie Mac says that mortgages on manufactured homes are considered a higher-risk loan, originating lenders will also require a premium in most instances. Expect to pay a higher interest rate than charged for mortgages for traditionally built homes in the same area.
More good information on financing a manufactured home is available from the HUD website. This website gives you access to HUD counselors who can answer specific questions. Specific information for government loans can be found on the websites of the FHA, VA, and RHS.
By typing “manufactured housing loans” into your search engine, you will find thousands of websites offering mortgages and rate quotes. You will easily find the range of interest rates and costs in your area of the country.
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