Manufactured Home Refinance With FHA Loans Part 2

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In part 1, we noted that many manufactured homes are purchased with loans which have terms that make refinancing an absolute necessity. Owner financing or bank financing with high rates and/or balloon notes need to be refinanced as quickly as possible.

Let’s now explore the qualification and processing requirements for using an FHA insured loan to refinance a manufactured home. Most of these items should be handled by your mortgage professional, however it is useful for you to be aware of the guidelines yourself.

The first step is to determine whether the home was built after 1976 according to HUD Code. This is very easy. For each section of the home, you will find a HUD certification label attached to the end of the home. Adherence to the HUD code is the major difference between modular homes and manufactured homes.

This label will look like this:

There will be an identification number stamped into the label and later, the FHA appraiser will be required to verify that this label is affixed to the home.

Sometimes, the label has been removed or covered over by new siding. If this turns out to be the case, there is no reason to panic. The Institute for Building Technology and Safety (IBTS) keeps a record of all HUD label numbers. You can access their website at http://www.ibts.org/label_req.htm and have them retrieve the label information for a cost of $50 or $75 if you want it done in a rush.

Now that you know the home was built according to HUD guidelines, the next step is to determine whether the foundation meets guidelines. This step is a little more complicated since HUD’s “Permanent Foundations Guide for Manufactured Housing” is over 400 pages long! The highlights of the requirements are that the home must anchored down appropriately, the tongue and wheels must be removed and the home must be on an enclosed permanent foundation. An engineer’s certification that the foundation meets the requirements is required. A common mortgage processing hold-up occurs when the engineer’s letter of certification does not specifically state that the foundation meets the requirements of the Permanent Foundations Guide for Manufactured Housing. To avoid being overcharged, make sure that the engineer understands that you are asking for a foundation certification and not a more extensive inspection.

HUD has set out some of the most common problems which prevent the home from being eligible for FHA financing on their website. (link updated 11/11/08) Here is the list:

The most common permanent foundation errors delaying the approval of an FHA-insured loan for a manufactured home are:

1. The foundation footings aren’t set below the frost line
2. Dry-stacked piers are used instead of required piers with mortared head and bed joints
3. The use of ground anchors - because FHA doesn’t accept these as a permanent attachment
4. Any permanent foundation lacking an engineer’s certification, even if it complies with all other elements
5. Vinyl skirting used as an enclosure that doesn’t meet ALL of the following FHA requirements:
   1. Properly enclosed crawl space with a continuous permanent foundation-type construction (similar to a conventionally built foundation, i.e., concrete, masonry or treated wood)
   2. Designed to resist all forces without transmitting the building superstructure to movements or effects caused by frost heave, soil settlement, or the shrinking or swelling of expansive soils
   3. Adequately secured to the perimeter of the unit to exclude entry of vermin and water
   4. Allowance for proper ventilation of the crawl space

Problem number 2 above - dry stacked piers - is one of the most common problems. Manufactured home dealers frequently skip paying for this when they know the purchaser is using conventional financing. The cost to bring this up to standards can be easily be in the $500-$600 range. However, this can often be financed into the loan and the lower 30 year fixed interest rate is well worth it.

In the next installment, we will cover how an FHA manufactured home mortgage is impacted by the borrower’s credit, loan to value and other borrower qualification factors.

Carl Pruitt is an FHA mortgage expert with 23 years experience in the mortgage/real estate businesses.