Here in the United States Tax season is upon us, or tax refund/sale season as some people like to think. As a result I have seen quite a few advertisements for brand new shiny manufactured homes that you could use your shiny new tax refund as a down payment for. Using your tax refund as a down payment on a home could be a great idea, even as a down payment on a manufactured home – however I would like to offer the following words of caution.
There are very steep regulations held by most lenders regarding the re-sale of manufactured homes that you should take into consideration. While it might not affect you during the current purchase, it sure will if for some reason you should need or want to re-sale the home at some point in the future.
The Federal Housing authority or FHA has several loan programs that make home ownership possible for a lot of people with options like down payment assistance and are available for much more than just site built homes or condominiums. FHA loans can also be used to purchase mobile homes, manufactured homes and/or modular homes and are heavily used in our areas as well as held by a lot of lenders as the “golden standard”.
Manufactured homes are often sold and transported in sections to be assembled on-site. Some buyers may wonder if the assembly counts as "construction", and would such "construction" reclassify the manufactured home in the eyes of the FHA?
In the eyes of the FHA a manufactured home differs from a site built home due to the nature of its assembly. Site Built or new construction property is built "on-site" whereas a manufactured home is "a structure that is transportable in one or more sections. In traveling mode, the home is eight feet or more in width and forty feet or more in length."
These homes are registered with the MVD and are regulated under the rules known as Federal Manufactured Construction and Safety Standards and must be labeled accordingly. To be eligible for FHA mortgage insurance, the manufactured home must be built after June 15, 1976 and there must be a certification label to prove it.
The only manufactured homes that may be classified as real estate or "real property" are those which have a permanent foundation built to FHA standards. They must be considered a "permanent dwelling" or the home is considered personal property (like a vehicle) for tax purposes and is ineligible for a 30-year FHA mortgage. According to FHA requirements, "the mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years from the date amortization begins."
For Buyers: I am not trying to discourage you from purchasing a manufactured home from one of the local dealers. I am trying to give you information that can educate, and empower you in your purchase. If this is the route you want to go, please try to put your investment on a permanent foundation that is certified to FHA standards. This will protect your investment should you ever choose or need to sell in the future. The other lender requirement I see often is that the home can only have been moved one time. From the dealership to its permanent location. There are always hurdles to jump through with each home purchase, however, these two lender conditions make it very difficult if not impossible for a buyer to purchase your home from you.
For Sellers: If you are in a place where you own a manufactured home currently not on a permanent foundation that has been moved more than once and would like to sell your home. Talk to a local Licensed Real Estate professional. Every home and situation is different, they may be able to help you problem solve a way to sell your home that works for you and a buyer.
The take away? Be smart about your investment, do your homework, find a professional you can trust to give you the information you need that will educate and empower you regarding common regulations and the local market. There are several site-built homes or manufactured homes currently on the market for sale in similar price ranges to the manufactured homes I have seen advertised.