Can You Refinance A Manufactured Home? Everything You Need To Know

Do you own a manufactured home? The benefits of refinancing a mortgage may have you thinking of lowering your interest rate and monthly payment. However, as the owner of a manufactured home, you might wonder if you can refinance a manufactured home – formerly known as a mobile home – and if this involves any unique qualifications.

You can refinance a loan used to purchase a manufactured home as long as you meet the property and financial requirements for a refinance. Your home must qualify as a manufactured home, and you must meet the financial guidelines set by your lender for credit score and debt-to-income ratio (DTI), among other factors.

Let’s discuss the pros and cons of a manufactured home loan refinance, typical lender requirements, and the steps required to refinance your manufactured home.

Why Should You Refinance A Manufactured Home?

Who typically refinances manufactured homes? Owners of manufactured homes may be looking to lower their interest rate and monthly payments or cancel private mortgage insurance (PMI). Others may be switching to another type of mortgage to get better terms than they have with their original loan.

Some homeowners also refinance this type of prefabricated home to fund major home improvements. For example, with a cash-out refinance, you could get cash equal to 80% of your home’s equity to finance any costly or urgent repairs your manufactured home needs.

Because interest rates are typically lower, refinancing is often a better financing option for homeowners than credit cards or personal loans.

Pros And Cons Of A Manufactured Home Refinance

Like with any investment, you’ll have to consider the pros and cons of refinancing. Before you start the process, check out these upsides and downsides:

Pros

• A potentially lower interest rate and monthly payment: Refinancing allows you to switch to a different loan with a lower interest rate (or at least that’s the goal). This can help you secure a reduced monthly payment and save you thousands of dollars over the life of your loan.
• Funds for major home improvements: With a cash-out refinance on a manufactured home, you can access cash equal to a portion of your home’s equity that you can put toward renovations.
• Increased home value: Home improvements can increase the value of a manufactured home, helping you get a higher price for the home when you go to sell later on down the road.

Cons

• Costs of refinancing: Refinancing does cost money – you’ll have to pay closing costs. Costs will vary, but in some cases, refinancing costs may prevent you from saving money in the long run.
• No guarantee of lower monthly payments: Not every refinance secures you a lower interest rate. Trimming your loan term can mean higher monthly payments.
• Additional accrued debt: By taking out a cash-out refinance for your manufactured home, you’ll have a higher monthly mortgage payment.

How To Refinance A Manufactured Home

Now that you know the potential ups and downs that come with refinancing, we’ll walk you through how to refinance your manufactured home in several steps.

1. Meet The Property Requirements For A Manufactured Home

A manufactured home must meet property requirements to qualify for a mortgage refinance. Here are some criteria your manufactured home has to satisfy:

• The property must be set on a permanent foundation. This deems the home “real property” and makes it eligible for lender financing. If the manufactured home isn’t affixed to a permanent foundation, it’s considered “personal property” and won’t qualify for financing.
• Owners of manufactured homes must own the land the home sits on. If they lease the land, they won’t qualify for a refinance.
• The house must have been built on or after June 15, 1976. The Department of Housing and Urban Development (HUD) states that homes built on or after this date are considered manufactured homes. Those built earlier are considered “mobile homes” and won’t qualify for financing.
• The house must be at least 12 feet wide and have 400 total square feet. It must also be without any towing hitches, wheels or axles.

2. Meet The Financial Requirements For A Manufactured Home Refinance

You must also understand the financial refinancing requirements that lenders typically set and whether you’ll meet those standards. For starters, you must have a minimum credit score of 580 to refinance to an FHA loan. If you’re refinancing to a conventional loan, you’ll typically need a credit score of 620. Credit score requirements will vary by lender.

It’s also common for lenders to require a debt-to-income ratio of no more than 43%. Some lenders may be flexible with this requirement if you’re strong in other areas. You may also face a loan-to-value (LTV) ratio maximum – typically 80%.

3. Reach Out To Your Current Lender

It’s smart to reach out to your current lender before applying with a new one. Your current lender might be more flexible with you than a new lender because of your existing relationship. Plus, you may be able to save on certain fees you’ve already paid for, such as a title search or home inspection. If this information is recent enough, you may be able to bypass some of those extra costs.

You should also reach out to your lender for guidance on which types of refinances will work best for you.

4. Choose Your Refinance Loan Type

The next step is to evaluate all the refinance loan options available to you. Your lender will be a great resource for this decision, but you can also do your own research ahead of time. Here’s an overview of some refinance loan options for owners of manufactured homes:

5. Shop Around For The Best Terms

Having a mortgage with your current lender doesn’t mean you shouldn’t shop around and consider other options. Other lenders may be able to provide you more incentives, like a lower interest rate or cheaper closing costs, so you should always explore what’s available before you apply.

6. Apply For Your Refinance

Once you’ve chosen a lender and a loan type that’s right for you, it’s time to apply. You’ll need a handful of documents, like pay stubs, W-2s and bank statements, to prove you meet the requirements to refinance. Additional documents may be required to prove debts, assets, income or credit history. Your lender will be able to walk you through the application process and any necessary paperwork.

7. Close On Your New Loan

If your application is approved, you’ll move on to the closing process. Here, the details of your home and your finances are finalized. You’ll also have to pay closing costs, which are typically 3% – 6% of your loan amount.

The Bottom Line

Refinancing a manufactured home can help you switch to a more suitable loan, take advantage of lower interest rates or fund value-boosting renovations. Use your lender as a resource to point you toward the right loan option and guide you through the refinancing process.

If you meet the financial requirements and you’re ready to start the refinance process, apply with Rocket Mortgage® today.