How A Mobile Home Refinance Works

Getting a mortgage for a mobile or manufactured home can be its own ordeal. There are specific requirements for factory-built homes that many lenders have before they’ll give you a mortgage. That goes for refinancing, too. Here we’ll talk about mobile home refinancing, the different requirements you must meet and some of the options you have.

Borrowers who own a mobile home or manufactured home have the ability to refinance their mobile home loan. They may want to refinance to get a better interest rate or do a cash-out refinance and pull money out of their equity.

The technical difference between mobile and manufactured homes is when they were built. A factory-built home built prior to June 15, 1976, is a mobile home, whereas it’s a manufactured home if it was built after this date. What makes these homes appealing is their affordability. This can also make them good candidates for refinancing. Work with your lender to determine if refinancing your mobile or manufactured home is a viable option for you.

There are some steps homeowners need to take when pursuing a mobile home refinance. Here’s a basic outline of what you need to do.

1. Consult With Your Mortgage Lender

Because financing mobile and manufactured homes is different than most homes, it can be beneficial to discuss a refinance with your current lender first. If you decide to go with another lender, know that many of them will require that your home be affixed to land that you own. This turns your mobile or manufactured home into “real property.”

2. Pick A Loan To Refinance To

If your mobile home is properly attached to a foundation on land that you own, your loan options increase. Here are some of your refinance choices:

• Conventional home loan refinance: Conventional home loans are the most common mortgages. They typically have higher credit score requirements, but fewer costs than government-backed loans.
• FHA streamline refinance: If your manufactured home meets HUD guidelines, you can qualify for an FHA refinance. If you have an existing FHA loan, you may qualify for an FHA streamline refinance, which is a simplified, cheaper and quicker refinance process.
• VA streamline refinance: If you have a VA Loan, you can qualify for a VA streamline refinance, or IRRRL, which is also a simplified and faster option.
• USDA streamline refinance: Similar to FHA and VA streamlines, a USDA streamline refinance lets you refi your USDA loan for a better rate through a simplified process.

3. Apply For The Loan Refinance

Once you’ve decided on how to refinance, you’ll need to apply. All borrowers will need to submit proof of income and assets, identification and tax forms. These specific documents can include bank statements, pay stubs, investment account statements, W-2s and 1099s.

Depending on the loan and the lender, you’ll need to meet different requirements. These typically include meeting a minimum credit score, having a low debt-to-income ratio (DTI) and having enough equity in your home.

4. Pay Closing Costs

After you’ve applied and your refinance closing is on the horizon, you need to know that you'll have to pay closing costs. For most loans, you can expect to pay 2% – 6% of the loan amount in closing costs. These cover a new appraisal, a new title search, legal fees, mortgage discount points and other fees.

Before you reach closing, your lender will supply you with a Closing Disclosure. This document lays out all of the costs you can expect. Your closing costs can be paid upfront or you may have the option to roll them into your mortgage. Note that if you roll them into your mortgage, you will pay interest on them, which can add up over the loan term.

There are a few requirements you’ll need to meet to refinance your manufactured home. One major requirement for a mortgage is for the manufactured home to be on a permanent foundation. Manufactured homes that aren’t on a permanent foundation are considered chattel property or personal property, and you’ll have fewer loan options. You also can’t lease the land – you must own it.

Borrowers need the right credit score for the refinance they’re applying for. For most loans, the minimum credit score required is between 580 – 620. On top of that, you’ll need to have a qualifying DTI. While DTI requirements vary, lower than 43% is a good starting point.

There are advantages and disadvantages to mobile home refinancing. Whether it’s a good idea for you depends on the existing mortgage, your finances and what you’re trying to accomplish. Here are the pros and cons you should consider before applying.

Pros

• Lower monthly mortgage payment: Homeowners can end up with a lower monthly mortgage payment with a refinance. This can happen if you extend the loan term (from, say, 15 years to 30 years) and/or if you refinance to a lower interest rate.
• Ability to pay other expenses: If you cash out your home equity, you can use it to pay off other expenses like student loans, car loans, medical bills or credit card debt
• Possibly obtain a lower interest rate: If you’re changing to a shorter term, or if interest rates were higher when you first got your mortgage, refinancing can help you get a lower interest rate. This could drastically reduce the amount you pay over the length of the loan.

Cons

• Responsible for paying closing costs: You’ll likely have to pay some closing costs when refinancing. The lender will likely require an appraisal and title search. There are also other fees you’ll have to pay.
• Might not obtain a better interest rate: Depending on the market at the time of refinance, interest rates can be higher than the original loan.
• May have a higher monthly payment: If you take cash out of your equity when you refinance, you’ll have a higher monthly mortgage payment.

To refinance a mobile home or manufactured home, you’ll need to own the land the home is on and have it on a permanent foundation to qualify for most mortgages. When you refi, you’ll need to pay closing costs that cover the cost of a new appraisal, title search and any additional fees.

Whether or not refinancing is right for you depends on the market, your finances and what you’re trying to accomplish with a refinance. Whether you’re looking to take cash out of your equity or looking to lower your monthly payment, refinancing can be a positive option for your mobile or manufactured home.

Interested in refinancing? Apply online with Rocket Mortgage® to explore your financing options.