Manufactured homes provide an affordable alternative to traditional site-built houses, allowing homeowners to own property at a fraction of the cost. However, when it comes to accessing home equity through financial products like a Home Equity Line of Credit, many manufactured homeowners find themselves wondering if they qualify. Getting approved for a HELOC on a manufactured home can be challenging and dependent on various factors, including home classification, foundation type, lender requirements, and state regulations. Since taking out a HELOC on a manufactured home can be more challenging than obtaining one on a traditional house due to lender restrictions, property classification, and home value considerations.
Challenges of Getting a HELOC on a Manufactured Home
While it is possible to obtain a HELOC on a manufactured home, the process is often more complex compared to traditional site-built homes.
When shopping for a home equity line of credit online, it is imperative that you find the lenders that actually allow HELOCs on manufactured homes, otherwise you are wasting your time.
Some common challenges include:
HELOC Lender Restrictions
Many conventional banks and credit unions do not offer HELOCs on manufactured homes due to the perceived risk associated with depreciation. Unlike site-built homes, which generally appreciate in value, manufactured homes can lose value over time, making lenders cautious about offering credit lines secured by these properties. Most home equity lenders do not offer equity loans and HELOCs on manufactured homes. The RefiGuide can connect you to the best HELOC lenders that offer second mortgages on manufactured and mobile homes.
Property Classification Issues
One of the biggest hurdles to obtaining a HELOC is whether the home is classified as real or personal property. If a manufactured home is still titled as personal property (like a vehicle), lenders are unlikely to approve a HELOC or manufactured home equity loan. Homeowners may need to convert their title to real property by permanently affixing the home to land they own.
Higher HELOC Interest Rates and Stricter Terms
Even when a home equity lender does offer a HELOC on a manufactured home, borrowers often face higher interest rates and stricter terms. This is due to the increased risk perceived by lenders, as well as the limited resale market for manufactured homes.
How to Improve Your Chances of Getting a HELOC on a Manufactured Home
Although obtaining a home equity loan or HELOC on a manufactured home can be difficult, there are steps homeowners can take to improve their chances:
1. Ensure the Home is Classified as Real Property
If your manufactured home is still classified as personal property, work with your local county recorder’s office to convert it to real estate. This typically involves securing a permanent foundation and surrendering the mobile home title.
2. Improve Your Credit Score
Lenders will look at your creditworthiness when evaluating your HELOC application. A credit score of 620 or higher is generally required, though some lenders may demand a score of 680 or above.
3. Increase Home Equity
The more equity you have in your home, the more likely a lender will approve your home equity line of credit. Lenders typically require at least 20% equity, though some may have stricter requirements.
4. Work with Specialized HELOC Lenders
Not all banks and credit unions offer HELOCs for manufactured homes, but some specialized lenders cater to this market. Research financial institutions that have experience with manufactured home lending. There are quite a few mortgage lenders that offer programs to refinance a manufactured home, but very few companies will offer home equity lines of credit.
5. Explore Alternative Financing Options
If you struggle to get a home equity line of credit, consider alternatives such as:
- Personal Loans: Unsecured loans that do not require home equity. Many mobile home equity loans are actually personal installment loans.
- Cash-Out Refinancing: Replacing your current mortgage with a new loan (cash out refinance) that allows you to receive money.
- Chattel Loans: Loans specifically designed for manufactured homes not affixed to real estate.
What Classifies as a Manufactured Home?
Manufactured homes, sometimes confused with mobile homes, are factory-built homes constructed after June 15, 1976, in compliance with the U.S. Department of Housing and Urban Development (HUD) standards. Unlike modular homes, which are also factory-built but meet local building codes and are assembled on-site, manufactured homes are built on a permanent steel chassis and transported to their final location. Learn more about manufactured home loan requirements.
To be eligible for a HELOC, a manufactured home must typically meet certain requirements:
- Permanent Foundation: Most lenders require the home to be affixed to a permanent foundation.
- Title Conversion: The home must be classified as real property rather than personal property.
- HUD Compliance: The home must comply with HUD’s Manufactured Home Construction and Safety Standards.
- Age of the Home: Many lenders require the home to be built after a certain year, often within the last 20 to 30 years.
The Future of HELOCs on Manufactured Homes
As the demand for affordable housing grows, lenders may become more open to offering HELOCs on manufactured homes. With advancements in manufactured home construction and increasing property values in some regions, these homes may gain greater acceptance in the lending market. However, until broader changes occur, homeowners seeking a home equity loan or HELOC must be diligent in meeting lender requirements and exploring alternative financing solutions.
Takeaways on Manufactured Home HELOCs
Can you get a HELOC on a manufactured home? The answer is yes, but it requires navigating lender restrictions, ensuring property classification as real estate, and maintaining strong creditworthiness. While challenges exist, homeowners who take proactive steps can improve their chances of securing this valuable financial tool. As the market for manufactured homes evolves, the availability of HELOCs may expand, offering more opportunities for homeowners to access their home equity.
References
Consumer Financial Protection Bureau. (2022). Manufactured housing finance: New insights from the Home Mortgage Disclosure Act data.
U.S. Department of Housing and Urban Development. (2021). HUD and Manufactured homes.
About RefiGuide
Bryan Dornan is a financial journalist and currently serves as Chief Editor of RefiGuide.org. Bryan has founded several mortgage and marketing companies and has worked as a loan officer and mortgage broker in the industry for over 25 years and has a wealth of experience in providing mortgage clients with the highest level of service in the industry. Bryan's continual focus is to promote affordable home-ownership to consumers like you across the United States. He also writes for RealtyTimes, Patch, Buzzfeed, Medium and other national publications. Find him on Twitter, Muckrack, and Linkedin
More articles by RefiGuide