Home Equity Loan on Manufactured Home: What You Should Know

If you own a manufactured home “also identified as a mobile home,” you may wonder if you can receive a HELOC on it. Yes, but there are specific standards for borrowing equity on a manufactured home, with an advanced minimum credit score and the age of the home. Stay with us at the end of the blogs to learn more about getting a home equity loan for a mobile home.

Why Take Out a Home Equity Loan for a Produced Home?

Some might want to use their home equity to make renovations or combine debt. If their primary mortgage rate is low enough, they might want to avoid refinancing to current rates, which may be higher. On the other hand, a home equity loan lets them take out a second mortgage while still pounding into their present equity.

A home equity loan is a second mortgage in which you receive a lump sum, similar to a cash-out refinance. The main difference is that you do not need to change the rate on your primary mortgage because it is a second mortgage. After accounting for both loans, the amount of HELOC on a mobile home will be created based on lender restrictions, your property worth, and the equity you have in your home. Only the amount borrowed on your home equity loan will be charged at the new rate.

Home Equity Loans for Manufactured Homes: What to Consider.

If you’re considering receiving a home equity loan for your manufactured home, there are many deliberations to consider. Some may impact obtaining a standard mortgage, whether principal or secondary. Others evaluate if the home equity loan can meet your needs.

Age of Your Home
For most borrowers, modular dwellings and mobile homes are equivalent. However, from the perspective of the law and building code enforcement, they are two distinct things.

Mobile houses are those built after June 15, 1976. The Department of Housing and Urban Development (HUD) imposed serious federal quality and safety rules and regulations on that date.

Any home built to the updated standards is called a manufactured home. Homes constructed after this date will have a HUD identifier. If your tag is worn or missing, you can contact your lender to ask for new documents.

To be qualified for traditional financing, your loan must be for a “manufactured home.” Mobile home financing is often only available through specialized lenders.

Permanent Foundation
Most lenders will ask that your home be connected to a solid foundation on the surface on which it stands. It means that the skeleton has to be removed. The foundation gets assessed as part of the assessment procedure. The FHA also has specific foundation-related criteria.

If your fixed foundation fails to meet the essential criteria, or if you do not have one, you may need to apply for a tangible asset loan (for personal property) from a particular lender.

Ownership of Land
Typically, lenders prefer you to be an owner of the property where the prefabricated house is located. You are not permitted to rent space in a trailer park or court. This is caused by the fact that the land accounts for more than half of real estate’s value. The scarce resource is land. If you were standard, the home would reduce in value compared with when you purchased it, and the lender could not recover their investment.

The home is aging with time, and more things may break, and you may need care if you don’t own the property beneath. Like cars, manufactured homes not attached to land sometimes lose value. The value of homes on owned land often rises.

Home Equity Amount
Your home’s worth and the amount of equity you still have in the goods after both loans have been subtracted influence how much you may borrow when you apply for a home equity loan. Many lenders will let you borrow up to 90% of the value of your property. Let’s give a fleeting example to demonstrate what that looks like in real life.

You owe $200,000 on your principal mortgage, and your property is appraised at $350,000. First, $315,000 is calculated by multiplying $350,000 by 0.9. The maximum size of your home equity loan is $115,000 after subtracting your existing $200,000 balance. Learning how much you can borrow to support your financial objectives is crucial.

Rate of Blending
How can one determine if a home equity loan or a cash-out refinancing is the most suitable for them? Here’s where an experienced Home Loan Expert can assist you with a math issue. A weighted average is calculated using the interest rates and amounts of your first and second mortgages.

When the blended rate is higher, you execute a cash-out refinance if, after making the calculations, it turns out to be less expensive to do so. If not, the ideal option would be a home equity loan.

How to Apply for a Manufactured Home Equity Loan

There are many stages related to applying for a home equity loan for your manufactured home.

Gather the Necessary Records
In addition to getting a credit history and score, lenders will want to review your assets and income, just as with any other loan. In light of this, you should have the following on hand:

• W-2s and 1099s for two years
• Two years worth of tax returns
• Reports over the last two months for any accounts used to qualify
• The last two pay stubs

In addition, collecting records that act as a HUD tag alternative or identification of a past foundation inspection will speed up the procedure later.

Examine Additional Loan Conditions
Along with compiling records, you need to figure out what you are qualified for. Most lenders want a higher credit score than a revised cash-out because a home equity loan relies on a second lien. While each lender will have particular requirements, a minimum FICO® score of 680 is an acceptable target. You can expect better terms if you score higher.

Also, you must pay attention to your debt-to-income ratio (DTI). Charging a DTI below 43% will increase your probability of being eligible for the most significant number of alternatives.

Send in the loan application.
When you have all the proof and have looked at the criteria, you can fill out the form and mail it to a lender. If you choose to proceed at this stage, your lender may want a deposit so that they have the money to start the remaining steps. In addition, a loan estimate will be sent to you so that you can compare prices while shopping.

Have Your House Appraised
Finding out how much you can borrow depends on the value of your property, which is determined by a home appraisal. As mentioned, after subtracting both loans, even the most eligible borrowers usually still need to leave at least 10% equity in their house. Additionally, there is an essential health and safety part, so you may have to address specific issues before closing.

Traditionally, a person would come out and do an exterior and interior examination as part of a home evaluation. Desktop, hybrid, and drive-by assessments are still performed, but they are growing more popular as more data becomes accessible online.

Loan Underwriting and Closing
Final underwriting checks will also be finished during your evaluation. Answer your lender’s information requirements immediately to prevent closing delays.

Bring your Closing Disclosure, a picture ID, and any necessary closing costs when closing. Your lender will give a list of the things that you must bring. There is a three-day waiting time before you get the money, as home equity loans and refinances include a right of rescission.

Make Use of Home Equity Loan Funds
You may do anything you want with the money you get from your home equity loan. Since home-secured loans have lower interest rates than credit cards or personal loans, they are usually advantageous for combining debts. The money can also be used for major home renovations or variations.

A home equity loan can be secured for a manufactured house, but it all requires calculations to figure out if this is a better option than a refinance with cash out. In every case, among numerous additional uses, home equity can be utilized for debt consolidation and renovation projects. Most of the time, you’ll need to be on a permanent foundation and own your land to qualify for a HELOC on a mobile home or a home equity loan.