If you own a manufactured home â also known as a mobile home â you might be wondering if you can qualify for a home equity loan or line of credit. The answer is yes, but there are requirements specific to borrowing equity on a manufactured home, such as a higher minimum credit score and the homeâs age. Read on to learn more about getting a home equity loan on a mobile home.
Manufactured homes, also known as mobile or modular homes, can be an affordable way to buy a house. With prices much lower than site-built homes, manufactured homes offer homeowners the opportunity to enter the housing market while keeping costs low.
However accessing equity in a manufactured home through a home equity line of credit (HELOC) can be challenging compared to a traditional site-built house. As personal property rather than real estate manufactured homes are seen as higher-risk collateral by many lenders.
In this comprehensive guide we’ll cover everything you need to know about getting a HELOC loan for your manufactured home including
Overview of HELOC Loans
- What is a HELOC?
- How HELOCs work
- Pros and cons of HELOC loans
Manufactured Home HELOC Requirements
- Manufactured home criteria
- Land ownership
- Homeowner criteria
- Documentation needed
Finding a Lender Willing to Offer a Manufactured Home HELOC
- Challenges finding a lender
- Specialized manufactured home lenders
HELOC vs. Home Equity Loan for Manufactured Homes
- Comparing the two types of loans
- Which option may be better
Alternative Borrowing Options
- Personal loans
- Cash-out mortgage refinancing
Final Tips for Getting Approved
Let’s dive in!
What is a HELOC and How Does it Work?
A home equity line of credit (HELOC) allows homeowners to borrow against the equity they have built up in their home. It works like a credit card, with a set credit limit and revolving balance.
With a HELOC, you can withdraw money as needed up to your credit limit. You’ll pay interest only on the amount you actually use, not the total limit. This flexibility makes HELOCs helpful for handling unpredictable expenses.
For example, if repairs are needed, you can withdraw exactly the amount you need for the work. Or, if you have fluctuating income, you can use the HELOC to cover expenses in lower-earning months.
HELOCs typically have variable interest rates, so your monthly payments will change along with rate changes. You’ll draw from the HELOC during the “draw period”, usually 10 years, then enter the “repayment period” where you no longer access funds and must pay back the balance over 10-20 years.
Pros:
- Only pay interest on what you use
- Flexible for unpredictable costs
- Interest may be tax deductible
Cons:
- Variable rates carry risk
- Limited draw period
- Closing costs to open
Now let’s look at the specific requirements for manufactured home HELOC loans.
What are the Requirements for a Manufactured Home HELOC?
Since manufactured homes are seen as higher risk collateral than traditional houses by lenders, you’ll face stricter requirements to qualify for a HELOC loan. Both your home and your finances will be closely evaluated.
Manufactured Home Criteria
Lenders will want to see certain features and characteristics to consider your manufactured home adequate for a HELOC:
- Double-wide or larger – Single-wide homes often cannot qualify.
- Built after 1976 – This indicates construction meets HUD safety standards.
- Moved only once – From dealer lot to current location, to preserve structural integrity.
- Affixed to permanent foundation – With towing gear removed.
- You own the land – Not in a community with land rent.
- HUD certification – Verifies home meets codes.
Meeting manufactured home requirements makes the collateral less risky in lenders’ eyes. Next let’s look at what’s expected of you as the borrower.
Homeowner Financial Criteria
As the borrower, you’ll also need to meet certain financial standards to be approved for a manufactured home HELOC:
- Credit score of at least 660 – Lenders want to see good credit management. Scores below 640 will likely be denied.
- Low debt-to-income (DTI) ratio – Usually below 50% total monthly debt payments vs. income.
- Loan-to-Value (LTV) ratio less than 90% – Compares loan amount to home value. Lower is better.
- 2+ years of steady income/employment – Stability lowers your risk as a borrower.
Having these finances in good shape makes you less likely to default on the HELOC loan in the lender’s view.
Documentation You’ll Need to Apply
To verify you and your home meet the above criteria, lenders will require documents including:
- HUD certification label
- Proof home was built after 1976
- Title showing you own the land
- Income verification – W2s, tax returns, paystubs
- Bank statements
Providing proper paperwork avoids delays so be sure to gather what’s needed before starting your application.
Difficulty Finding a Lender Willing to Offer a Manufactured Home HELOC
With stricter requirements and perceived higher risk, many lenders shy away from offering HELOC loans for manufactured housing. Local banks and credit unions you already use will often decline applications.
Larger banks also frequently deny HELOC loans for manufactured homes. Their computerized underwriting systems may automatically rule out manufactured homes as collateral.
This leaves homeowners frustrated as they get turned down repeatedly trying to tap home equity they have built up. Thankfully, there are some lenders specializing in manufactured home lending that can help.
Specialized Lenders to Contact for Manufactured Home HELOCs
While limited, there are lenders who understand manufactured homes and will offer HELOC loans to qualified borrowers:
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Credit Human – Offers HELOCs up to $25,000 on multi-section manufactured homes less than 20 years old with 65% LTV or lower.
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Cascade Loans – Has programs for double, triple, and single-wide manufactured homes. Must speak to a loan officer for eligibility requirements.
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21st Mortgage – One of the largest manufactured housing lenders in the U.S. Has options for borrowers with credit scores as low as 600.
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Triad Financial Services – Specializes in manufactured home equity lending. Can provide pre-qualification and rate quotes.
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AAA Fair Credit Foundation – Non-profit lender offering manufactured home HELOC loans and other programs to underserved communities.
Reaching out to one of these specialized lenders is key to finding a HELOC program that will work for your manufactured home. Now let’s compare HELOCs to another home equity option: home equity loans.
HELOC vs Home Equity Loan for Manufactured Homes
Along with HELOCs, home equity loans are another way to tap equity in your manufactured home. How do you choose? Let’s look at the key differences:
Home Equity Loan
- Fixed interest rate
- Fixed monthly payments
- Receive lump sum
- Limited flexibility
HELOC
- Variable interest rate
- Pay interest only on what you use
- Withdraw increments as needed
- Repayment flexibility
For many manufactured homeowners, the flexibility and interest savings of a HELOC make it the better option. With large, predictable expenses, a fixed-rate home equity loan can also be a good fit.
Consider whether you need access to funds for ongoing costs where a HELOC would help, or a large lump sum where a home equity loan may work better. Your financial advisor can help weigh the pros and cons for your situation.
Alternative Borrowing Options Beyond Manufactured Home Equity
If you aren’t able to qualify for a HELOC or home equity loan on your manufactured home, don’t give up. Here are two other options to consider:
1. Personal Loans
Personal loans from online lenders provide set lump sum payments from $1,000 up to $50,000 or more. Terms are usually 2-7 years. Rates are often lower than credit cards.
Lenders like Upstart, Upgrade, and LendingClub offer personal loans with minimal collateral requirements. This can provide accessible financing even when your manufactured home equity is out of reach.
2. Cash-Out Refinance
Refinancing your existing manufactured home loan through an FHA, VA or conventional mortgage can allow you to pull cash out at lower rates. This converts equity into spendable funds.
Companies like 21st Mortgage, Vanderbilt Mortgage, and LoanDepot specialize in manufactured home refinancing options. Rates are still near record lows in 2023, making now an opportune time to explore refinancing your mobile home loan.
Final Tips to Get Approved for a Manufactured Home HELOC
Getting a lender to approve a HELOC loan for your manufactured home can be frustrating. Use these tips to boost your chances:
- Shop with specialized manufactured housing lenders only
- Highlight safety features – fire sprinklers, storm shelters, etc.
- Maintenance – keep home and landscaping in great shape
- Ask lender for specific reasons if denied and correct any issues
View Your Refinancing Options
Find a refinance lender that will work with your unique financial situation.
Meet Home Equity Loan Requirements
Both you and your manufactured home must meet specific requirements to get a home equity loan.
âLenders will commonly stipulate that the home be a double-wide or larger and be built after 1976,â says Rose Krieger, a Senior Home Loan Specialist at Churchill Mortgage in Spokane, Washington.
Why must it be built after 1976? Thatâs when the U.S. Department of Housing and Urban Development began enforcing the National Manufactured Housing Construction and Safety Standards Act of 1974, which introduced stricter construction and safety requirements.
Most lenders offering manufactured home equity loans also insist that the home has been moved only from the dealership to its current foundation, Krieger says. Lenders worry that the homeâs structural integrity could be compromised if it has been moved more than once, she says.
The homeâs title also must have been eliminated. âTitle elimination on a manufactured home just means that now the title to the home also includes the land that the home is on,â Krieger says.
In other words, the borrower has to own the underlying land and the foundation. The wheels, axles and towing hitch used to move the home must have been removed.
In addition to the lender requirements for your manufactured home, the borrower must meet financial requirements.
- Maximum debt-to-income ratio: Your DTI ratio shows how much of your gross monthly income is required to pay your debts. This can be as high as 45% to 50% for some lenders, but many will want it under 40%, Krieger says.
- Minimum credit score: Because manufactured home loans are riskier, lenders may require a higher credit score. While some lenders will accept a score as low as 620, most want to see 660 or even 700 and higher, Krieger says.
- Maximum loan-to-value ratio: The LTV ratio compares your loan amount to your manufactured homeâs value. Depending on the type of loan you want, this can be as high as 80% to 90%, Krieger says. If you have a first mortgage or are seeking a home equity line of credit, expect this number to be lower.
About Home Equity Loans for Mobile Homes
FAQ
Is it possible to get a HELOC on a manufactured home?
What credit score is needed for a HELOC loan?
Is it hard to get a HELOC now?
Is HELOC cheaper than home equity loan?
Where can I get a manufactured home equity loan?
Traditional banks and credit unions are often the go-to choice for homeowners seeking home equity loans. Many of these financial institutions offer loan programs for manufactured homes, although the availability and terms may vary. Here’s what you need to know about obtaining a manufactured home equity loan from traditional banks and credit unions:
What are the requirements for a mobile home equity loan?
In most cases, the following requirements must be met before a mobile home equity loan or line of credit is approved: There must be equity in the home, meaning the first mortgage is no more than 80-90% of the home’s market value. The home must be double-wide or larger (in some cases, at least 600 square feet).
Should I refinance my home if I have a HELOC?
If you’re looking at options other than a HELOC or home equity loan on your manufactured home, consider: Cash-out refinance: Refinance your mortgage and take equity out of your home. A cash-out refinance can be helpful if you have a low interest rate on your loan and want to use the equity in your home to fund other projects.
What credit score is needed for a manufactured home equity loan?
Your credit score is an important factor that lenders consider when determining eligibility for a manufactured home equity loan. A higher credit score generally indicates a lower risk, increasing your chances of approval. While specific credit score requirements vary, lenders typically look for a score of 620 or higher.