How To Get The Best Home Equity Loan For Your Mobile Home

Owning a mobile home can be an affordable way to enter the housing market However, many homeowners run into challenges when trying to tap into their home equity through loans or lines of credit. Traditional banks and lenders often view mobile homes as riskier investments and have strict eligibility requirements Thankfully, there are still some great options out there for mobile home owners in need of cash. In this article, I’ll explain everything you need to know to get the best home equity loan or line of credit for your mobile home.

Overview of Home Equity Loans and Lines of Credit

Before diving into the specifics around mobile home equity lending let’s review the two main products available

• Home Equity Loan – This is a lump sum loan that you pay back over a fixed term, similar to a mortgage. The interest rate and monthly payments do not fluctuate.

• Home Equity Line of Credit (HELOC) – A line of credit acts more like a credit card. You are approved for a maximum limit but can draw down as needed. Interest rates are variable.

In both cases, your home acts as collateral for the loan. The lender places a lien against your property. If you default, they can foreclose and force a sale to recover their money.

You can use equity lending for almost any purpose – debt consolidation, home improvements, emergency expenses, etc. The key is having enough equity built up to qualify.

Equity Challenges With Mobile Homes

Mobile homes differ from traditional stick-built homes in a few key ways that make building equity more difficult:

• They depreciate over time rather than appreciate.
• They are classified as personal property rather than real estate.
• Owners often lease the land rather than owning it.

This means mobile homes often don’t gain much value. And when they do, lenders worry that won’t last long-term. They view mobile homes as riskier collateral.

As a result, it can be harder to get approved for financing and interest rates tend to be higher to offset the perceived risk.

Tips for Qualifying for a Mobile Home Equity Loan

While difficult, it is still possible to get approved with the right lender. Here are some tips:

• Have at least 20% equity – Most lenders want to see you have at least 20% equity already built up in the home to get approved. This means having no more than an 80% loan-to-value ratio on your existing mortgage.

• Own the land – Not owning the land is one of the biggest barriers. If you own the land your mobile home sits on, it’s viewed much more like real property.

• Doublewide or larger – Singlewide homes have a harder time qualifying. Lenders prefer homes that are at least 600 sqft.

• Good credit – Aim for a credit score over 700 if possible, although some lenders may accept lower.

• Prove permanency – Removing the hitch/wheels and having a foundation helps prove it’s not transient.

As you can see, overcoming the “mobile” perception is key to getting approved. The more permanent your home appears, the better.

Finding the Right Mobile Home Equity Lender

Mobile home financing is a specialty product. Only a handful of banks and lenders offer equity loans and lines of credit for manufactured housing. Here are some top options to consider:

• Credit Human – Offers loans up to $25K for multi-section units if land is owned. Max age of home is 20 years old.

• 21st Mortgage – One of the largest manufactured housing lenders. Offers cash-out refinancing as well.

• Cascade Loans – Specializes in mobile home equity loans. Offer loans for single, double, and triple wide homes.

• Manufactured Nationwide – Offer cash-out and streamline refinancing for mobile homes not in parks.

• MH Advantage – Credit union focusing on mobile and manufactured housing lending.

I recommend calling a few lenders to compare options and interest rates. Each lender has its own eligibility guidelines so be sure to ask about requirements.

Borrowing Alternatives To Consider First

While possible to get approved, mobile home equity loans and lines tend to have high rates and closing costs. Before applying, you may want to explore some other options:

• Cash-out refinance – If rates are lower than when you bought, you may be able to refinance and take some cash out at the same time.

• Personal loan – An unsecured personal loan is easier to qualify for than home equity financing, although rates are higher.

• Sell an asset – Can you sell a car, boat, RV, or other valuable asset to get the cash you need?

• Side hustle income – Taking on part-time work could generate cash faster than financing in some cases.

• Home improvement loan – Some credit unions offer loans specifically for mobile home improvements.

• Borrow from 401(k) – You can take a 401(k) loan rather than borrowing against your home equity.

• Credit cards – Putting expenses on 0% intro APR cards can buy you some time to pay for projects.

Always compare interest rates and weigh the pros and cons before deciding how to access extra cash from your mobile home’s value.

5 Key Tips for Getting Approved

Based on what we’ve covered, here are five key tips to boost your chances of getting approved for a mobile home equity loan:

1. Shoot for a 720+ credit score.

2. Make sure you own the land your home sits on.

3. Pick a doublewide or larger unit if possible.

4. Remove any wheels/hitches and make it appear permanent.

5. Shop around with a few specialty lenders to compare options.

Following these tips sets you up for success. But having realistic expectations is also important. Approval is never guaranteed. Make sure you have a backup plan if you aren’t able to tap into your home equity as hoped.

What To Do If You Get Denied

Don’t get too discouraged if your initial loan applications get rejected. Here are some tips if you get denied:

• Ask the lender for the specific reasons for the denial. Seeing this in writing helps you learn what criteria you failed to meet.

• Review your credit reports for errors that may be dragging down your score. Dispute any inaccuracies.

• Get pre-qualified with multiple lenders to see if you have better luck elsewhere.

• Hold off on applying again until you improve your financial profile. Pay down debts, increase income, etc.

• Consider alternative borrowing options or ways to come up with the cash.

• If owning the land is the main obstacle, talk to the land owner about purchasing the lot your home sits on. This converts it to real property.

• As a last resort, discuss selling your mobile home and using the funds to buy a conventional stick-built home that’s easier to finance against.

Stay persistent and creative, and you can eventually figure out a way to tap into your hard-earned equity, even though it may require some compromises.

Using Equity Wisely Once Approved

If you do get approved, be smart about how you use the funds. Some tips:

• Set a reasonable draw amount. Don’t tap everything and put your ownership at risk.

• Use it only for worthwhile home upgrades that may boost resale value.

• Pay down high-interest debts to save money long-term.

• Set up automatic payments so you never miss dues and damage your credit.

• Have a repayment plan and stick to it. Don’t let new equity debt linger.

• Refinance once eligible to get better rates. Don’t let lenders take advantage of your credit history.

• Consult a tax pro – you may lose some deductibility if not using funds for the home directly.

Alternatives To Move Beyond Mobile Home Living

As we’ve explored in this article, borrowing against a mobile home can be challenging. If your goal is simply to upgrade to a larger, more permanent house, there may be easier options than equity loans. Here are a few to potentially discuss with a financial advisor:

• Sell the mobile home and use the cash to help buy a traditional stick-built house. You’ll get more long-term gain in equity and value this way in most cases.

• Rent out your current mobile home at a profitable monthly rate. Use the cash flow to pay the mortgage on a new primary residence purchased conventionally. Keep the mobile until the remaining mortgage is paid off, then sell or keep renting it out for added income.

• Take out a personal loan for a smaller amount needed for a down payment on a house. Pay this back slowly while renting out the mobile home you still own.

• Downsize to a smaller mobile home that’s newer and easier to finance against. Use the leftover profit to put towards a down payment on a house.

• Move the mobile to land you purchase and convert it to real property, making finance options open up.