Unlocking Equity in Your Manufactured Home With a Home Equity Loan

As the owner of a manufactured home, you may be wondering if you can access the equity you’ve built up in your property. The answer is yes – you may qualify for a home equity loan or line of credit using your manufactured home as collateral. This can provide you with funds to make home improvements, consolidate debt, or cover major expenses. However, there are some specific requirements your manufactured home must meet to be eligible.

In this article, we’ll explain what a home equity loan is, the criteria your manufactured home must meet to qualify as collateral, and the step-by-step process of applying for a manufactured home equity loan We’ll also address common questions surrounding these types of loans. Read on to learn more about unlocking equity in your manufactured property!

What is a Home Equity Loan?

A home equity loan is a type of loan that allows you to borrow against the equity you’ve built up in your home. Equity refers to the current market value of your home minus any outstanding mortgage debt.

For example, if your manufactured home is worth $100,000 and you owe $60,000 on your mortgage, you have $40,000 in equity ($100,000 – $60,000 = $40,000). With a home equity loan, you can access some or all of that equity – essentially borrowing against the value of your property.

The funds from a home equity loan can be used for almost any purpose – home renovations, debt consolidation, college tuition, medical bills, and more. The loan is secured by your home, meaning your property acts as collateral. This also results in lower interest rates compared to other types of consumer loans.

Home equity loans come in two main forms:

• Home Equity Loan – This is a one-time lump sum loan that you repay with fixed monthly payments over a set repayment term.

• Home Equity Line of Credit (HELOC) – This operates more like a credit card, providing you with access to a revolving line of credit up to a certain limit. You can draw from the line as needed and make monthly interest-only payments on the amount borrowed.

Manufactured Home Requirements for Collateral

Manufactured or mobile homes can be used as collateral for a home equity loan provided they meet certain criteria. Here are the main requirements a manufactured home must fulfill to qualify

• Affixed to a permanent foundation – The home must be permanently attached to a foundation on the land not simply resting on blocks. Proper foundations include poured concrete slabs or permanent masonry foundations.

• Not located in mobile home park – The manufactured home cannot be situated in a mobile home or trailer park community. It must be on land that you own.

• You own the land – You must hold title to the land on which the manufactured home is affixed. The property must be titled as real estate, not as personal property.

• De-titled – The process of “de-titling” or surrendering the vehicle title must be completed. This officially detaches the home from vehicle title classification and converts it to real estate. Requirements vary by state.

• Proper zoning – The land and home must conform to local zoning laws and land-use regulations for manufactured housing in that area.

If you are unsure whether your manufactured home meets these collateral conditions, consult with a lender specializing in manufactured home loans. They can review property specifics and determine eligibility.

The Manufactured Home Equity Loan Process

If your manufactured home satisfies the collateral criteria, you can move forward with applying for a home equity loan. Here is an overview of the typical process:

1. Check your equity – Determine how much equity you have built up in your manufactured property. Online calculators can help you estimate this. Remember, equity equals market value minus mortgage debt.

2. Review loan options – Research different lenders and loan programs to find the best rates and terms for your situation. Compare fees, APRs, loan amounts, and other factors.

3. Complete the loan application – You will need to provide detailed information on income, employment, assets, debts, credit history, property details, and the requested loan amount.

4. Home appraisal – The lender will send out an appraiser to assess your property and confirm the current market value. The appraised value determines how much equity you can borrow against.

5. Loan approval – After underwriting your application, the lender will inform you whether you are approved and finalize the loan details. This is also when you’ll lock in your interest rate.

6. Closing – During closing, you’ll sign final loan documents and the funds will be distributed. The lender will place a lien against your home as security for the loan.

Expect the process to take anywhere from 2 to 6 weeks from application to funding. Having all required documents ready can help expedite approval.

Frequently Asked Questions

If you are considering a manufactured home equity loan, you likely have some lingering questions. Here we address some of the key issues that often come up:

Can I get a home equity line of credit on a manufactured home?

Unfortunately, most lenders do not offer HELOCs on manufactured homes. You may be able to qualify for a fixed-rate home equity loan, however.

How much equity can I borrow?

Most lenders will let you borrow up to 85% of your home’s appraised value minus your current mortgage balance. Some set lower maximums at 80% loan-to-value.

What credit score do I need?

Each lender sets its own underwriting standards, but you will generally need a minimum credit score in the mid-600s to qualify and get decent rates. The higher your score, the better.

Can I get an FHA Title I loan?

Yes, FHA Title I loans are a special mortgage program specifically for manufactured homes. They offer more flexible credit guidelines but have loan limits capped at $25,000 – $60,000 depending on the region.

Are rates higher than standard mortgages?

Rates may be 0.5 – 1% higher compared to rates for site built homes, due to the higher risk lenders associate with manufactured properties. Excellent credit can help you secure the lowest rate.

How long does it take to get loan funds?

If you submit all required documentation promptly, it typically takes anywhere from 2 – 6 weeks from application to funding. Closing and receiving funds can happen more quickly once approved.

Can I get a loan with land as collateral?

Yes, you can pursue a straight land loan using just the real estate parcel as security, without the home included. Loan amounts are based on land value and may have more restrictions.

Are these loans assumable?

Very few manufactured home loans are assumable, where a new buyer can take over the existing mortgage. Most will need to qualify for their own new financing.

Benefits of Unlocking Home Equity

There are many good reasons to consider a home equity loan or line of credit if you own a qualified manufactured home:

• Access cash for major expenses without selling your property
• Consolidate and pay off higher interest rate debts
• Finance important home improvements and renovations
• Avoid private mortgage insurance (PMI) required on standard loans
• Potentially deduct mortgage interest on your taxes (consult a tax advisor)
• Take advantage of currently low interest rates
• Build financial flexibility and liquidity into your monthly budget

Just be sure to carefully consider the costs, loan terms, and payoff timeline so the equity loan makes sense for your needs and budget.

Consult a Manufactured Housing Loan Expert

As you can see, manufactured homes can be eligible for equity loans and lines of credit, opening up borrowing options beyond FHA Title I loans. However, specialized knowledge about these types of property is required. We recommend speaking with a lender experienced in underwriting equity loans for manufactured housing.

An expert lender can guide you through the process and help determine if your specific home qualifies as collateral. They can also match you with the optimal loan program for your financial situation. Contact a manufactured home financing specialist today to discuss whether a home equity loan is right for your needs!