VA Lender’s Handbook Ch7 P20 (Manufactured homes)

Loans for Manufactured Homes Classified as Real Estate

 

Many may already be familiar with the fact that the VA will not approve the purchase of a manufactured home unless it is permanently fixed on a foundation and is part of a lot. To further clarify, the manufactured home must be affixed to a lot and considered real estate under state law of the state in which the home resides. While there are some exceptions for manufactured homes that are not permanently affixed to foundations, those are handled differently than manufactured homes classified as real estate. This article only covers how loans for manufactured homes classified as real estate are handled. If you are interested in buying a manufactured home that does not have a permanent foundation, speak directly with a VA-approved lender, and they should be able to work with you.Loans for Manufactured Homes

 

The tricky thing about manufactured homes is that there are several different scenarios that a borrower may want to purchase one in. The borrower may already own a lot and just want to drop a manufactured home on it, they may want to buy a home and a lot to put it on, they may be refinancing an existing manufactured home and putting it on a lot, or they may be refinancing an existing manufactured home that’s already on a lot. The VA Lender’s Handbook provides a convenient table that shows the different scenarios and the maximum loan amount that the borrower can receive in that scenario.

Allowable Loan Purpose Maximum LoanThe loan amount is limited to:
To purchase a manufactured home to be affixed to a lot already owned by the veteran. The lesser of:

  • the sum of the purchase price plus the cost of all other real property improvements, or
  • the total reasonable value of the unit, lot, and real property improvements, plus
  • the VA funding fee
To purchase a manufactured home and a lot to which it will be affixed. The lesser of:

  • the total purchase price of the manufactured home unit and the lot plus the cost of all other real property improvements, or
  • the purchase price of the manufactured home unit plus the cost of all other real property improvements plus the balance owed by the veteran on a deferred purchase money mortgage or contract given for the purchase of the lot, or
  • the total reasonable value of the unit, lot, and property improvements, plus
  • the VA funding fee.
To refinance an existing loan on a manufactured home and purchase the lot to which the home will be affixed. The lesser of:

  • the sum of the balance of the loan being refinanced plus the purchase price of the lot, not to exceed its reasonable value plus the costs of the necessary site preparation as determined by VA plus a reasonable discount on that portion of the loan used to refinance the existing loan on the manufactured home plus authorized closing costs, or
  • the total reasonable value of the unit, lot, and real property improvements, plus
  • the VA funding fee.
An IRRRL to refinance an existing VA loan on a permanently affixed manufactured home and lot. The sum of:

  • the balance of the VA loan being refinanced, plus
  • allowable closing costs, plus
  • up to two discount points, plus
  • the VA funding fee

Note: This is the only type of permanently affixed manufactured home loan that does not require full underwriting and an appraisal. The provisions applicable to IRRRLs apply (see the articles on chapter 6) except the term of the loan may be as long as 30 years and 32 days.

 

So if you’re hoping to purchase a manufactured home and get it on a lot, you’re in good shape. Manufactured homes can be a very attractive option for veteran borrowers looking either for a starter home or a place to quietly retire because they are so much more affordable than building a custom home. Granted, there isn’t as much customization available on manufactured homes, but for a fraction of the cost, customization isn’t too big of a thing to sacrifice for most people. The real trouble with getting a manufactured home is that you also generally need to purchase an empty lot, and empty lots are nearly as expensive (sometimes more expensive) than lots that already have homes on them.

 

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