According to Freddie Mac’s Primary Market Mortgage Survey, there were about $1.6 trillion in first-lien refinance originations in the first half of 2021. This was a 33% increase in refinance activity compared to the first half of 2020. Borrowers who refinanced their first-lien mortgages in the first half of 2021 lowered their mortgage rate on average by more than 1.20 percentage points.
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Table of Contents
What are the Differences Between Refinancing a Traditional Home and a Manufactured Home?
First off, not all lenders lend to manufactured homeowners. You will want to find a lender specializing in this type of lending.
And within this niche, the manufactured lenders may not have the specific products that fit your particular scenario. The type of mortgage refinancing you get will come from your credit scores, qualifications, and financial goals.
Manufactured Home Refinance Interest Rates
Conventional loans: A traditional mortgage is a “conforming” loan that meets Fannie Mae’s or Freddie Mac’s requirements. Rates are approximately 7.439% for a 30-year fixed; 7.357% for a 20-year fixed; 6.777% for a 15-year fixed; 6.06% for a 10-year fixed as of February 2023. Bankrate compiles a list of average mortgage rates that updates daily, so be sure to check the current interest rates. You will need a minimum credit score of 620 to qualify. Find some of the top manufactured home lenders here.
Fannie Mae: A Fannie Mae loan is a government-sponsored enterprise (GSE) that purchases mortgage loans from smaller banks or credit unions and guarantees these loans on the mortgage market for low- to median-income borrowers. The current rate for a 15-year fixed-rate mortgage is 5.51% as of February 2023. A minimum credit score of 620 is required.
Freddie Mac: Freddie Mac doesn’t originate or service home mortgages itself. Instead, it buys home loans from banks and other commercial mortgage lenders. Rather than lending directly to borrowers, Freddie Mac operates in the U.S. secondary mortgage market, buying loans that meet our standards from approved lenders. Those lenders are then, in turn, able to provide more loans to qualified borrowers and keep capital flowing into the housing market. Freddie Mac then pools the mortgages it buys into securities, which they sell to investors worldwide.
FHA (Federal Housing Administration) loans: An FHA loan is a government-backed mortgage loan that allows you to buy or refinance a home with a looser financial requirement. They offer both fixed-rate and adjustable-rate and 15 or 30-year terms. Applicants must have a minimum credit score of 580 to qualify for an FHA cash-out refinance. As of February 2023, the national average 30-year FHA refinance APR is 7.25%. Note that to be eligible for an FHA refinance, you have to currently have an FHA-backed mortgage loan.
VA loan: This loan is only available to military veterans and active service members with the Department of Veterans Affairs (VA). The VA doesn’t set a required minimum credit score for a VA loan. Most mortgage lenders will want to see a credit score above 620. As of February 2023, the average 30-year VA refinance APR is 7.078%. You can refinance from a conventional loan to a VA loan in order to take advantage of the looser approval requirements.
USDA loan: This allows United States Department of Agriculture (USDA) borrowers to lower their interest rates and change their loan terms. No appraisal is required. A 30-year fixed USDA loan is approximately 7.185% as of February 2023. There is no 15-year fixed option or adjustable-rate mortgage (ARM) program available via the USDA. The minimum score required is 640.
To learn more about the different types of loan options for manufactured homes, check out this video:
Refinance Options If You Don’t Own the Property on Which Your Mobile Home is Located
When a home is affixed to land, it is considered real property. When it is not, it is regarded as personal property. You’ll have more limited refinance options if your manufactured home is on leased land or at a mobile home park.
FHA Title 1 loans
FHA Title 1 loans are the federal government’s way of helping low- to moderate-income homeowners finance critical home improvements if they don’t otherwise qualify for a traditional home equity loan. These loans are backed by the FHA but are issued through private lenders with their own money. Interest rates will be comparable to a regular FHA loan, but loan amounts are capped.
To qualify, you must:
- Use the mobile home as your primary residence
- Have it set on a permanent foundation
- Lease from an FHA-compliant site
- Have an FHA-eligible lease
A chattel loan is used to purchase a manufactured home or other movable pieces of personal property, such as machinery or a vehicle. Interest rates will be higher than other options that range from 7.75%-10% with terms up to 20 years.
Personal loans have higher interest rates than other loans because they are unsecured loans deemed higher risk to the lender. Interest rates can range from 4.49% to 35.99% and from 12 to 60 months or longer. But you don’t have to provide any collateral, so your mobile home won’t be at risk if you default. You’ll need a minimum credit score of 500 to qualify.
Learn more about how to refinance a modular home without land here.
How to qualify for the best refinancing rates
- Check your credit reports: Review them, and fix any errors. The higher the credit score, the better your rate will be
- Do you own the land? You’ll have more loan options if your home is permanently affixed to the land
- Figure out what kind of refinance you want: There is the cash-out refi, cash-in refi, rate and term refi, reverse mortgage, no closing cost refi, and the short refinance
Ultimately, the type of mortgage refinancing you will come down to your loan type, qualifications, and financial goals.
Determine Which Type of Home You Need to Refinance
The terms may seem interchangeable. For lenders, there are significant differences:
- Manufactured homes: Manufactured homes are usually built in a factory. Traditional homes are built onsite. Once completed, manufactured homes are moved to their final destinations on a truck and placed onto foundations, making them permanent. You will need to own the land on which the manufactured home foundation is built. It could be single-wide or double-wide.
- Modular home: Modular homes are primarily constructed in a factory, but the house is transported in pieces to the home site, where construction is finished. Once built, you can’t move a modular home.
- Mobile home: A mobile home is built in a factory but on a permanently attached chassis. It is then transported to the site by being towed or on a trailer. They are often left always or semi-permanently in one place but can be moved. You can rent space in a mobile home community or own the land on which it’s located.
To refinance a manufactured home using a traditional mortgage, the home must meet these requirements:
- Have at least 400 to 600 square feet of living area
- Be permanently affixed to a foundation
- Be taxed as real property
- Display a Department of Housing and Urban Development (HUD) certification label, a HUD data plate, a HUD seal, or an MH Advantage sticker confirming the home meets HUD safety standards.
Choose the type of loan, an FHA, conventional, chattel, or personal loan. You’ll have to compare the different lenders’ offerings.
READ MORE: How to refinance
Start Looking for Refinancing Options
Mobile home interest rates and manufactured home loan rates and fees can vary widely between lenders. Look for a loan that has low fees and interest rates.
Consider talking to a mortgage broker. If you do not understand the different types of mortgages, it can save you a lot of time and money by streamlining the whole process.
Choose a Mortgage Lender
Since manufactured home loans differ from traditional mortgages, you need to find a lender that supports them.
- Rates: Mobile home loan rates are generally slightly higher than traditional mortgage rates; you look for reasonable rates and fees. The lower the interest rate, the less you’ll pay over time
- Loan options: Make sure your lender offers the type of loan you need
- Down payment requirements: Many manufactured home loans have more flexible down payment requirements. If you haven’t saved much money, look for a low-down-payment option
- Credit requirements: Many manufactured housing lenders are willing to work with poor to fair credit borrowers
- Geographic availability: Not all lenders operate in all 50 states
- Customer service: Pay attention to review sites and comments
Submit Your Loan Application
Make sure your application is complete and that you know any down payment requirements and have the funds available.
Before you apply
- Obtain an estimate for the amount you’ll need
- Decide on the type of manufactured home loan you want
- Make sure you meet minimum credit score and debt-to-income ratio requirements
- Secure quotes from different lenders to compare rates
Understanding the Cost of Refinancing a Manufactured Home
New homes can cost significantly less than traditional homes. The average price of a manufactured home is $118,700 in July 2021. The average price for a single-wide is $76,000, and the average cost for a double-wide is $137,800.
- Down payment
- Land cost
- Property taxes and other escrow
- Closing costs
- Loan fees
READ MORE: What are Truth-in-Lending requirements?
What Credit Score Do I Need to Refinance a Manufactured Home?
A 500 or 600 range could get you approved. A credit score lower than 500 may not qualify at all. Higher credit scores will always get you better rates and terms. Credit scores in the 700s and 800s will get the lowest interest rates. Many places offer free credit scores, so you’ll know where you stand.
What are the Benefits of Refinancing Your Manufactured Home?
You could get a lower interest rate, get into a fixed rate and be able to lower your monthly payment are common reasons. Other reasons are: borrowing for home improvements or purchasing land to permanently affix the home to the ground.
Alternatives to Refinancing
- Borrow from a friend or relative
- Look for a seller who is willing to finance your loan
- Apply for refinancing through a credit union
The Bottom Line
While there are nuances in manufactured home lending, the type of loan you choose will largely depend on financial goals, credit history, and income.
An essential aspect of your refinancing decision is the why. Be sure to compare the pros and cons, including the interest rate and any fees or penalties associated with ending one loan and opening another.
There are two main reasons loans on manufactured homes are less likely to refinance than their site-built counterparts. Manufactured homes have smaller loan sizes and more considerable fees, producing fewer cost savings. And most manufactured homeowners with chattel loans rarely do mobile home refinancing because they have fewer options.
Because of the lower cost of materials and faster build timeline than traditionally built homes, manufactured homes are priced between 10% and 35% less per square foot than traditional homes. So, it also boils down to inequitable financing opportunities that widen homeownership gaps and economic divides.
The difference between a fixed-rate and an adjustable-rate mortgage is that, for fixed rates, the interest rate is set when you take out the loan and will not change. With an adjustable-rate mortgage, the interest rate may go up or down.
Many ARMs will start at a lower interest rate than fixed-rate mortgages. This initial rate may stay the same for months, one year, or a few years. When this introductory period is over, your interest rate will change, and your payment amount will likely go up.
Search locally and online on Google. Put in “local mortgage broker.” You can ask friends, family, and real estate professionals. Don’t forget to compare online reviews and shop around. A mortgage broker can save you time and money if you don’t know much about the different types of mortgages. Verify if a mortgage broker is licensed by checking your state regulator or the Nationwide Mortgage Licensing System & Registry.