Mobile homes can be an attractive and affordable option and HUD has some innovative new ways to help you buy one
In recent years, thanks to improvements in quality and the regulations governing manufacturing and sales practices, mobile homes have become an attractive way to own your own home. In some cases, it’s nearly impossible to tell the difference between a mobile home and a more traditional “permanent” dwelling. One thing both types of homes have in common in recent years is that both of these housing sectors were subject to severe stress and losses in the aftermath of the collapse of the nation’s housing market. The blight of unprecedented foreclosures hit owners of mobile homes as hard (in some cases harder) than owners of permanent dwellings.
The thin silver lining in all of this is that just as there are bargains to be found sifting through the nation’s stock of foreclosed permanent dwellings, the same is true for mobile homes. The federal agency responsible for monitoring and expanding the nation’s supply of affordable housing (the federal Department of Housing and Urban Development, or HUD) has a specific program that oversees the supply of the nation’s mobile home market. It also has a few innovative loans and financing programs you can take advantage of. Today, looking into mobile homes HUD owns or manages can be an excellent way to become a homeowner.
Here’s a brief update for 2014:
Foreclosed mobile homes: HUD has many to choose from
HUD manages an inventory of thousands of foreclosed homes for sale. These homes can be found in every state in the country. In some communities, there are actually more foreclosed manufactured or mobile homes in HUD’s inventory than there are permanent homes. Let’s first dispense with any possible confusion there may be in definitions.
For HUD’s purposes, it uses these definitions. A manufactured home (formerly known as a mobile home for HUD’s purposes) is built to the Manufactured Home Construction and Safety Standards (HUD Code) and displays a red certification label on the exterior of each transportable section. In most cases, these homes are built in sections of two or three and assembled and secured on a property site. Manufactured homes must be constructed according to HUD codes. The HUD Code, unlike conventional building codes, requires manufactured homes to be constructed on a permanent chassis. (Modular homes are constructed to the same state, local or regional building codes as site-built homes.)
Other types of systems-built homes include:
- Panelized wall systems
- Log homes
- Structural insulated panels
- Insulating concrete forms.
For the purposes of this discussion, we’ll be referring to mobile homes.
HUD has foreclosed mobile homes for sale because the purchaser/original homeowner had a Federal Housing Administration (FHA) insured mortgage or loan, a Veterans Administration (VA) loan or a Rural Housing Services (RHS) loan in place for procuring the dwelling. (All three of these agencies are separate departments working with or under HUD jurisdiction.)
When the homeowners defaulted on these loans, HUD paid the lender and took possession of the properties and the works with selected real estate agents and lenders to sell these properties.
Since these properties are in default and distress, you may get a home at a very low price. In general, you’ll already start ahead of the game, as mobile homes are generally less expensive than permanent stick-built homes. There are unique considerations to undertake, though, and HUD actually has excellent advice and service to help you navigate the process.
HUD maintains a detailed inventory of foreclosed properties you can review online and find information on how to visit local properties and which HUD-approved real estate agent is listing and representing the property. Visit the site, click on your state, follow the direction and start reviewing available properties near you.
In addition to the “traditional” way in which you can start the purchasing process when you find an attractive property, HUD has three unique ways you can buy a foreclosed property:
- Neighbor Next Door – HUD's Good Neighbor Next Door initiative is designed to encourage the renewal and revitalization of communities and neighborhoods hit hard by foreclosures. It provides an opportunity for law enforcement officers, firefighters, emergency medical technicians and teachers to purchase homes in these communities. HUD provides a substantial incentive in the form of a 50 percent discount off the list price of eligible properties. (Bids for these properties must be submitted by a HUD-registered real estate broker on behalf of prospective buyers in these categories.)
- Homes for Nonprofits – the FHA offers community and faith based nonprofit organizations the opportunity to purchase HUD homes at discounts up to 30 percent. With this discount, local nonprofit organizations invest in their communities through property rehabilitation and can then resell these properties to first-time homebuyers and low to moderate income families.
- Buy a home for $1 – HUD’s Dollar Homes Initiative helps local governments foster housing opportunities for low to moderate income families and address specific community needs by offering eligible prospective buyers the opportunity to purchase qualified HUD-owned homes for $1 each. (These homes generally come with requirements for the new homeowners to substantially upgrade these homes to meet local codes and to maintain these homes.)
HUD has mobile homes in its inventory eligible for each of these specific programs.
Financing is available
Not only does HUD have an impressive inventory of foreclosed mobile homes you can review and even bid on, HUD oversees a number of very attractive loan programs to assist you in getting one. Just as HUD takes over the care and sale of foreclosed properties acquired due to a foreclosure on a loan from FHA, VA and RHS, these same agencies can assist you on the other side of this transaction. Mobile homes are eligible for government-insured loans offered by the FHA, VA, and the RHS. There is some confusion at times when prospective homebuyers pursue these loans. HUD does not issue home loans, and neither do any of these agencies. What these individual agencies do is insure these loans through private, qualified lenders. Because of the backing of the federal government, private lenders issuing these loans are required to offer more generous terms (for interest, down payment and even assistance in cases of financial struggles) for these loans.
FHA mobile home loans
While there are two FHA programs through which prospective homebuyers may pursue financing for the purchase a foreclosed property HUD owns (Title I loans and Title II loans) only Title I loans may be issued for the purchase of foreclosed mobile homes owned by HUD. These Title I programs offer coinsurance. HUD insures private lenders against losses of up to 90 percent of the value of a single loan, while the lender retains responsibility for the remaining 10 percent. Prospective buyers are required to make a down payment and the interest rates (while far more favorable than traditional loans for mobile homes) will be negotiated between the borrower and the lender.
Title I mobile home loans may be issued for:
- Up to $92,904 for a manufactured home and lot
- Up to $23,226 for a lot only
A HUD-approved appraiser must appraise the lot. (The dollar limits for combination and lot loans may be increased up to 85 percent in HUD-designated high-cost areas.) The maximum loan term for a HUD backed mobile home loan is:
- 20 years for a single-module home and lot
- 25 years for a multiple module home and lot
- 15 years for a lot only
HUD mobile home eligibility requirements
Homes built prior to June 15, 1976, even with modifications, do not meet the HUD standards and cannot be accepted as compliant with the HUD Code for mobile homes. As the homeowner, you may find a licensed engineer willing to inspect your home for compliance with your state's housing code. FHA does not insure mortgages on manufactured homes built prior to June 15, 1976. Most other mortgage insurance firms follow FHA's policy.
An eligible mobile home must:
- Meet the Model Manufactured Home Installation Standards.
- Carry a one-year manufacturer's warranty if the unit is new
- Be installed on a homesite that meets established local standards for site suitability
- Have adequate water supply and sewage disposal facilities available.
The proceeds of a Title I manufactured home loan may not be used to finance furniture (for example, beds, chairs, sofas, lamps, rugs, etc.). However, built-in appliances and equipment and wall-to-wall carpeting are eligible for financing.
Eligible borrowers must:
- Have sufficient funds to make the minimum required down payment
- Be able to demonstrate that they have adequate income to make the payments on the loan and meet their other expenses
- Intend to occupy the mobile home as their principal residence
- Have a suitable site on which to place the manufactured home. (The home may be placed on a rental site in manufactured home park, provided the park and lease agreement meet FHA guidelines.)
- The home may be situated on an individual homesite owned or leased by the borrower
If you’ve been considering looking into the inventory of foreclosed properties near you as either an investment or an option for home ownership, you may want to broaden your horizons by considering mobile homes in that search. Today’s mobile home is built to much higher standards than previous generations and you can even get the support (and possible financial support) from the federal government. Enlisting the assistance of a licensed and seasoned real estate professional will help you in this endeavor and in this respect, Repy! can be of some assistance. We can connect you to local real estate agents familiar with the market and skilled enough to help you find a home that best fits your needs.