How A Mobile Home Refinance Works

Getting a mortgage for a mobile or manufactured home can involve a different set of steps compared to getting a mortgage on a traditional single-family home. There are specific requirements for these types of properties that many lenders have before they’ll give you a mortgage. That goes for refinancing, too.

A mobile home refinance might be right for you if you want to adjust your loan terms, lower your monthly mortgage payments or borrow money against the equity in your home. Beyond your reason for refinancing, you’ll also want to consider the different requirements, pros and cons. 

We’ll go over the basics of what kinds of mobile and manufactured homes can be refinanced, what loans are available, and what you need to do to refinance. But first, it’s important to understand that a mobile home and a manufactured home, though similar, are not the same things.

What’s The Difference Between A Mobile Vs. Manufactured Home?

Let’s go over the difference between mobile and manufactured homes. Technically, the difference lies in the date when they were built. A factory-built home built prior to June 15, 1976, is a mobile home, whereas it’s a manufactured home if it was built after this date. This is because the Department of Housing and Urban Development (HUD) implemented construction and safety standards that year for this type of home.

Can You Refinance Loan For A Mobile Home?

Borrowers who own a mobile home or manufactured home have the ability to refinance their mobile home loan. You may choose a rate-and-term refinance to get a better interest rate or do a cash-out refinance to pull money out of your home equity.

One of the factors that makes these types of homes appealing is their affordability. This can also make them good candidates for refinancing. Work with your lender to determine if a mobile or manufactured home loan refinance is a viable option for you.

Manufactured Home Mortgage Refinancing Requirements

There are a few requirements you’ll need to meet to refinance your mobile or manufactured home. One major requirement for a mortgage is for the manufactured home to be on a permanent foundation. Manufactured homes that aren’t on a permanent foundation are considered chattel property or personal property, and you’ll have fewer loan options. You also can’t lease the land from a mobile home park – you must own it.

Borrowers also need the right credit score for the refinance they’re applying for. For most loans, the minimum credit score required is 580 – 620. On top of that, you’ll need to have a qualifying DTI. While DTI requirements vary, lower than 43% is a good starting point.

Understanding The Basics of Mobile Home Ownership

Before you start the process of mobile home refinance, you should understand the different types of ownership.

Mobile Home Ownership Types

Mobile home ownership is a little more complicated than ownership of a traditional home. With a traditional home, you own the land and the structure (dwelling) on the land. This can also be true with mobile homes, but not always. Mobile home ownership always pertains to the dwelling but may or may not include the land that the mobile home or manufactured home sits on.

Real Property Vs. Personal Property

Another important fact to know when you’re considering a mobile home refinance is that mobile homes and manufactured homes are classified as either real property or personal property. Real property refers to land and anything attached to it. Personal property, on the other hand, refers to anything that can be moved. Why is this important? Because you can't refinance a home that is considered personal property, but you can refinance a home that is considered real property. How can you tell if your home is real property or personal property? Manufactured homes are typically attached to the foundation, but mobile homes are not, so that’s a good place to start. Find out which category your mobile home is under, as this will significantly impact your financing options.

Types of Mobile Home Refinancing Options

When it comes to choosing a loan for your mobile home refinance, you have quite a few options. Let’s take a look at conventional loans, FHA loans, VA loans and USDA loans.

Conventional loans

Conventional loans are not backed by a government agency and can be acquired through a variety of different financial institutions. Conventional loans usually require a credit score of 620 or higher with a maximum debt-to-income ratio (DTI) of 50%.

FHA loans

Backed by the Federal Housing Administration, FHA loans can be a great option for refinancing a mobile home due to their requirements being easier to meet than those of conventional loans. FHA loans typically require a credit score of 580 or higher and a debt-to-income ratio of 50%  or lower, but, depending on the lender, sometimes your DTI can be as high as 57%.

VA loans

Eligible service members, veterans, and certain members of the National Guard and Reserves who are looking to refinance their mobile homes might benefit from using a VA loan. Backed by the U.S. Department of Veterans Affairs, VA loans offer favorable terms compared to conventional loans. For example, the minimum credit score is 580 and a debt-to-income ratio ranging from 45% to 60%.

USDA loans

Backed by the U.S. Department of Agriculture, USDA loans can be used to refinance mobile home loans and can be a great option due to their aim at rural and suburban home buyers. This type of loan requires a credit score of 640 or higher and a DTI of 43% or lower. You can see if a home is eligible by visiting the USDA’s eligibility map. Rocket Mortgage® does not offer USDA loans, but we’re here to help you determine the best option for your specific needs and financial situation.

Steps To Refinance Your Mobile Home

There are several steps homeowners may need to take when pursuing a mobile home refinance. Here’s a basic outline of what you can expect from the process.

1. Consult With Your Mortgage Lender

Because financing mobile and manufactured homes is different from financing most homes, it can be beneficial to discuss a refinance with your current lender first. If you decide to go with another lender, know that many of them will require that your home be affixed to land that you own. This turns your mobile or manufactured home into “real property.”

Depending on the loan program, your manufactured home might also have to be a certain number of square feet in order to qualify.

2. Choose A Loan Program

You'll have a wider variety of loan options if your mobile home is properly attached to a foundation on land that you own. Here are some of your refinance options:

• Conventional mortgage refinance: Conventional home loans are the most common mortgages. They typically have higher credit score requirements, but fewer costs than government-backed loans.
• FHA Streamline refinance: If your manufactured home meets guidelines set by HUD, you may qualify for an FHA refinance. If you already have an FHA loan, you may qualify for an FHA Streamline refinance, which is often a cheaper and quicker refinance process.
• VA Streamline refinance: If you have a VA Loan, you can qualify for a VA Streamline refinance, also called a VA IRRRL, which is also a simplified and faster option.
• USDA Streamline refinance: Similar to FHA and VA streamlines, a USDA Streamline refinance lets you refi your USDA loan for a better rate through a simplified process.

3. Apply For The Loan Refinance

Once you’ve decided on how to refinance, you’ll need to apply. All borrowers will need to submit proof of income and assets, identification and tax forms. These specific documents can include bank statements, pay stubs, investment account statements, W-2s and 1099s.

Depending on the loan and the lender, you’ll need to meet different requirements. These typically include meeting a minimum credit score, having a low debt-to-income ratio (DTI) and having enough equity in your home.

4. Pay Closing Costs

After you’ve applied and your refinance closing is on the horizon, you'll have to pay closing costs. For most loans, you can expect to pay 3% – 6% of the loan amount in closing costs. These cover a new home appraisal, a new title search, legal fees, mortgage discount points and other fees.

Before you reach closing, your lender will supply you with a Closing Disclosure. This document lays out all of the costs you can expect to pay for the refinance. Your closing costs can be paid upfront or you may have the option to roll them into your new mortgage loan. Note that if you roll them into your loan, you’ll pay interest on them, which can add up over the loan term.

The Pros And Cons Of Mobile Home Refinancing

Mobile home refinancing comes with a few advantages and disadvantages. Whether it’s a good idea for you depends on your current mortgage, your finances and what you’re trying to accomplish. Here are the pros and cons you might consider before applying.

Pros Of Mobile Home Refinancing

• Lower monthly mortgage payment: Homeowners can end up with a lower monthly mortgage payment with a refinance. This can happen if you extend the loan term (from, say, 15 years to 30 years) and/or if you refinance to a lower interest rate.
• Ability to pay other expenses: If you cash out your home equity, you can use it to pay off other expenses like student loans, car loans, medical bills or credit card You might also use it toward home improvements or renovations.
• Possibly obtain a lower interest rate: If you’re changing to a shorter term, or if interest rates were higher when you first got your mortgage, refinancing can help you get a lower mortgage This could drastically reduce the amount you pay over the life of the loan.

Cons Of Mobile Home Refinancing

• Responsible for paying closing costs: You’ll likely have to pay some closing costs when refinancing. The lender will typically require an appraisal and title search. There are also other fees you’ll have to pay.
• Might not obtain a better interest rate: Depending on the market at the time of the refinance, interest rates can be higher than the original loan.
• May have a higher monthly payment: If you cash out your equity when you refinance, you’ll have a higher monthly mortgage payment.

Alternative Mobile Home Refinancing Options

Refinancing a mobile home classified as personal property involves a different process than refinancing one that’s affixed to land. Lenders may offer chattel loans for mobile homes without permanent foundations.

How Do You Refinance With A Chattel Loan?

In order to refinance, homeowners can apply for a chattel loan program. These loans typically have shorter term lengths and higher interest rates than traditional mortgage refinances. However, they can be a viable option for mobile home owners looking to lower their monthly payments or secure a lower interest rate.

How Do You Refinance With a Personal Loan?

Mobile home owners may also have the option to refinance to a personal loan. Personal loans often have fewer restrictions compared to other mortgage refinancing options. Other advantages of refinancing to a personal loan include having faster approval timelines, lower closing costs and shorter term lengths.

The Bottom Line: Mobile Home Refinancing Is Possible

To refinance a mobile home or manufactured home mortgage, you’ll need to own the land the home is on and have it on a permanent foundation. When you refi, you’ll need to pay closing costs that cover the expenses of a new appraisal, title search and any additional fees.

Whether refinancing is right for you depends on the real estate market, your finances and what you’re trying to accomplish with a refinance. If you’re looking to take cash out of your equity or lower your monthly payments, refinancing can be a positive option for your mobile or manufactured home.

Interested in refinancing? Start an application online with Rocket Mortgage to explore your home financing options.