Manufactured Homes: HUD Code, Title and Financing

What counts as a manufactured home

Under 24 CFR 3280.2, a manufactured home is a structure “transportable in one or more sections.” In traveling mode it is “8 body feet or more in width or 40 body feet or more in length,” or “320 or more square feet” when set up. It is “built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation.” Self-propelled recreational vehicles are excluded.

HUD’s handbook states: “All Manufactured Homes built since June 15, 1976 must comply with these standards.” The standards are the HUD Code at 24 CFR Part 3280.

Proof of compliance is the HUD Certification Label, “a two inch by four inch aluminum plate permanently attached.” It sits at one end of each section. If the label is missing, lenders must obtain label verification from the Institute for Building Technology and Safety (IBTS).

Real property or personal property

This distinction drives most financing choices. HUD’s Title I rules say a manufactured home:

• “may be treated as Personal Property or Chattel when it retains its vehicle title (or certificate of title)”; or
• “may be treated as realty by the state or locality in which the Property is located, and for which the vehicle title is surrendered and canceled.”

Classification follows state or local law. When the home is personal property, a lender may take a security interest in the home and “concurrently place a real property lien on the land.”

Buyers looking at land for a home can see buying land.

Financing options compared

FHA Title I. The handbook lists these nationwide loan limits:

• manufactured home, single-section: $105,532;
• manufactured home, multi-section: $193,719;
• combination home and lot, single-section: $148,909;
• combination home and lot, multi-section: $237,096;
• lot only: $43,377.

The minimum cash investment is “at least 5 percent of the total purchase price,” or 10 percent for a credit score of 500 and below. Maximum terms are 20 years plus 32 days for a home, 15 years plus 32 days for a lot, and 25 years plus 32 days for a multi-unit home and lot. The upfront insurance premium “is 2.25 percent of the Base Loan Amount.”

FHA Title II. This is the standard FHA mortgage. The home must be a one-family dwelling with at least 400 square feet, carry the HUD label, “be classified as real estate,” stay on a permanent chassis and sit on a permanent foundation built to HUD’s Permanent Foundations Guide. It must also “have been directly transported from the manufacturer or the dealership to the site.” See FHA loans.

Fannie Mae. The loan “must be secured by both the manufactured home and the borrower’s interest in the land.” Both “must be legally classified as real property under applicable state law.” Fannie Mae buys first-lien loans on principal residences, single- or multi-width, and on multi-width second homes only. Investment properties are ineligible. Homes on leased land qualify only in a Fannie Mae-approved condo or PUD project. See conventional loans.

VA. VA lists a funding fee of 1% for “Manufactured home loans (not permanently affixed).” See VA loans.

Installation rules

Federal Model Installation Standards in 24 CFR Part 3285 “provide minimum requirements for the initial installation of new manufactured homes.” Two systems exist:

• State programs. A state may run its own installation program. Its standards must provide protection that “equals or exceeds” the federal model.
• HUD-administered program. Where a state has no qualifying program, the federal standards are the minimum, and HUD administers the program.

The manufacturer’s installation instructions are based on these standards. Manufacturers must also give instructions to protect a home stored “for more than 30 days” before its first siting. Lenders’ appraisers record the HUD label serial number; see home appraisal cost.

Points to check before buying

• HUD label on each section, or IBTS verification if it is missing.
• Title status: vehicle title kept, or surrendered so the home is real property.
• Foundation: required for FHA Title II.
• Land: owned, leased, or in a community. This affects which loans are available.
• Due-on-sale: federal law (12 U.S.C. 1701j-3) lists exempt transfers for loans on “a residential manufactured home,” such as a transfer to a relative after the borrower’s death.