The Home Buyer's Korner

Information presented should be used for educational purposes only.

February 28th, 2015

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The Home Buyer’s Korner

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FHA & Manufactured Homes

Gray ModularFHA mortgages aren’t just offered on single family homes. They ensure FHA approve condominiums projects, two to four unit properties, townhomes and yes both new and existing manufactured homes, as well as modular homes. Each have unique qualifying requirement, but none are difficult to achieve and an experience FHA lenders can assist you with any type of these properties you are interested in.

Newly manufactured homes are sold and transported in sections to be assembled on-site. These homes are regulated under the rules known as Federal Manufactured Construction/Safety Standards and must be labeled accordingly. To be eligible for FHA financing, the manufactured home must be built after June 15, 1976 and there must be a certification label to prove it. Manufactured home floor space should not be smaller than 400 square feet and must be classified as real estate and not chattel or personal property.

To be classified as real estate or real property, the manufactured unit must have a permanent foundation built to FHA standards. They must be considered a “permanent dwelling” or the home is considered personal property for tax purposes.  To be eligible for a 30-year mortgage, FHA requirements the mortgage to include both manufactured unit and its site.

If you own the land you want to have you manufacture home on, any equity you have on the property can be used for the three and one-half percent down payment FHA requires. Manufactured homes offer many advantages home buyers want to take advantage of.  They offer affordable housing for less per square foot that traditionally stick built homes and they can be installed on your property relatedly fast, as compared to a home’s made of brick and mortar or wooden construction.

If you own or plan to buy land for your manufactured home, there are several matters you should consider.

In cities, suburban areas and even in some semi-rural areas, you may face zoning requirements that must be met. In certain areas, there may be a prohibition against manufactured homes, or certain requirements regarding their size and exterior appearance. You can find out if there are any restrictions or requirements by contacting the local community’s planning and land use department.

Restrictive covenants are limitations in property deeds that control how you can use the land. These may include a requirement that homes be a certain size or a prohibition that lands not be used for certain purposes. A title search should be performed when you buy the land to insure it doesn’t reveal information about any restrictions that would prevent you from constructing your manufactured home. Sometimes, restrictions are described in ways that are difficult to understand and you should consult with an experienced real estate attorney/title agent to see if there are any restrictive covenants that would keep you from placing your home on the land you are considering.

Although a manufactured home comes complete with plumbing, electrical, and heating systems, it must, like all homes, be connected to electrical, water, and sewerage facilities. If your site is in a well-developed area, all necessary utilities may be available, subject to connection charges. Find out exactly what utilities are available and how much it will cost to connect your home to all utility sources and ensure these costs are included in your total purchase price, so the cost can be financed with your FHA mortgage.

Electricity is usually available in all areas, but if the area where you plan to live does not have ready access to electric power, a connection could be quite expensive. Check with the local power company. 

In many locations, there may not be local government-supplied water lines. If there is no water, you may have to drill a well. Do not assume that all drilling will provide water. You and your dealer should check with a local well-drilling company about costs and whether success is guaranteed. Also, check with local health authorities to make certain there are no problems with the quality of the water in the area.

If you cannot connect your home to a sewerage system, you must check with local authorities about installing a septic tank. Properly installed septic systems can work quite well, but sometimes they cannot be used; for example, where the soil is not able to absorb the discharged waste. For more information, contact the local health department or the office responsible for granting building permits.

FHA will require inspections for all these utilities, as well as a final inspection of the property by a licensed inspector and a certificate of occupancy by an applicable local building authority. Be sure your land meets all these requirements at a reasonable cost. If it becomes cost prohibitive or available utilities can’t be accessed at a reasonable cost your plans to build on your land can be dashed.

It’s important to note that FHA will finance up to 97.5 percent of the total sale priced, which can include normal cost to improve your site, but an FHA value must meet or exceed the total cost of your manufactured home and its site value to ensure maximum financing.  If it the cost to connect is so prohibitive, it’s without a doubt that the total appraised value will not be sufficient to cover the cost to connect, you will have to pay the difference in cash.  To find out more about manufactured home purchasing read our post on FHA One Close, Cisterns and Well & Sewer Systems.


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