How to Get a Reverse Mortgage on a Manufactured Home
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A reverse mortgage can be a source of supplemental income for homeowners. Under this kind of mortgage, however, homeowners do not make payments to a lender and a loan does not need to be repaid until after you move.
With a reverse mortgage, homeowners give up equity in their home to receive payments from the lender instead, which may be suitable for individuals looking to supplement retirement income.
If you’re a senior (ages 62 or older) who owns in a manufactured or mobile home, you may wonder if a reverse mortgage is an option. Indeed, you may be able to take out a reverse mortgage on manufactured homes, however, that’s not the case for mobile homes. This may be a bit confusing. After all, mobile and manufactured homes are usually considered to be the same thing. In this post, we’ll explain the difference, and tell you how to get a reverse mortgage on your manufactured home.
- Differences between manufactured home and a mobile home
- Can you get a reverse mortgage on a mobile home?
- How to qualify for a reverse mortgage on a manufactured home
- How to apply for a reverse mortgage
Differences between manufactured home and a mobile home
Manufactured homes and mobile homes are often referred to interchangeably. However, there is an important difference between the two — the date they were built.
On June 15, 1976, the Manufactured Home Construction and Safety Standards Act was passed. This law placed new standards on the creation of mobile homes.
Although mobile and manufactured homes are still often considered the same, it’s technically correct to refer to homes of this kind built after 1976 as manufactured homes. These homes adhere to the new standards set by federal law.
Home built prior to the date of the law’s passing are most correctly referred to as mobile homes. These homes tend to be smaller and less safe, with fewer of the amenities that make newer constructions more appealing.
Homes built in compliance with the law are certified with a red label on the exterior. This is known as the HUD tag.
Can you get a reverse mortgage on a mobile home?
A reverse mortgage is not available for a mobile home, since the term ‘mobile home’ refers to those manufactured homes built before June 15, 1976. Such homes lack the HUD tag that qualifies them for financing as outlined by guidelines by the U.S. Department of Housing.
If, however, your home was built after that date, you should be OK, assuming you meet other reverse mortgage requirements.
The most common form of reverse mortgages for manufactured homes are the Federal Housing Administration (FHA) insured home equity conversion mortgage. There are common sets of regulations on these mortgages maintained by the HUD. However, states may offer alternative forms of the reverse mortgage that can vary greatly from one state to another.
How to qualify for a reverse mortgage on a manufactured home
In order for a manufactured home to qualify, it must first be appraised. Home appraisers pay attention to and report on a variety of construction issues. Manufactured homes must meet the following standard requirements:
- Have a total floor area of at least 400 square feet.
- Have been constructed after June 15, 1976, and include a HUD tag.
- Have been moved from where it was made directly to the property site.
- Be designed as a single-family principal residence that sits on a permanent foundation.
- Have a soil grade that is at or above the area’s 100-year flood elevation.
- Exist with the site as a single real estate entity.
There are additional requirements specific to manufactured homes that should be discussed with a mortgage lender. Also, appraisers look at the health and safety qualities of the home much like they would a traditionally built home. To qualify, manufactured homes have to meet these minimum safety standards. Inspectors look for toxic chemicals on the premises, adequate heating in the home, and other safety issue to determine a home’s eligibility.
How to apply for a reverse mortgage
Find a FHA-approved lender. HUD itself does not extend loans. Instead, interested borrowers have to contact an FHA-approved lender if they want to apply for a loan. HUD maintains a searchable database for these lenders on its website.
Get your documents in order. There are also specific forms of documentation that the mortgagee must obtain to secure FHA backing. If an HUD tag is not present on the home, a verification statement must be obtained from the Institute for Building Technology and Safety.
A mortgagee must also obtain a certificate stating that the home complies with standards set in the Permanent Foundations Guide for Manufactured Housing. This certificate can be obtained through either an engineer or architect.
Meet the basic age and ownership requirements. The borrower must be at least 62 years of age, act as the principal resident and either own the home outright or be able to pay off their mortgage balance with the proceeds generated from closing the reverse mortgage.
Continue paying taxes and insurance. Applicants must also have enough funds to pay taxes, insurance and repairs on the home.
Meet with a housing counselor. Those applying for a reverse mortgage must also meet with an HUD-approved mortgage counselor to discuss how the loan functions and the applicant’s obligations.
Check out state options. In addition to all of the above, states and local governments sometimes offer their own variations on the reverse mortgage. The most common reverse mortgage for manufactured homes, the home equity conversion mortgage, is an FHA-insured mortgage.
It is important to note that state level reverse mortgages are only available in limited areas. Also, the requirements on applying for these alternative reverse mortgages may fluctuate based on the lender given the lack of federal standardization.
Proprietary reverse mortgages may require counseling, while a single-purpose mortgage can only be used for the specific reason outlined by the lender. Counselors and lenders can discuss the specific requirements that need to be met prior to applying for these mortgages.
The bottom line
A reverse mortgage is a potential way of generating revenue by trading home equity for payments. However, mobile homes built before June 15, 1976, are ineligible for this kind of mortgage. Only manufactured homes built after the date are eligible.
Homes have to meet specific criteria laid out by HUD to be approved for this type of loan such as health and safety regulations, among others.
Applying for the loan requires that applicants be of a certain age and that their homes meet the appropriate criteria. These loans can be applied for through an FHA-approved lender, which HUD maintains a database of on its website.
Applicants may also find alternatives to a FHA-insured reverse mortgage. These alternatives can be found at state and local levels, but may include unique stipulations on approval and be available only in limited parts of the country.