Prefab Homes Are Allowable Renovation Projects For FHA 203k loans.
When you are buying a home, you might hear the terms modular homes and manufactured homes, it is critical that you understand how these prefab homes differ. The FHA 203k mortgage program allows for both modular and manufactured homes. The differences can affect a home’s price and its resale value, and even dictate your financing options.
I receive a lot of calls from prefab home buyers that start with an extended conversation on the specifics of the home in order to arrive at the structure’s true identity. A borrower can purchase an existing prefab home or refinance their current home with a 203k mortgage. Many lenders will not allow a manufactured home with a 203k mortgage, however we do.
What Are Modular Homes?
- Modular homes are built in sections at a factory.
- Modular homes are built to conform to all state, local or regional building codes at their destinations.
- Sections are transported to the building site on truck beds, then joined together by local contractors.
- Local building inspectors check to make sure a modular home’s structure meets requirements and that all finish work is done properly.
- Modular homes are sometimes less expensive per square foot than site built houses.
- A well-built modular home should have the same longevity as its site-built counterpart, increasing in value over time
What Are Manufactured Homes?
- Formerly referred to as mobile homes or trailers, but with many more style options than in the past.
- Manufactured houses are built in a factory.
- They conform to a Federal building code, called the HUD code, rather than to building codes at their destinations.
- Manufactured homes are built on a non-removable steel chassis.
- Sections are transported to the building site on their own wheels and then the wheels are removed. This is often the quickest means to identify a manufactured home: did the home have wheels or no wheels?
- Multi-part manufactured units are joined at their destination.
- Segments are not always placed on a permanent foundation, making them more difficult to re-finance.
- Building inspectors check the work done locally (electric hook up, etc.) but are not required to approve the structure.
- Manufactured housing is generally less expensive than site built and modular homes.
- Manufactured homes sometimes decrease in value over time.
Manufactured Home Criteria
To obtain a FHA 203k mortgage on a manufactured homes a borrower must be ready to supply additional documentation. A few items that will need immediate attention is the length of time on the home site, proof the home was new when delivered to site and no renovation will disturb the homes structural conformity to national manufactured housing codes.
The 203k program allows for renovation on manufactured homes when they meet all of the following requirements:
- Built after June 15, 1976
- On a permanent foundation for over one year, can be renovated, or
- A manufactured home that not has been on a permanent foundation but has been located on the property for over a year and will be placed on a permanent foundations as part of the 203k process. Additional steps will apply to all homes that are not on a permanent foundation prior to closing, call me to discuss your situation.
- The unit must have been new when delivered to the property with no prior occupancy.
- The renovation must not effect the structural integrity of the home that was designed and constructed in conformance with the Federal Manufactures Construction and Safety Standards.
- Each foundation must meet HUD standards and must be certified by a licensed engineer.
- The unit must be titled as real estate at or prior to closing, this is a biggie on refinance loans, so dig out your paperwork from your original purchase, I see many homes that are still titled as a trailer and a piece of land.
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