Freddie Mac Guidelines: Manufactured Home Loan Purposes and Use of Proceeds

What Loan Purposes Are Allowed for Manufactured Homes

Fannie Mae treats multiwide and single-wide manufactured homes differently when it comes to loan purposes. This distinction affects what you can do with your financing.

Multiwide manufactured homes get the full range of loan options. You can use Fannie Mae financing for a purchase, a no cash-out refinance, or a cash-out refinance. These homes typically offer more financing flexibility because they're larger and often appreciate better than single-wide units.

Single-wide manufactured homes face more restrictions. You can only get purchase financing or a no cash-out refinance. Fannie Mae doesn't allow cash-out refinances on single-wide homes, which means you can't tap into your home's equity through a refinance.

Say you own a single-wide manufactured home worth $80,000 with a $40,000 mortgage balance. You can refinance to get a better rate or payment, but you can't take cash out of that $40,000 in equity. You'd need to look at other loan products or consider a personal loan if you need cash.

How Purchase Loan Proceeds Can Be Used

Purchase loans for manufactured homes cover more than just the home itself. The proceeds can pay for several related costs that traditional site-built home purchases don't typically include.

You can use loan proceeds to buy the manufactured home and the land if you don't already own it separately. Many manufactured home buyers need to purchase both the home and the lot, and Fannie Mae allows this in a single transaction.

The loan can also cover documented delivery and setup costs. This includes anchoring the home to a permanent foundation system, site development work, and connecting permanent utilities. Well and septic system installation costs are also eligible if needed for your property.

Here's what this looks like in practice: You're buying a $120,000 multiwide home and need a $30,000 lot. The delivery and setup costs run $8,000, and you need a new septic system for $12,000. Your total loan amount could be $170,000 to cover all these eligible costs.

However, certain credits must be deducted from your purchase price. Any manufacturer rebates, dealer incentives, or sales concessions reduce the loan amount. If the dealer gives you a $5,000 rebate and pays $2,000 in closing costs, those amounts come off your loan proceeds.

The loan cannot pay for insurance premiums except mortgage insurance. You'll need to pay homeowner's insurance, flood insurance, or other coverage separately.

No Cash-Out Refinance Rules and Limits

A no cash-out refinance lets you replace your existing manufactured home loan with new terms while taking minimal cash back. The proceeds can only go toward specific purposes.

You can pay off your current first mortgage and any junior liens secured by the manufactured home and land. This includes any deferred balance from a previous loss mitigation plan. The loan can also cover payoff costs like late fees or prepayment penalties on your existing mortgage.

Standard closing costs for the new loan are allowed. This covers appraisal fees, title insurance, attorney fees, and lender charges.

The cash-back limit is the greater of 1% of your new loan amount or $2,000. If you're refinancing into a $150,000 loan, you could receive up to $2,000 cash back since 1% would only be $1,500. On a $300,000 refinance, you could get $3,000 back since 1% exceeds the $2,000 minimum.

Your new loan must also meet the requirements in [[Section 4301.4]] for no cash-out refinances.

Cash-Out Refinance Options for Multiwide Homes

Cash-out refinances give you more flexibility but come with additional restrictions. Only multiwide manufactured homes qualify for this loan type.

The most common use is paying off your existing mortgage and junior liens while taking additional cash. However, your current first mortgage must be seasoned for at least 12 months before you can do a cash-out refinance.

There's an important exception to the seasoning requirement. If you're refinancing to convert your manufactured home from personal property to real property under state law, the 12-month seasoning doesn't apply. This conversion often happens when you're combining separate loans on the home and land into a single mortgage.

Say you have a $60,000 chattel loan on your manufactured home and a $40,000 land loan. You want to convert the home to real property and combine everything into one $120,000 mortgage while taking $20,000 cash out. This transaction doesn't need the 12-month seasoning because you're converting to real property.

If you own your manufactured home and land free and clear, you can get a cash-out refinance to access your equity. However, you must have owned both the home and land for at least 12 months before the loan closes.

For free-and-clear properties, at least one borrower must have been on the title for six months prior to closing. This prevents quick flips and ensures legitimate ownership.

Required Documentation for Manufactured Home Loans

Your lender will need specific documentation to verify the loan purpose and use of proceeds. The requirements vary based on your transaction type.

For purchase transactions, you'll need a purchase agreement that clearly shows the home price, land cost if applicable, and any delivery or setup charges. Invoices or estimates for foundation work, utility connections, and site preparation must be documented and reasonable.

If you're receiving manufacturer rebates or dealer incentives, these must be disclosed and will reduce your loan amount. Your lender needs written documentation of any credits or concessions.

Refinance transactions require payoff statements from all existing liens on the property. For cash-out refinances, you'll need to demonstrate 12 months of seasoning through loan statements or payment history, unless you're converting to real property.

Property ownership documentation becomes critical for cash-out refinances. You'll need to prove when you acquired the manufactured home and land through deeds, titles, or purchase agreements.

Common Issues That Complicate Manufactured Home Financing

The biggest complication comes from mixing up personal property and real property classifications. Many manufactured homes start as personal property (like a car) and later convert to real property (like a house). Your loan options depend on this classification.

Single-wide home buyers often get frustrated by the cash-out refinance restriction. If you need to access equity, you'll have to consider other options or potentially upgrade to a multiwide home.

Seasoning requirements catch many borrowers off guard. You can't immediately do a cash-out refinance after purchasing or refinancing. The 12-month waiting period is firm unless you're converting to real property.

Documentation for delivery and setup costs can be tricky. Some dealers bundle these costs into the home price, while others itemize them separately. Your lender needs clear documentation to determine what's eligible for financing.

Land ownership issues create complications when the manufactured home and land have separate financing. Converting to a single mortgage often requires legal work to properly classify the home as real property under state law.

References

For the official guidelines, see 5703.6: Mortgage purpose and use of proceeds for Mortgages secured by Manufactured Homes in the Fannie Mae Selling Guide.