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FHA Streamlines and Expands Access to Manufactured Home Loans

After calls from the White House to expand access to affordable housing, the FHA is streamlining its guidelines for manufactured home loans.

November 16, 2021
November 16, 2021
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Getting a loan for a manufactured home is about to get easier for people in need of a more affordable path to homeownership.

The Federal Housing Administration (FHA) revised its policies for mortgage lenders that finance manufactured home loans to both streamline the process and expand eligibility requirements for borrowers.

In a press release, the FHA said updates to its Title I Manufactured Home Loan Program requirements will “remove financing barriers and expand access to credit” for borrowers. It also consolidates lender policies for the first time in nearly 40 years, eliminating more than 120 policy documents previously referred to by lenders.

The Title I updates will more closely align the program to the Title II FHA loan, the highly popular “standard” FHA program typically used by homebuyers.

New eligibility requirements for manufacture home loans

Those sidelined during the 2021 run-up in home prices may benefit from the revised loan eligibility requirements.

Most notable is the ability to use gift funds from eligible sources, which have played a more prominent role in homebuying as first-time homebuyers look for ways to compete against return buyers with more cash and equity.

The FHA is also expanding the allowable income sources to align with its real-estate mortgage programs. The revised handbook includes the following income sources:

  • Wages, child support, alimony, and rental income;
  • Social Security or welfare benefits;
  • Retirement benefits, military and veteran’s usability benefits;
  • Unemployment benefits
  • Interest and dividend payments;
  • Lottery winnings paid over extended periods; and
  • Insurance benefits paid on a fixed schedule.

Additionally, the FHA revised how student loan debt is calculated in debt-to-income ratio for manufactured home loans to align with its Title II programs. Borrowers can now use either their actual documented payment or 0.5% of the outstanding loan balance if their monthly payment is currently zero.

Previously, FHA required lenders to assume a payment equal to 1% of the student loan balance if no payment information was available.

Finally, manufactured homes will be appraised using “enhanced value determinations that use a sales comparison approach.”

"This truly is great news and will allow us to offer financing to first-time buyers or anyone looking for an affordable option to today’s skyrocketing prices," said Mark Wambold, a Senior Vice President Area Manager at Fairway Independent Mortgage Corporation (Fairway owns "Manufactured homes fill a necessary void in the market with the lower development cost and quicker build times. I expect to see considerable growth in this segment as supply chain issues are resolved."

Lenders must implement the changes on loans closed on or after May 9, 2022 and are free to implement them immediately.

The FHA also updated its Title I Property Improvement Loan Program to “make requirements for this program consistent with current lending practices.”

"With these new expanded guidelines for home improvement loans there will be thousands of homes across the country than can now be renovated using this financing," Wambold said. "All in all I think this is good policy and I am excited to see it."

The Title I facelift comes after the Biden administration called on state, local, and federal government entities to boost the supply of manufactured homes and increase access to financing.

“This nation is in an affordable housing crisis and manufactured housing will be a key part of the solution,” said Principal Deputy Assistant Secretary for Housing and the Federal Housing Administration Lopa P. Kolluri. “Our new and updated Title I policies will not only expand access to credit for borrowers seeking loans for quality and affordable personal property manufactured homes, but will also make it easier for lenders to offer financing through the Title 1 program.”

Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.

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