Getting a Reverse Mortgage on a Manufactured Home
If you are like me, you are only familiar with the term “reverse mortgage” because of the commercials on TV. After seeing Alan Thicke talking about the benefits of a reverse mortgage for the hundredth time, I decided to do a little research. I was particularly interested in what a reverse mortgage was, why they were beneficial, and how one would go about getting a reverse mortgage on a manufactured home. Here’s what I learned:
What is a Reverse Mortgage?
A reverse mortgage is a loan available to homeowners, 62 years or older, that allow them to take the equity in their home and turn it into cash payments.
Reverse mortgages are also known as a Home Equity Conversion Mortgage (HECM).
Google defines a reverse mortgage as:
a financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments, typically to supplement retirement income.“..unlike traditional mortgages, which decline as you pay down the loan, reverse mortgages rise over time as interest on the loan accrues..”
The loan is not required to be repaid until the home is either sold or vacated. This is very popular for retirees with limited incomes that need help covering basic living expenses or assistance in paying health care costs.
How are Reverse Mortgages Beneficial? Are they a Scam?
Reverse mortgages are a legitimate product offered by lending institutions. Several rules and regulations must be followed by the bank in a reverse mortgage agreement.
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Are Manufactured Homes Eligible for a Reverse Mortgage?
A manufactured homeowner must meet a dizzying list of requirements and inspections to qualify for a reverse mortgage.
The Department of Housing and Urban Development (HUD), The Federal Housing Administration (FHA), and the lender all have their requirements and rules that must be met when getting a reverse mortgage on a manufactured home.
You have to make three different entities happy if you plan on getting a reverse mortgage on a manufactured home.
Manufactured Home Requirements for Reverse Mortgages
The Home Equity Conversion Mortgage Program (HECM) has an extensive list of requirements for manufactured homes to be eligible for a reverse mortgage.
There are several requirements that a manufactured home must meet in order to qualify for a reverse mortgage. The AAG (American Advisor’s Group) provides a complete specification list for obtaining a reverse mortgage on a manufactured home:
1. Your home must have a HUD seal affixed on the outside of the home, which proves that the home conforms to the Federal Manufactured Home Construction and Safety Standards, under HUD code.
2. Your home must be produced after January 1, 1990.
3. Your home must be taxed and classified as real estate and must be designed to be used as a dwelling with a permanent foundation built to FHA requirements.
4. Your home must be in its original location. The only acceptable move the home must have encountered was the move from the factory to the dealer and then to the site. Once on the site, it must have remained there permanently.
5. Your home must have at least a minimum floor area of 800 square feet.
6. Your home must not be in a condominium association.
7. Your home must be built and must remain on a permanent chassis.
8. Any wheels, axles or a hitch must be removed from your home.
9. Your home must be permanently attached to the property.
10. Your home must have acceptable perimeter enclosure (skirting is a must).
11. Beneath your home, the finished grade must be at or above the 100-year flood elevation.
12. Your home must have an engineer’s certificate stating that the foundation meets HUD guidelines.
13. Your home must have permanently installed utilities that have been protected from freezing.
14. Your home must have the affixed HUD tag or data plate, and the appraiser must include the serial number on the appraisal report.
15. Your home must be double wide or bigger.
16. Your mortgage must cover both the unit and its site.
17. You must own the land the home rests on.
18. You must meet any additional requirements specified by your lender and HUD.
Fees Associated with Getting a Reverse Mortgage on a Manufactured Home
FHA appraisals, HUD counseling fees, foundation inspection, insurance, origination fees, and servicing fees are typically required for reverse mortgages.
Once you pass all the requirements listed above, you have a couple more steps to go before getting a reverse mortgage on a manufactured home. These requirements cost upfront before you get the reverse mortgage but can sometimes be added into the mortgage though that reduces your net loan amount.
The FHA will require an appraisal, HUD will want you to be counseled by one of their representatives, and an engineer will need to inspect your foundation. The foundation inspection is required because so many manufactured homes are improperly tied down or permanently installed.
The HUD counseling session costs around $125 and must be with a licensed agent. This link will help you find a counselor close to you:
The appraisals will assist in determining the amount you can get through a reverse mortgage. The counseling will ensure you understand what is going on and the inspections are required because so many manufactured homes are improperly tied down (or permanently installed). Origination and servicing fees are profit for the bank and mortgage insurance protects the bank’s investment.
Lending Tree explains more about getting a reverse mortgage on a manufactured:
Reverse mortgages are offered with fixed as well as adjustable rates. On an adjustable rate reverse mortgage, owners can take the payment as a lump sum, a line of credit, or payments through the remainder of their lives if they remain in the home.
While reverse mortgages can be risky, they do provide the borrower with much-needed cash for their senior years. The funds are used at the outset to retire the existing mortgage balance. Then, the remainder of the money may be used as the borrower sees fit: for medical expenses, home repairs, debt consolidation, or senior travel.
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Additional Resources about Getting a Reverse Mortgage on a Manufactured Home
This article is just the bare basics of getting a reverse mortgage on a manufactured home, but it is a start.
The following links will help you learn more about reverse mortgages:
This link is a calculator that can help you figure out how much your payment could be based on several factors such as home value and interest rate:
In summary, manufactured homes seem to get a raw deal when it comes to reverse mortgages just like every other financial and insurance-related activity. It’s always harder to finance and insure manufactured homes so I suppose we should expect to deal with additional requirements and red tape when it comes to getting a reverse mortgage, too.
More Helpful Information about Manufactured Home Financing
Do you have experience getting a reverse mortgage on a manufactured home? Are you a professional that can provide tips or advice? Please share in the comments below!
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