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FHA Title I
(Reformed) financing for
manufactured homes (HUD Code) or modular equivalent
homes on leased homesites, or
land-home.
For a comparison
with the FHA Title II conventional home and m/h
land-home financing go to the FHA-Compare
tab
© Edward Hicks, 2009 All
rights reserved. www.mobilehomepark.com
The FHA Title I
program*, provides for pre-approved private
lenders make loans from their own funds to
eligible borrowers for the finance new and used
manufactured homes, and single family home improvements.
Through the purchase of mortgage insurance, HUD insures
the lender against loss if the borrower defaults.
HUD does not lend money nor regulate interest
rates on these loans. The program is
also used to make home improvement loans for qualified
residential properties.
Key features of the newly revised FHA Title I
manufactured home financing program provides for:
- 15 Year (Singles) or 20 (Multi Section) Year
financing for a manufactured home (HUD Code built) on
a leased homesite up to
- $69,678 for the home alone, or up to
- $92,904 for a 20 year single section or 25 year
"multi section" home including fee simple land in a
condo, or cooperative structured ownership of the
land. Land (homesite) value not to exceed
$23,226.
- Loan limit adjustments: Section 2145(b) of HERA
requires the Secretary to develop a method of indexing
to annually adjust Title I manufactured home loan
limits. This index will be based on manufactured
housing price data collected by the United States
Census Bureau. Subsequent changes in the Title I
maximum loan amounts will be made effective by direct
notice to lenders through Title I letters.
- Down payments of not less than 5.0% for qualified
borrowers with a valid social security number or proof
of legal residency in the USA, with "tri merged"
credit scores over 500, and 10.0% if less than 500.
- Homesite leases are required initially to be for a
minimum of 3 years, with annual one year extensions.
Any change of land use by the landlord requires a
minimum of 180 days prior notice.
Loans to include
- home, plus manufacturer installed options and
invoiced transportation costs.
- approved retailer installation,
- sales taxes, & other approved governmental
imposed fees,
- first years hazard insurance,
- air conditioner,
- skirting/underpinning,
- steps, awnings, screen rooms,
- approved retailer installed accessory
structures.
* The new policy guidance will be
effective for credit applications taken on or after June
1, 2009, with the exception of the higher loan limits,
which went into effect on March 3, 2009, under Title I
Letter, TI_480.
FAQ
Some frequently asked
questions which have come up about the newly revised
program which were recently answered (edited for
clarity) in a letter from the HUD staff to Senator
Bennet of Colorado.
1. What method will be
used to determine the loan amount, for a new
manufactured home purchase:
Determine borrower's
required down payment percentage: 95% if tri-merge
credit score is above 500, and 90% if under.
The allowable "advance"
percent of the sum of the wholesale (base) price of the
home, plus any eligible itemized options, including the
charge for freight, all as detailed on the
manufacturer's invoice.
Sales tax to be paid by
the borrower, as detailed in the retail sales
installment contract.
Dealer's actual cost of
transportation to the home site, set_up and anchoring,
including the rental of wheels and axles, if not
included in the freight charges.
Dealers actual cost of
skirting, garage, carport, patio or other appurtenance,
and for purchase and installation of central air
conditioning system or heat pump, if not installed by
the manufacturer.
Any other authorized fees
and charges.
The base loan amount is
then subject to an up_front insurance premium of 2.25%.
In addition, the borrower will pay a periodic annual
premium not to exceed 1.0%.
2. What method will be
used for a Used Home Refinance?
For the purchase or refinance of an
existing, previously occupied home. Appraisal conducted
by National Automobile Dealers Association (NADA)
certified appraiser. If a NADA appraiser is not
available, the lender must use an FHA roster approved
appraiser, who must certify to having experience
appraising manufactured homes.
For more detailed
information regarding the above information, refer to
TI_481, Appendix 2_2, Loan Calculation, Appendix 7,
Premium Insurance, and Appendix 8_1, Appraiser
Requirements.
3. How will the borrower's
credit worthiness be established?
Credit worthiness will be
determined after a full and careful review of their
credit and Employment history, stability of income, and
debt ratios. Credit scores will be used when available
Since many FHA Title I
borrowers do not have sufficient credit to support
scoring, guidelines are in place to allow for the
development on non_traditional credit, where
compensating factors will be considered in evaluating
the borrower's credit risk.
4. How much in closing or
settlement costs will be allowed, and can they be
included in the loan amount? Borrower Costs that May be
Financed:
Up_front insurance
premium
Origination fees, not to
exceed 2 percent of the base loan amount
State and local
taxes.
Premiums paid for hazard
insurance for the first year of the loan term, including
premiums for flood insurance where
applicable.
Credit report
costs.
Appraisal fees in
connection with the purchase or refinance of an
existing, previously occupied manufactured home, which
was built after June 1976 to the HUD Codes.
Fees for determining
whether the property is in a special flood hazard
area.
Recording fees, recording
taxes, filing fees and documentary stamp
taxes.Fee for inspection of the
property by the lender or its agent,
Fee not to exceed a
maximum amount set by HUD. HUD publishes the maximum
fees on its web_site, at www.hud.gov.
And such other items as may be specified by
HUD.
5. Which costs May Not be
Financed:
Discount points paid by
the borrower for a lower interest rate. The lender must
document that the borrower received a lower rate by
paying discount points.
Fee for services of a
qualified closing agent to act on behalf of the lender
in closing a dealer direct loan transaction.
Premiums for credit life
insurance or credit disability insurance.
Payments into an insurance
escrow account.
Other fees necessary to
establish the validity of the lien.
Such other items as may be
specified by HUD.
For additional
information on allowable fees and charges, refer to
TI_481, Appendix 2_4.
6. Will there be
restrictions on the structure of the Land Lease
Community?
The borrower is required
to obtain a three (3) year leasehold agreement. The
lease must: be renewable upon expiration of the initial
3 year term by successive one (1) year
terms.
Require lessor to provide
the lessee written notification of termination of the
lease, not less than 180 days prior to the expiration of
the current lease term, in the event the lessee is
required to move due to the closing of the
community.
Provide that failure to
give such notice of termination in a timely manner will
cause the lease term, at its expiration, to
automatically renew for an additional one (1) year
term.
7. What are the
Manufactured Home Site requirements?
Must comply with
standards, ordinances, zoning and land use regulations,
if any, issued by State and local government.
Provide adequate water
supply and an adequate sewerage disposal system. Site
must use public or community water and sewerage systems,
unless such systems are unavailable to provide an
adequate level of service to the manufactured home site.
Sites served by an on_site water or sewerage systems,
must comply with the State and local minimum lot area
requirements applicable for such systems.
Must be served by adequate
utility connections.
The lender must document
that the home site complies with the standards above.
The lender is to obtain certification from an
appropriate State or local government official. If
documentation from a government official is not
available, the lender must obtain certification from a
civil engineer or other competent
inspector.
For additional details on
manufactured home sites, refer to TI_481, Appendix 5_2.
8. What will the loan
terms be: amortization, terms, interest rates,
pre_payment penalties, origination fees, etc., and what
will the rates be tied to?
The interest rate
must be fixed for the full term of the loan. Adjustable
rate loans are not permitted.
Loan terms: not less than
6 months and shall not exceed 20 years plus 32 days
Lot Only Loans Shall not
exceed 15 years, plus 32 days
Single Unit Manufactured
Home and Lot Loan Combination Shall not exceed 20 years,
plus 32 days
The interest rate is
negotiated between the borrower and the
lender.
There are no pre_payment
penalties.
Origination fees (up to
2%), may be charged to the borrower and financed into
the loan.
For
additional details on the loan term specifications,
refer to TI_481, Appendix 2_2, 2_3.
9. Can the loans be used
to finance used homes?
Title I loans are
permitted for the purchase or refinance of an existing,
previously occupied home.
The value will be
determined by an appraisal. The loan amount will be
determined by using the lesser of the purchase price,
plus
allowable fees and
charges, or the appraised value, plus allowable fees and
charges.
The rate, term and
amortization will be under the same guidelines as
previously stated.
For additional information
regarding financing existing homes, refer to TI_481,
Appendix 2_2 B.
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