While not all manufactured homes qualify for reverse mortgage loans, there are circumstances under which they do. A number of stringent requirements must be met in order to secure this type of financing for a manufactured home, which is sometimes referred to as a mobile home or a trailer.
Mobile Home vs. Manufactured Home
The terms "mobile home" and "manufactured home" are often used interchangeably, but they are not the same thing. True mobile homes were manufactured prior to 1976, which is when the National Mobile Home Construction and Safety Act (NMHCSA) went into effect. This law established a "federally-regulated national building code" for these types of homes. NMHCSA are often referred to as Housing and Urban Development (HUD) standards. Any trailer homes built after that time are referred to as manufactured homes. A true mobile home - meaning one that was built prior to 1976 - is not eligible for a reverse mortgage. However, certain newer manufactured homes are eligible for reverse mortgages, assuming specific requirements are met.
Reverse Mortgage Requirements for Manufactured Homes
The requirements for this type of property to qualify for a reverse mortgage are even more stringent than those used to determine eligibility for FHA financing for a manufactured home Don't assume your manufactured home is eligible for a reverse mortgage just because you were able to get an FHA mortgage when you purchased it. The extensive criteria required to qualify follow.
Age of Structure
Only manufactured homes built in 1990 or later can qualify for a reverse mortgage.
Size
The unit has to be at least 800 square feet and be a doublewide (or wider).
Intended Purpose
The until must be designed and built to be used as residential property. For example, if you have a manufactured structure designed to be an industrial office that has been converted to be a dwelling, it would not qualify.
HUD Seal
The dwelling has to display an official HUD seal (affixed by the manufacturer) that indicates it was built in accordance with NMHCSA standards.
Property Ownership
A manufactured home that is located on rented property is not eligible for this type of loan. Instead, it has to be located on property that is owned by the same person who owns the structure. The reverse mortgage has to cover both the home and the land on which it sits. You can't take out this type of loan on just the structure.
Original Location
The dwelling has to remain in the same location where it was originally moved from the manufacturer. It has to have been purchased new from the manufacturer and moved to the property without ever having been set up elsewhere.
Foundation
The manufactured home has to have a permanent foundation/chassis, which means that it is permanently attached to the property. An engineer must sign-off that the foundation meets HUD guidelines.
No Moving Gear
It can't have any equipment that could be used to move it attached (i.e., no hitch, no axel, no wheels).
Real Estate Status
It has to be classified as real estate (real property) and be subject to property tax as such. This can be the case only with manufactured homes that have permanent foundations.
Skirting
The dwelling must have skirting around the bottom. It has to be enclosed; that there can't be a gap between the structure and the ground.
Utilities
It has to have utilities that are permanently installed. They have to be installed in such a way to protect them from freezing. The skirting helps with this, as does insulation.
Grade
The grade of the property below the home has to be "at or above the 100-year flood elevation."
Additional Requirements
Specific reverse mortgage lenders may have additional requirements, but the conditions above will be required by any lender that offers this type of financial product. Of course, whether a particular property qualifies for a reverse mortgage is relevant only if the homeowner qualifies. These loans are available to homeowners 62 or older who meet specific financial criteria, including having sufficient equity in a qualifying property.
Proceed With Caution
While some people perceive reverse mortgages to be a good source of retirement income, these types of loans are not without disadvantages. Of course, they have positive aspects as well. If your manufactured home meets the requirements to qualify for one, do your due diligence before deciding to move forward. Make sure you understand how reverse mortgages work. Discuss the consequences with your children or other heirs, and seek advice from a qualified professional, such as an attorney with estate planning expertise or a retirement planning professional.
