This week in our comments section, a reader asked us a question about how certain aspects of FHA appraisals work. “I am pre-approved for a FHA loan, and lucked into having an estate offered to me before they list with a realtor, at a fantastic price! Problem is, it is 6 acres with an older mobile home…it was built in 1977, so meets the age requirement barely, but I have heard many different explanations as to what qualifies it as ‘permanent’, or ‘tied to the land’.”
“It cannot be moved, has had permanent additions on foundations attached, and a complete roof addition over all of it, so certainly cannot be moved, and is in REALLY great condition. However, the title has NOT been retired for itso my question is, can this property be financed? One bank says yes, but another 2 said NO WAY, and that if I let the bank that said yes do it, I would pay for inspections etc only to be told no at the closing.??? Worried”
FHA loan rules for mobile home foundations are found in HUD 4000.1 and include the following-the mobile or manufactured home must:
“-be built and remain on a permanent chassis;
-be designed to be used as a dwelling with a permanent foundation built in accordance with the Permanent Foundations Guide for Manufactured Housing (PFGMH); and
-have been directly transported from the manufacturer or the dealership to the site.”
Additionally, the property must be classified as “real property”. According to HUD 4000.1, it must “be classified as real estate (but need not be treated as real estate for purposes of state taxation)”
However, FHA loan rules are not the only ones at work when it comes to FHA appraisals. A property that does not meet state or local code requirements, in addition to the above, would not “pass” the appraisal process.
FHA appraisals aren’t necessarily “pass/fail”. The appraiser will recommend corrections or repairs where possible. But in some cases there may be conditions which cause the property to be rejected outright. In such cases, the borrower must pay the appraisal fee regardless of the outcome.
That is because the appraisal fee is due for services rendered, rather than for a specific outcome. Also, an FHA appraisal is not a home inspection, which is far more in-depth. Borrowers should pay for both the appraisal, and the inspection to make the most informed purchase possible.
Additionally, lender standards may also apply. A lender who is willing to work with a borrower purchasing a manufactured or mobile home would still be required to observe the FHA appraiser’s recommendations where applicable. But some lenders won’t even process mobile home loans, so finding a participating lender who will is the first step.
The next step in this particular case is finding out why a lender would deny the loan (since it’s known that there are two lenders the borrower has spoken to who would not) and determine if those reasons are something that could be addressed prior to the appraisal.