May 31, 2017
A reader got in touch recently to ask an FHA loan question about the disposition of the property once the loan has closed. “After receiving the loan, are there any regulations on putting two other mobile homes on the property? They will not be on a permanent foundation. We are currently buying 15 acres of land in Texas.”
FHA loan rules are clear about the status of a mobile or manufactured home that is purchased with an FHA mortgage loan-all such property types must meet FHA minimum standards and be affixed to a permanent foundation as a condition of loan approval.
However, the FHA Single Family Loan Handbook, HUD 4000.1, does not address the condition of add-ons, improvements, or other modifications that happen after the loan has closed. A borrower who wishes to add other structures or modifications would need to insure those things meet state/local building code or other requirements, and it’s also worth checking the FHA loan agreement to see if it contains some kind of stipulation regarding such changes in terms of their contributing to or detracting from the future marketability of the home.
The real issue the reader in this case should be concerned with is FHA refinancing. If a borrower wishes to refinance the home an a new appraisal is required, property features that don’t meet building code or other standards could stand in the way of loan approval depending on circumstances and the severity of the issue.
Improvements and add-ons to the property should enhance the property’s value rather than detracting from it. It may be helpful to get some advice in this area before proceeding to make sure any alterations to the property do not have a negative effect on the resale value.
State law, building code, and lender standards are the main concern in this particular case rather than FHA loan rules, at least until it’s time to apply for cash-out refinancing or any other type of “appraisal required” refinance loan. What happens during the appraisal at that time helps determine the home’s current fair market value, which in turn helps the lender determine the maximum loan amount possible. Borrowers should take that into consideration when planning changes or renovations to the property if a refinance loan might be a future decision.