Don’t let the FHA government program name fool you.  Loans are not funded by the government, but by private lenders who may assist developers in obtaining FHA backed mortgage insurance.

Administered by the multi family section of the HUD staff in various cities around the projects may be individually approved for low interest, long term loans which are funded by private lenders with a guarantee from FHA.  Processing must be done by one of approximately 110 qualified lenders, after first confirming market and economic feasibility.

The funding may include any existing, and non recorded debt, and up to 90% of approved costs.These costs may include: land at market value, most hard on-site infrastructure costs, plus engineering & survey costs, interest, taxes, and insurance during the construction period plus loan costs and fees. The construction loan can be for up to 3 years, but most are generally approved for 2 years, and the permanent loan is for up to 40 years.

The loans are processed by the HUD staff under the Traditional Application Processing procedures as presented by an approved lender. After a preliminary application meeting is held with the HUD staff and the lender in which the proposed project business plan and the market and economic feasibility reports are reviewed, HUD may issue an invitation to submit an Application For Firm Commitment. Submission of all engineering drawings along with an environmental study, preliminary cost and appraisal evaluation, and a fee of $3.00 per $1,000 of the loan amount starts the Firm Commitment approval process.  The statutory period for approval is 60 days, but it may be shorter.

For proposed projects in which there will be new vacant homesites, the HUD staff is going to require the developer to specify the method of financing for home sales to individual new homeowners.  Where current “off the shelf” chattel mortgage financing programs are used, at today’s relatively high interest rates, and credit scores, it must be shown the combination of monthly lot rents and home payments are not burdensome on the buyers, and are competitive with local apartment rents for homes of similar sizes. 

For example, in a market where a 3/2 900-1,000.apartment rents for about $755 per month, a new community or one which is being expanded with new homesite rents at $275 per month, would suggest a monthlyhome payment of not more than $480 per month for new residents.This would be a payment which is typical for m/h which is sold for about $49,900 with 5.0% down, including sales tax and all installation costs, using a 20 year loan at 10.75%.Longer terms or lower rates may provide for a higher priced home. Higher credit scores may also lower interest rates, as will higher down payments than 5.0% The good news is that the manufactured home may be much larger, or have more and better quality features than the apartment. And, it has all the advantages of single family detached living. . . . no common walls, adjacent parking, no walk ups, etc.

The program does not allow the developer or an exclusive retailer to have sole rights to home sales within the community, but will allow any qualified retailer to install community approved homes, provided the residents also qualify for residency by community standards.

Communities now may be developed using the program for communities which restrict residents to age 55+.However, it may be difficult to fund on necessary initial phase relatively high capital costs of the amenities for such communities. Where a community already has amenities in place, this limitation may not be a problem.

A book is available which explains the entire process of this little known program in more detail, with copies of relevant forms and documents and link to various FHA websites.  How To Get An FHA Guaranteed Loan For Acquisition and Rehabilitation or Development of a MH Community is the only source for all the information, forms, analysis, you will need to get a non-recourse, 40 year, fixed rate loan for land lease community development, or an apartment project using HUD Code or Modular units. Includes forms, base costs, high cost percentages for many areas of the, MAP regulations, etc. Monograph 60 pages plus charts, graphs, & forms. To get more details about this publication Click Here. Or you can now download the E-Book edition and be reading the full version in seconds.  Instant Download Now!