Mobile Home Loans: Financing A Manufactured Home

Buying a home can be an expensive ordeal, but for the right homeowner, a mobile or manufactured home can offer the perks of owning their own space for a much lower cost. This doesn’t mean that everyone can pay for one out of their own pocket, though; mobile homes run between $60,000 – $100,000.

While there are financing options available for mobile and manufactured homes, the processes are a little different than getting a traditional mortgage.

If you’re interested in learning how to buy a mobile home and the different financing options you can choose from, read this article and start planning your move.

The terms “mobile home” and “manufactured home” are often used interchangeably, and not always incorrectly. The biggest difference is that no true mobile homes have been built after June 15, 1976, when the U.S. Department of Housing and Urban Development (HUD) put the National Manufactured Housing Construction and Safety Standards Act into play. Also known as the “HUD Code,” these new safety standards designated that any “mobile home” made after 1976 should be referred to as a “manufactured home.”

One of the key physical differences between them is that manufactured homes are typically built upon a permanent metal chassis and not intended to be moved. Relocating a manufactured home is possible, but doing so could interfere with your financing.

Modular Homes

Another term often confused with mobile and manufactured homes is “modular home.” Modular homes are also prefab homes built in a factory. A modular home is more similar to a traditional home in layout and safety standards. These homes are delivered to their desired build sites in separate modules and constructed on-site, and installed onto a permanent foundation.

Unfortunately, mobile and manufactured homes are not recognized as traditional real estate by most lenders, and obtaining financing can be a bit of a challenge, particularly for mobile homes built prior to June 15, 1976 (most lenders won’t even consider financing something categorized as a “mobile home”).

Banks that offer conventional loans may make exceptions for mobile homes built on approved foundations, but it may just be easier to look elsewhere for home financing.

FHA loans are insured by the Federal Housing Administration (FHA), and they’re popular for their low down payments and fixed interest rates. Prospective borrowers must meet the required credit score, and the home in question must comply with the HUD Code and local zoning laws.

The FHA offers two loan options for manufactured homeowners, each with differing criteria and terms. Let’s review them both.

Title I Loans

An FHA Title I loan can be used to buy personal property, such as your mobile or manufactured home, and is ideal if you don’t intend to purchase the land on which your home will sit. The home must meet FHA guidelines before being placed on a rental site, and the homeowner must provide a signed lease stipulating the rental terms. Title I loans also require that your home act as your primary residence, and that the installation site includes sewage and water service.

The loan terms for a Title I are relatively short, with a maximum repayment period of 20 years, and you can borrow up to $69,678. With the right lender and credit score, though, your required down payment could be as low as 5%.

Title II Loans

FHA Title II loans are for homeowners who intend to purchase both a manufactured home and the land on which it will reside. The loan covers both the home and the land, so a Title II cannot be used for homes on leased land, in manufactured home communities or mobile home parks.

In order to qualify for a Title II loan, your home must meet the following requirements:

• If it is a manufactured home, it must have been built after June 15, 1976; mobile homes will not qualify.
• The total floor area must be at least 400 square feet.
• The home must be permanently installed on an approved foundation.
• Your manufactured home must be classified as real property.

Title II loans can offer lower down payments than Title I loans, as well as greater loan amounts and longer terms. Your down payment on a Title II loan can be as low as 3.5%, and your loan terms can last as long as 30 years.

You can also refinance using a Title I or Title II loan. Not all lenders offer either loan option, so finding one that does can be a bit of a challenge. Those lower down payments also mean you’ll have to pay an upfront mortgage insurance premium, and subsequent monthly insurance payments.

There are other options than FHA loans for manufactured and mobile home financing, some from traditional sources and others less so. Depending on the status of your home and your own financial situation, you could choose from any of the following options.

VA Loans

VA loans are backed by the government through the Department of Veterans Affairs (VA), and are available to current or veteran service members for purchasing homes, including manufactured homes. Borrowers who qualify for a VA loan may be able to buy with no money down and no monthly mortgage insurance. If you meet the eligibility requirements for a VA loan, your manufactured home must meet further qualifications:

• The home and the land must be bought together using the loan.
• The manufactured home must meet HUD Code; mobile homes will not qualify.
• The home must be permanently affixed to the foundation.

A VA loan could finance 100% of your manufactured home’s purchase price if you can prove your property is permanently attached to your land. You can also use a VA loan to refinance your current manufactured home that you plan to move to land that you own.

USDA Loans

The U.S. Department of Agriculture (USDA) offers Rural Development loans, more commonly known as USDA loans, that could be used to finance the purchase of a manufactured home.

Your home must meet certain geographical requirements, which can be determined on the USDA’s eligibility site, and you’ll need a credit score of 640 or more. Another caveat is that your annual gross income mustn’t exceed 115% of the area’s median income. A USDA loan also comes with an upfront guarantee fee equal to 1% of your loan amount, and an annual fee worth .35% of your loan balance.

While you can’t get around those additional fees, a USDA loan offers no money down financing, just like with a VA loan. The loan could also finance up to 100% of a home’s appraised value.

Fannie Mae And Freddie Mac

Traditional mortgage sources Fannie Mae and Freddie Mac both offer specialized manufactured home loans – if you can meet their criteria. While we'll discuss other special offerings below, our friends at Rocket Mortgage^® offer loans with terms of 10 – 30 years as long as you make a 5% down payment.

Fannie Mae offers the MH Advantage^® program for financing manufactured home purchases with 30-year financing and down payments as low as 3%. The drawback, however, is that your manufactured home must meet similar criteria as traditional site-built homes, such as construction, architectural and energy efficiency standards. You may also have to install a driveway and connecting sidewalk in order to qualify for the program.

Freddie Mac can finance manufactured homes through their Home Possible^® program. Like MH Advantage, it offers down payments of 3%, and qualified borrowers can choose between a 15-, 20- or 30-year fixed-rate mortgage if they meet certain income requirements. Home Possible loans come with a loan level price adjustment (LLPA) credit of 1% of the loan amount up to $3,500. If the loan is below $200,000, the credit will be $2,000 as opposed to 1%. Home Possible also allows gift money or funds to help cover your down payment. If you make under 50% of the area median income, you can get a $2,500 grant under this program.

Chattel Loans

A chattel loan is typically used to purchase vehicles as personal property, such as planes, boats and farm equipment. These loans can also be used to finance the purchase of a mobile home. As the loan is for the home only, and not the land, it can be ideal if you’re planning to live in a park or community – or if you already own land and just want to buy the home. The home can secure the loan as collateral.

As a chattel loan covers the cost of the home only, the loan amount and processing fees would theoretically be smaller than with real property. Additionally, the closing process can be quicker and less involved than with more traditional mortgages.

There are some downsides when using a chattel loan in place of a home loan. First of all, the loan terms are much shorter, only lasting 15 – 20 years, and that could mean higher monthly payments for the homeowner. The upside of this is that you may be able to pay off your debt sooner than you could otherwise, depending on your financial situation. Chattel loans have also been found to have higher interest rates than traditional mortgages by approximately .5 – 5%.

Personal Loans

If for any reason your other loan options wouldn’t work out, you may want to consider getting a personal loan. An advantage with taking this route is that the condition of your home doesn’t play a role in your approval for the loan. Rather, what matters most is your credit score and debt-to-income ratio (DTI). So, if your home is a mobile home that doesn’t meet the HUD Code standards, you can still get approved for the loan.

Personal loans offer fixed rates and lower minimum borrowing amounts than many other loans, and depending on your lender, you could borrow up to $100,000. You can also receive your funds within a week, or even days. If that sounds like a good deal to you, read more on how to get a personal loan for your mobile home.

Just as with buying traditional housing, there are some factors you’ll want to consider when choosing a mobile or manufactured home to purchase, because they could affect what type of loan you’d qualify for.

Location Of Your Home

If you intend to buy land on which to place your house, that can make a difference in which loan you may qualify for. Make sure that zoning regulations allow for the placement and installation of mobile or manufactured housing. If you want a USDA loan, your land must reside in an eligible area. If you’re renting in a mobile or manufactured home community, that may limit your loan options, as well as add a rent bill to your monthly costs.

Size Of Your Home

Many lenders consider the size of your home before approving you for a loan. The bigger the home, the more money you may need for the purchase. Mobile homes come in single and double-wide sizes, as well as single and double units. Depending on your location, the size of your mobile or manufactured home may affect whether you can live there or not.

Condition And Type Of Home

As with many transactions, buying a used mobile or manufactured home can cost less, though you may risk lingering maintenance issues and needed repairs. The other factor to consider is how old the home is. If you’re buying a mobile home built prior to 1976, you may be limited to loans specific to mobile homes, whereas manufactured homes built later will have more financing options.

If you’re still in the dark, review these frequently asked questions regarding mobile and manufactured home loans to see if we’ve got answers.

What Lenders Offer Loans For Mobile And Manufactured Homes?

While finding a lender who offers financing for mobile and manufactured housing can be a challenge, knowing where to look is most of the battle. Some manufactured home retailers are more than happy to set up financing options for their customers. There are also mortgage lenders that specialize in mobile and manufactured home financing. The most straightforward solution, though, is to go through a standard mortgage lender that offers the loan you’re looking for.

What Is The Minimum Credit Score Needed For A Mobile Or Manufactured Home Loan?

For your convenience, we’ve listed below the minimum credit scores for the loan types discussed.

How Can I Qualify For A Mobile Or Manufactured Home Loan?

You can find the requirements for many mobile and manufactured home loans in the sections above, as well as other useful information like rates and terms.

What Loans Are Available For Mobile Homes In Parks?

Some mobile home loans are meant to purchase only the home, not any land around it. Home loans intended for mobile homes within parks or communities include:

• FHA Title I loans
• Chattel loans
• Personal loans

More information on these types of loans can be found in the article above.

Mobile and manufactured homes can offer as much as a site-built home for the right homeowner, and can make a smaller dent in their wallet as well. If you’re considering this type of home for yourself, make sure to do your research and ask around about financing options. Depending on your situation and the home you have in mind, your options include FHA loans, chattel loans and personal loans – the latter of which Rocket Loans® can help you out with.

If a personal loan sounds right for you, apply today and take one step closer to homeownership.