How to Finance a Manufactured or Mobile Home

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Despite expectations for a cooling housing market, home prices have continued to rise steadily. With current market conditions making homebuying more difficult for consumers, manufactured and mobile homes are becoming an appealing option.

Here’s everything you need to know about financing a manufactured home.

Mobile Homes vs. Manufactured Homes

“Mobile” and “manufactured” are terms that are often used interchangeably, but they have some key differences.

Both types of homes are made in a factory and then transported to their intended locations, but mobile homes are properties built before June 15, 1976. After June 15, 1976, the Department of Housing and Urban Development set new guidelines for these properties and renamed them “manufactured” homes.

The 1976 cutoff

On June 15, 1976, a new rule from the Department of Housing and Urban Development, or HUD, required manufactured homes to have “HUD tags” to meet most lending guidelines. These certifications ensure that the manufacturer complies with safety standards created by HUD.

Before the rule, manufactured homes were prone to electrical and wiring problems that caused home fires, such as heating and cooking equipment being close to sleeping areas.

Mobile homes built before that date, even if they have modifications, can’t be accepted as compliant with the HUD code. The Federal Housing Administration, or FHA, doesn’t insure mortgages on manufactured homes built before June 15, 1976, and most other mortgage insurance forms follow the FHA policy.

The FHA, VA and USDA have programs for manufactured homes, though each has different qualification requirements. There are also conventional loan options that cater to manufactured homes.

Options for Financing a Manufactured or Mobile Home

FHA Title I loans

The Federal Housing Administration (FHA) offers loans that have lower minimum credit score requirements, lower down payment requirements, and better debt-to-income ratio requirements than conventional loans. This makes manufactured home FHA loans a strong option for borrowers who don’t meet the requirements for a conventional mortgage.

Title I requirements:

  • The manufactured home must be used as the borrower’s primary residence
  • Title I loans are only available for manufactured homes built after 1976
  • The home must be placed on a suitable site, such as land owned by the borrower
  • The home must meet the Model Manufactured Home Installation Standards
  • There must be a one-year manufacturer’s warranty for new homes
  • There must be adequate water supply and sewage disposal facilities available

These loans can be used to purchase or refinance a new or used manufactured home, acquire a developed lot for placing a manufactured home, or obtain both a manufactured home and lot together. However, borrowers are not required to own the lot they use for their manufactured home. Instead, they can lease a lot, which is common in manufactured/mobile home communities.

Leasing a lot comes with its own set of requirements:

  • The lessor must give the homeowner a starting lease term of 3 years
  • The lease must require the homeowner to be given 180-day notice in the event of lease termination

Whether leasing a lot or purchasing your own land, there are a few loan amount and term requirements.

Maximum loan amounts:

  • Manufactured home only: $69,678
  • Manufactured home lot: $23,226
  • Manufactured home and lot: $92,904

Maximum loan terms:

  • 20 years, plus 32 days for a manufactured home loan or a single-section manufactured home and lot loan
  • 15 years, plus 32 days for a manufactured home lot loan
  • 25 years, plus 32 days for a multi-section manufactured home and lot loan

FHA Title II loans

The FHA Title II loan is similar to the traditional FHA loan, allowing borrowers with a credit score of 580 or higher to purchase a home with a 3.5% minimum down payment. The Title II loan has the unique benefit of financing the cost of transportation for new manufactured homes as well as any installation costs.

The Title II loan can also be used to refinance your existing manufactured home as long as it’s been installed at its location for a year.

Requirements for an FHA Title II loan include:

  • The home must be installed on property that you own, not leased land
  • The home must be permanently attached to the land
  • Title II loans are only available for manufactured homes built after 1976
  • The home must have a floor area of at least 400 square feet
  • There must be adequate water supply and sewage disposal facilities available

The FHA Title II loan falls under the FHA’s single-family loan limits, which will be $498,257 for 2024.

Fannie Mae MH Advantage program

One of the conventional financing options available is Fannie Mae’s MH Advantage program, which is less stringent than a traditional conventional home loan.

The program uses a 30-year loan term with a minimum down payment of 3% for multi-section manufactured home properties.

Requirements for Fannie Mae MH Advantage loan:

  • The minimum required credit score is 620, and borrowers with credit scores greater than 680 can get better deals
  • The home must have been built on or after June 15, 1976
  • The home can’t be on leased land
  • The home must be the owner’s primary residence or secondary home, not an investment property
  • The home must be permanently fixed to a foundation and connected to utilities
  • The home must be at least 12 feet wide and have at least 600 square feet of living area
  • The home must be considered “real property” according to local law—some states classify manufactured homes as “personal property”
  • The home must meet Fannie Mae’s MH Advantage home design requirements

Freddie Mac Home Possible program

The Freddie Mac Home Possible program is another conventional loan option for borrowers who would have trouble qualifying their manufactured home for a standard conventional loan. This single-family loan offers fixed-rate mortgages of 15, 20, or 30-year terms and 7/1 or 10/1 adjustable-rate mortgages, and there’s only a 5% down payment requirement.

The Home Possible conventional loan accommodates borrowers who have a credit score of at least 580, with no additional pricing if your credit score is better than 680.

The requirements for the Freddie Mac Home Possible program are very similar to Fannie Mae’s requirements, with a few differences:

  • Minimum credit score of 580, lower pricing for credit scores of at least 680
  • The borrower’s income cannot be greater than 100% of the area median income (AMI)

VA loans

The VA loan is only available to service members, veterans, and eligible surviving spouses, but if you qualify, the program offers competitive interest rates with zero down payment required.

VA loans require manufactured houses to be permanently fixed to the ground, so the property will need to already be fixed or be permanently attached to the ground after transportation.

Here are the requirements for getting a manufactured home loan with the VA program:

  • VA lenders usually require a credit score of 620
  • The home must be permanently affixed to the ground
  • The home must be considered “real” property instead of personal
  • There must be a minimum of 700 sq ft of interior floor space
  • The home must pass the VA’s Minimum Property Requirements (MPRs)
    • This includes working electric systems, sanitary water, sanitary sewage disposal, and more
  • The borrower must meet the VA’s eligibility requirements

Chattel loans

Chattel loans are a type of loan specifically designed for movable property, such as mobile homes and boats. These loans finance the property itself—not necessarily the land that the property sits on. Chattel loans are a great option if you live in a state that considers manufactured homes to be “personal property,” as other financing options such as Freddie Mac and Fannie Mae will not finance the property.

Borrowers will have shorter repayment periods with higher interest rates and APR. This means that your loan will be paid off faster than other loan options, but your monthly payment will be higher. Chattel loans also typically have lower processing fees.

Note that chattel loans use the property as collateral for the loan itself, which is a riskier option. If you default on your payment, the bank could repossess your manufactured home. Still, chattel loans are one of the most popular options for manufactured loans among consumers.

Chattel loans usually require a minimum credit score of 575 and 5% down, with some lenders requiring higher down payments depending on your credit score.

Personal loans

Personal loans don’t have the same restrictions that home loans do, which means you could even use a personal loan to finance a mobile home built before 1976. Personal loan lenders usually only offer loans up to $25,000 to $50,000, but some will go as high as $100,000.

Be wary of high interest rates on personal loans, but if you need to finance a mobile home or manufactured home and it costs less than the loan maximum from your lender, a personal loan might be the option for you.

How to qualify for manufactured home financing

Qualifying for manufactured home financing is a bit more complicated than traditional methods of home financing, as there are a lot of different options depending on your situation and the property you’re purchasing.

Here’s what to do to get financing for your manufactured home.

1. Check your credit

A good credit score is the best way to ensure a competitive interest rate on your home loan. Lenders want to see a good credit score of 620+ and a consistent credit history for lower rates and better loan terms.

Your exact credit score will also affect which loan type is best for you—someone with a poor credit score may need to get a government-backed loan to qualify, limiting your options.

Credit scores aren’t something you can change overnight, but by taking some simple steps such as making payments on time, keeping credit balances low and disputing errors on your credit report, you can adjust your credit in a few months’ time to potentially save thousands on a better interest rate.

2. Save for a 3% down payment minimum

Unless you qualify for the VA loan program, the lowest down payment you’re allowed to make to qualify will be 3-5%, depending on your credit score and which loan type you’re using.

The Fannie Mae MH Advantage program is the second-lowest down payment option available after the VA loan, with a 3% down payment minimum. Consider all of your preferred loan options and their down payment requirements before applying.

3. Decide on whether or not to buy land with your manufactured home

Some loan programs will require you to purchase your manufactured home with land or put the manufactured home on land you already own. Many loan types will also require you to permanently fix your home to the ground—such as the FHA Title II loan and the VA loan.

However, there are other options if you don’t want to purchase land. You can lease a lot from your property instead with options like the FHA Title I loan.

4. Decide on a loan and submit your application

Once you know the type of property you want to buy as well as your credit needs, you should be able to find a loan type that you’re eligible for. Review your options and what your property type is eligible for.

Research various lenders and find a few that offer the loan type you’re trying to get. You’ll want to compare several different lenders to ensure you’re getting the best rate possible.

Interest rates on manufactured homes

To qualify for the most competitive rates, you’ll need a strong borrower profile. This means a low debt-to-income ratio, a good downpayment, and a strong credit score and history.

The recommended credit minimum to receive favorable rates on a manufactured home is 680. If you want the best rates, your credit score should be 750 or higher.

Your specific interest rate will vary depending on the type of loan you choose, especially as the housing market continues to shift through 2024. However, using a government-backed loan to buy a manufactured home remains a cost-effective option for consumers to achieve homeownership.

Dan Rafter

Dan Rafter has covered real estate, mortgage and personal-finance news for more than 15 years, writing for the Chicago Tribune, Washington Post, Consumers Digest and many others. A graduate of the University Illinois with a degree in journalism, he is editor of Midwest Real Estate News magazine and blogs on commercial real estate for that publication at rejblog.com, in addition to being a contributor for Refi.com.

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