Financing your manufactured home
It’s possible to get a manufactured home loan, but the process is different from financing a traditional, site-built home. And not all lenders offer this type of mortgage.
Some manufactured homes qualify for conforming mortgages, the standard financing option for traditionally-built homes. FHA loans, along with loans backed by the USDA and VA, could also finance a manufactured home.
Your best option will depend on your eligibility as a borrower, the type and age of the home you’re buying, and whether your new home is considered ‘real property’ or ‘personal property.’
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Financing manufactured homes versus mobile homes
What’s the difference between “mobile homes” and “manufactured homes?”
People tend to use these terms interchangeably, but there is a difference. The difference matters when you’re trying to finance a new home:
- Mobile homes: Built prior to June 15, 1976, these homes will not qualify for a mortgage loan; it may be hard to get any secured financing at all
- Manufactured homes: Built on or after June 15, 1976, following government safety regulations. These homes might qualify for a mortgage loan. And if not, there are some other alternatives
That June day in 1976 is important because it’s when the Department of Housing and Urban Development (HUD) started regulating the safety of manufactured homes.
Homes built to HUD’s safety standards usually have a “HUD tag” attached to them.
But, even if the manufactured home you’re buying was built to HUD’s standards, it may not qualify for a traditional mortgage. If the home can’t clear a few more qualifying hurdles, you may need an alternative form of financing.
Who can get a manufactured home loan?
To get a mortgage loan on a manufactured home, you’ll have to qualify as a borrower by meeting minimum credit score, income, and down payment requirements — just like you would if you were buying a site-built home.
The manufactured home will also have to qualify for the mortgage. Along with following HUD’s post-June 15, 1976, safety regulations, the home must:
- Be ‘real property’ and not ‘personal property’
- Have at least 400 square feet of living space
- Be permanently attached to a foundation and on land that you also own
Let’s look at these criteria a little more closely before you start making loan applications:
Real property versus personal property
“Real property” must include land, along with property that can’t be quickly or easily removed from the land — things like a house, an in-ground pool, or a paved driveway.
Property that can be moved and used elsewhere — a car, a boat, or a true mobile home, for example — is considered personal property.
How can you learn whether an existing manufactured home is real or personal property? By finding out how the current owner pays taxes.
If the taxes go to the DMV, the home is considered personal property. In addition, a home on leased land won’t be considered real property. If you’re buying a new home from a dealer, you’ll need to place the home on land you own or land you’re buying.
The home you’re buying must have at least 400 square feet of living space to qualify for a manufactured home loan.
Most manufactured homes, especially double-wide or modular homes, easily meet this requirement.
But some types of loans for manufactured homes require more space. Fannie Mae’s conventional loan for manufactured homes, for example, requires the home to have at least 600 square feet of living space.
Foundations and land requirements
Manufactured homes can arrive in pieces and be assembled on site. Or they can be built off-site and towed to their permanent location.
In either case, upon arrival, the home will need to be attached to a permanent foundation before it qualifies for a conventional loan or for most government-backed loans.
Also, the home can’t be located in a mobile home park or on land someone else already owns and won’t be selling to you.
Mortgage loan options for manufactured homes
If your manufactured house meets the guidelines above, you may be able to finance it with a traditional home mortgage. Most likely, that’s a Fannie Mae, Freddie Mac, or government-backed mortgage program.
The loans work almost exactly the same as financing for traditional “stick-built” houses, though you can expect to pay higher interest rates.
Fannie and Freddie conventional manufactured home loans
With Fannie Mae and Freddie Mac conventional loans, you can put as little as 3 percent down. There are extra risk-based fees for manufactured home loans, so rates are slightly higher.
Fannie Mae’s MH Advantage loan works best when you’re buying a new home from a Fannie Mae-authorized manufactured home dealer and placing the home on land you already own or land you’re planning to buy.
Freddie Mac offers a similar loan program for manufactured homes. One key difference: Freddie’s loan can finance homes as small as 400 square feet while Fannie’s requires 600 square feet.
Private lenders throughout the nation offer Fannie and Freddie products, but you may have to shop around to find one that offers these manufactured home loans.
FHA Title II manufactured home loans
FHA loans exist to help credit challenged borrowers buy affordable housing.
If you’re buying a manufactured home, check out the FHA’s Title II program. This program resembles the FHA’s traditional mortgage for site-built homes.
The financing is insured by the Federal Housing Administration which allows borrowers with credit scores as low as 580 get loans with 3.5 percent down. You’d need to use the home as a primary residence.
As with conventional financing, FHA Title II loans work only for homes permanently attached to land you own (or land you’re buying). The home must also meet HUD’s post-1976 safety rules.
The FHA can also help you buy the plot of land for your new manufactured home through a process that resembles a construction loan.
Most private lenders offer loans backed by the FHA. As with Freddie and Fannie loans, you may need to shop around to find a lender that underwrites FHA Title II manufactured home loans.
VA manufactured home loans
The U.S. Department of Veterans Affairs insures loans for veterans and active duty military members.
The VA loan program includes financing for manufactured homes. Buyers must put 5 percent down, and the loan terms are shorter — between 20 and 25 years, depending on the property.
The VA can help eligible veterans buy land as well as manufactured homes.
Most private lenders offer VA loans, which offer some of the most competitive rates and lowest fees in the market.
USDA manufactured home loans
USDA Rural Housing loans require no down payment. This loan program is friendly to manufactured home buyers as long as the home is brand new.
The home will also have to be permanently attached to its foundation, built to HUD’s post-1976 standards, and at least 400 square feet.
Like all USDA loans, USDA manufactured home loans work only in rural and suburban areas — and only for buyers who fall within income limits.
Low-income home buyers (who earn 80% or less of their area’s median income) can get loans directly from the USDA.
Moderate-income buyers (incomes of 115% or less of their area’s median) can use USDA Guaranteed Loans which come from private lenders.
Loan options for mobile homes
Unless your manufactured home qualifies as real estate, you won’t be able to finance the home purchase with a conventional or government-backed mortgage program.
That’s OK, though. These homes can still be financed, just not with home mortgages.
There are a few different loan options if you can’t get traditional mortgage financing for your mobile home.
FHA Title I program
We already mentioned the FHA’s Title II loan for manufactured homes that qualify as real estate. The FHA also offers Title I loans for personal property which includes homes that are not classified as real estate.
You’d need to put 5 percent down. Annual percentage rates will be higher than loan rates for traditional homes, but the rate should be lower than personal loan rates.
The interest rate is fixed for the entire loan term, and there are maximum loan amounts based on whether you’re financing a home purchase, buying the land for the home site, or both.
Current FHA Title I loan limits:
- Manufactured home: $69,678
- Manufactured home lot: $23,226
- Manufactured home & lot: $92,904
There are also maximum loan terms:
- 20 years for a manufactured home or a single-wide home and lot
- 15 years for a manufactured home lot loan
- 25 years for a loan on a multi-wide manufactured home and lot
An FHA Title I loan can be used for refinancing a manufactured home as well as purchasing one.
Not all lenders offer this program, so you’ll need to call around or search online for lenders who offer FHA Title I financing.
A chattel loan offers an in-between option for mobile home financing. This loan resembles an auto loan in that the home serves as collateral for the loan.
You may be able to get a chattel loan if you don’t plan to buy the home site, which is often the case in a mobile home community.
And you’d need at least 5 percent down to get financing. Because the home’s value provides security for a chattel loan, these loans are less risky than personal loans and can offer more competitive rates.
However, rates will still be several percentage points higher than a traditional fixed-rate mortgage. That, combined with a chattel loan’s shorter loan term, often results in higher monthly payments.
If your manufactured home is still on wheels, or is not financeable for some other reason, personal loans could be worth looking into.
The most attractive thing about personal loans is that there is absolutely no property approval involved.
The loan is based on you, not the property. Even if the mobile home is in poor shape or too old to finance, you could still be approved based on your credit history and debt-to-income ratio.
This kind of financing is also fast. In a week or less, you can have the funds to help purchase a home.
But there’s a catch: Personal loan annual percentage rates will be a lot higher than rates for secured loans like mortgages or chattel loans. Your rate could even be as high as your credit card rate if you have shaky credit.
And some lenders charge origination fees as high as 6 to 7 percent — higher than the average mortgage loan’s closing costs.
Use existing home equity
If you already own a home, you could leverage your home equity to pay for a manufactured home to use as a second home or rental property.
Equity is the part of your home’s value that you’ve paid off. If your home is worth $300,000 but you owe only $150,000, you’d have $150,000 in equity.
You can borrow against your equity by getting:
- A cash-out refinance: This kind of loan replaces your existing mortgage with a larger one, generating extra cash. It’s a good idea if you need a new primary mortgage and cash out for a big purchase
- A home equity loan or line of credit: With these loans you’d keep your primary mortgage in place and add a second mortgage. Home equity loans provide a lump sum of cash; home equity lines of credit (HELOCs) let you borrow from your equity as needed
Since these kinds of loans are secured by your home’s value, interest rates are competitive, especially if you have good credit and enough equity for your lender’s loan-to-value rules.
But these loans also require a lien on your home which means you could lose the home if you fail to make payments.
Mobile home loan FAQ
The National Manufactured Housing Construction and Safety Standards took effect on June 15, 1976. The law requires that new homes meet the Department of Housing and Urban Development’s safety codes. Homes made before June 15, 1976, may not meet HUD safety codes, so mortgage lenders won’t finance them.
Yes, a manufactured home dealer may offer financing just like a car dealer does. However, you should do your own home financing research. The FHA Title I program could offer lower monthly payments through a lower interest rate and/or a longer loan term.
If you get a loan backed by the FHA or USDA, or a conventional loan with less than 20 percent down, you’ll be required to buy mortgage insurance. This coverage protects the lender in case you default on the loan. Mortgage insurance premiums will add to your monthly payments and upfront costs. These premiums also lower your interest rate, so they may save you money.
A modular home is built in pieces in a factory and then assembled on a permanent foundation at the home site. A manufactured home is built in a factory and placed on a permanent foundation with no intention of further mobility. A mobile home is built in a factory and normally has wheels; it can be placed on a permanent foundation.
To qualify for a traditional mortgage, a manufactured home must be at least 400 square feet and placed on a permanent foundation. It must also be built to HUD’s post-1976 safety standards and categorized as ‘real property’ and not ‘personal property.’
No. A homeowner could buy the manufactured home separately from the lot or along with the lot. Or, if using a chattel or personal loan, the homeowner could place the home on rented land.
What are today’s manufactured home loan rates?
As average mortgage rates return to historically normal ranges, many borrowers are paying more than they did in 2020 and 2021.
To save money, some buyers are considering manufactured homes as a path to homeownership.
To get the best manufactured home loan rates, look for a home that qualifies for a traditional mortgage and shop around with at least three different lenders.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.