Get Affordable Housing with USDA Loans for Manufactured Homes

USDA loans can offer serious benefits for those who use them. With no down payment requirements, low interest rates and looser income requirements than many other loan products, they open the door to homeownership for many Americans who previously had no other options. Even better, utilizing a USDA loan on manufactured and modular housing is possible.

Manufactured homes, once known as mobile homes, provide an affordable housing option for many Americans, especially in rural areas. A manufactured home combined with USDA home loan financing can make homeownership achievable for more people. Let’s look at what manufactured homes are, their benefits, costs, and how to get USDA loans to buy them.

What are Manufactured Homes?

Manufactured homes are prefabricated houses built in factories and then transported to sites where they are installed. They come in sections or as a single unit At the site, the home is set on a foundation and connected to utilities. Manufactured homes must meet the HUD building code standards.

Key features of manufactured homes

Built in factories under controlled conditions for quality and efficiency
Transported to site in sections or as a whole unit
Installed on permanent foundation
Available in different designs and floor plans
Much lower cost than site-built homes

Manufactured homes differ from modular homes, which are also prefabricated in sections but built to local building codes rather than federal standards. They are hard to distinguish from stick-built homes.

Benefits of Manufactured Homes

There are many good reasons to consider a manufactured home:

Cost savings – Manufactured homes cost around 50% less per square foot than site-built homes. This makes homeownership viable for lower and middle income buyers.
Customization – You can customize the home’s design, floor plan, features and finishes.
Fast move-in ready – Manufactured homes are move-in ready much faster than site-built homes. Just weeks after ordering, your new home is ready for occupancy.
Energy efficiency – Manufactured homes are built to federal energy standards making them quite energy efficient. This saves on utility bills.
Appreciation potential – Manufactured homes on owned land tend to appreciate in value like conventional homes.

Costs of Purchasing a Manufactured Home

A new manufactured home costs $50-$100 per sq. ft on average based on size and features. A double wide 1,500 sq.ft home would cost $75,000 to $150,000. Here are the main costs:

Home price – The base price depends on size, model, features, etc. Like automobiles, you can upgrade flooring, cabinets, appliances and more.
Delivery and setup – Transporting the home and installing it on site can cost $5,000-$20,000.
Land costs – You can rent a lot in a manufactured home park or purchase land. Land will add $10,000-$50,000 to costs.
Foundation – A permanent foundation for the manufactured home is required. Cost is around $7,500 for a basic slab foundation.
Utility connections – Hooking up electricity, water, sewer lines, etc. runs $2,000-$5,000.
Permits and fees – Plan for $1,000-$2,000 for various permits, impact fees and inspections.

How to Finance a Manufactured Home with a USDA Loan

USDA home loans offer a great financing option for manufactured homes in rural areas. The USDA Single Family Housing Guaranteed Loan Program assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Here are some key points about USDA loans for manufactured homes:

100% financing – USDA loans can cover 100% of the appraised value so no down payment is required. Closing costs and upfront fees can also be included in the loan.
Low rates and terms – Interest rates are very competitive and fixed for 30 years. The loan term can be 30 years as well.
Less stringent credit requirements – Credit score requirements are more flexible than conventional loans.
No mortgage insurance – Mortgage insurance is not required on USDA loans. This saves substantially on monthly payments.
Can include land – Land acquisition and site prep costs can be financed as part of the loan.
** Streamlined process** – USDA loans are easier to obtain than conventional home loans. Lenders can also obtain the loan note guarantee upfront for more flexibility.

If you’re interested in buying a manufactured home in an eligible rural location, check out USDA Single Family Housing Guaranteed Loan Program for more details.

Finding Quality Manufactured Homes

It’s important to find a reputable manufactured home dealer who focuses on quality and value. Ask for referrals from other manufactured home owners. Tour model homes to assess workmanship and materials. Look for the following:

A dealer affiliated with trusted manufactured housing brands like Clayton Homes, Cavco Industries, etc.
Strong customer service and responsiveness from the dealer
A good selection of floor plans, design features, and options to customize
High quality construction, fixtures, appliances and finishes
Energy efficient features like EnergyStar rated windows, appliances, HVAC systems
A dealer who handles permitting, delivery, setup, utility connections, etc.

Take time to educate yourself on what constitutes a well-built manufactured home before making this big purchase.

Tips for Buying Land for Your Manufactured Home

If you don’t want to live in a manufactured home park, you’ll need to purchase a lot or land for your manufactured home. Here are some tips when buying land:

Check that the property is suitable for a manufactured home. Not all communities allow them.
Make sure the land is accessible for the home to be delivered and installed.
Determine if the property has access to public water, sewer and electric service. If not, additional costs will apply.
Hire a home inspector to evaluate the property and identify any issues.
Research permits and fees required for placing a manufactured home on the property.
If financing the land, consider rolling costs into your USDA home loan.
If buying in a rural location, check USDA land eligibility requirements.
Allow extra time for due diligence since financing and zoning for manufactured homes can get complicated.

Proper due diligence on the home and land upfront will help ensure your manufactured home investment meets your long-term needs.

Locating Manufactured Home Communities

Instead of purchasing land, you may prefer to rent a lot in an established manufactured home community. These communities provide amenities, maintenance and a sense of community. Here are some tips for finding a suitable manufactured home park:

Search online directories like MHVillage.com and AllParks.com
Check listings on real estate sites like Zillow.com and Realtor.com
Drive through nearby manufactured home communities and look for “For Sale” signs
Talk to manufactured home dealers for recommendations on good communities
Contact a local real estate agent experienced with manufactured home communities

When touring manufactured home parks, observe the following:

Appearance of homes – Are they well-maintained?
Condition of roads, landscaping, amenities – Is the property cared for?
What types of homes are there? Are higher end homes permitted?
Does the park allow certain breeds of dogs or pets? Important if you have them!
Are there age limits? Retiree-only communities are common.
Are amenities like a pool, clubhouse, activities available?
Is the neighborhood and surrounding area safe and appealing?

Take time to research manufactured home communities just as you would any other neighborhood. Finding the right community can enhance your quality of life and home ownership experience.

Ensure Proper Installation and Setup

Proper setup and installation is crucial to your manufactured home living up to its potential. Here are key steps:

Permanent foundation – A reinforced concrete slab or pier foundation is required.
Leveling – Precise leveling prevents problems like doors not closing properly.
Load-bearing reinforcements – Supports under the home prevent sagging.
Proper ventilation – This reduces moisture and improves indoor air quality.
Secure anchoring – Tie-downs and anchors keep the home secure in storms.
Hookups – Use qualified pros to connect electric, water, sewer lines, HVAC, etc.
Vapor barrier – A moisture barrier under the home helps control dampness.
Accessibility -Install easy access ramps and wide doors if needed.
Site drainage – Drainage sloped away from the home prevents flooding.
Exterior finishes – Add skirting, decks, porches, landscaping.

Oversee the setup closely and inspect finished work. This helps avoid problems down the road.

Tips for Financing Your Manufactured Home

Here are some key tips when seeking financing for your manufacture

USDA Manufactured and Modular Property Requirements

For modular or manufactured housing to be eligible for USDA financing, the property must meet certain requirements first.

The housing unit must be built within the last 12 months and purchased from an approved dealer or contractor. The unit must be new and never installed or occupied at any other site or location. Manufactured single-wide homes must be at least 12 feet wide and have a minimum of 400 square feet of living space. Double-wide homes must be at least 20 feet wide.

The home must meet all Federal Manufactured Home Construction and Safety Standards (FMHCSS), which dictate how the property should be manufactured, constructed and installed.

The site on which the home is placed must be classified as real estate and taxable as such. It must also be affixed to a permanent foundation and located in an approved USDA-eligible rural area.

The homes lowest point should be higher than the 100-year floodplain and have water access and wastewater disposal mechanisms.

As with a traditional home purchase, USDA lenders will order an appraisal of any modular or manufactured property to ensure it meets all appropriate financing standards and assess its current market condition.

2,201 people found a USDA lender in the last 24 hours!

There are certain scenarios when a USDA loan cannot be used – even if the site is an approved rural area and you meet eligibility requirements as a borrower.

The USDA loan process includes:

Warranty Requirements – The home’s dealer must provide proof of warranty for the home to the lender. This warranty must comply with all HUD requirements.
Lender Requirements – The lender should have a copy of all manufacturer warranties on file. They will also require a guarantee fee and an annual fee (similar to PMI) if the loan is for 80 percent or more of the sales price.
Certification Requirements – The dealer and buyer must sign a document certifying that the home sustained no damage during transport or assembly.
Lien Requirements– You’ll need to ensure all contractors have been paid and that there are no liens attached to the property for work performed.
Real Estate Tax – The home needs to be taxable as real estate under state law.
Title and Lien – The title and lien must be recorded in local land records as including both the property and the site itself. The mortgage must have a title insurance policy, and you, as the buyer, must acknowledge that the home, though movable, needs to be secured to the site to be eligible for USDA financing.

Once all these requirements have been met, the home is constructed on its permanent foundation, and all liens are removed on the property, the loan can be approved and your funds dispersed.

One of the biggest hurdles in using a USDA loan on a modular or manufactured home can be finding a lender.

Not all lenders make loans for manufactured housing or offer financing for new construction.

If you’re interested in modular or manufactured homes, make sure to look for lenders who not only offer USDA loans on these properties but who also have deep experience with them. This will ensure your loan process goes smoothly and without error.

What are USDA Manufactured Home Loan Guidelines?

FAQ

What is the oldest manufactured home that can be financed?

The question of financing older manufactured homes often puzzles buyers, as lenders typically have strict criteria regarding the age and condition of the property. Generally, the oldest manufactured home that can be financed is one built after June 15, 1976.

Why is it harder to get a loan for a manufactured home?

Many lenders will not approve a conventional loan for a mobile home because they are not considered “real property.” However, homes that are attached to a permanent foundation could qualify. The common factor in qualifying for any loan is credit score. The better the score, the more likely you will qualify.

What is the USDA large deposit threshold?

USDA large deposits While for FHA Mortgages deposits that exceed 1% of the sales price are considered large, USDA loans have no specific rule for large deposits’ threshold. The definition of “large” is subjective and up to the underwriter.

Does USDA have a 90 day flip rule?

Appraisal Updates • An appraisal report is initially valid for 150 days from the effective date • Lenders may extend that period to 240 days (an extra 90 days beyond the initial period) with a one-time Appraisal Update Report. Property flipping is not prohibited.