Loans for Manufactured Homes and Land: A Complete Guide

Buying a manufactured home and the land it sits on can be an affordable way to become a homeowner. Unlike traditional site-built homes, manufactured homes are constructed in a factory and then transported to your property. This building method lowers costs, making manufactured homes on average 40% less expensive than site-built homes.

But financing the purchase of a manufactured home and land can be tricky You’ll need a specialized type of loan called a manufactured home loan, I’ll explain everything you need to know about getting financing to buy a manufactured home and land in this comprehensive guide

What is a Manufactured Home Loan?

A manufactured home loan is a mortgage specifically designed for financing manufactured homes, These loans have unique requirements and guidelines compared to loans for site-built homes,

Manufactured home loans can be used to:

• Finance just the home if you plan to rent a lot in a community.
• Finance just the land the home will sit on.
• Finance both the manufactured home and land together.

You’ll have several loan options to choose from, which I’ll cover next.

Manufactured Home Loan Types

There are a few main types of loans used for financing manufactured homes and land

Conventional Loans

Conventional loans are offered by private lenders like banks and credit unions. They are not backed by the government.

Typical requirements:

• Credit score of 620 or higher
• Down payment of around 5%
• Debt-to-income ratio below 43%

FHA Loans

FHA loans are insured by the Federal Housing Administration. They are a good option for borrowers with lower credit scores.

Typical requirements:

• Minimum credit score of 580
• Down payment as low as 3.5%
• Maximum loan amount of $92,904

VA Loans

VA loans are insured by the Department of Veterans Affairs. They are only available to military members and veterans.

Typical requirements:

• No minimum credit score
• Down payment of at least 5%
• No maximum loan amount

USDA Loans

USDA loans are backed by the U.S. Department of Agriculture. They are designed for low-income borrowers in rural areas.

Typical requirements:

• Minimum credit score of 640
• No down payment required
• Income limits apply

Chattel Loans

Chattel loans are specifically for financing manufactured homes without land. The home is considered personal property instead of real estate.

Typical requirements:

• Minimum credit score of 575
• Down payment of at least 5%
• Shorter loan terms of 15-20 years

Now that you know the main types of manufactured home loans, let’s go over the costs involved with purchasing a manufactured home and land.

The Costs of Buying a Manufactured Home and Land

Buying a manufactured home and land has several costs you’ll need to factor in:

• Land purchase – This will vary greatly based on location and acreage. Land can cost anywhere from $4,000 to $100,000+ per acre.

• Manufactured home – The size, custom features, and quality impact the home’s price. In 2022, the average manufactured home cost $125,700.

• Foundation – A permanent foundation usually runs $4,000 to $15,000 if required by your lender.

• Utility hookups – Connecting electric, water, sewer will add $6,500 to $34,600.

• Transportation – Delivering the home to your land costs extra. Get estimates from manufacturers.

• Installation – The home must be properly installed on the foundation, which involves extra fees.

• Insurance – Homeowners insurance is required and averages $100 to $300 per month.

• Taxes – You’ll pay annual property taxes like any homeowner. Calculate this cost before buying.

While manufactured homes are less expensive upfront, make sure to budget for these additional purchasing costs.

How to Buy a Manufactured Home and Land

If you’ve decided to buy a manufactured home and land, follow these steps:

1. Get pre-approved

Having a lender pre-approve you for financing will make your home search easier. They’ll tell you the maximum loan amount and costs you can afford.

2. Find land

Search for land in the location you want that will accommodate a manufactured home. Consult zoning laws to make sure manufactured homes are allowed.

3. Select a home

Browse model homes from manufacturers and customize the floor plan to your tastes. Get an estimate for total costs.

4. Purchase land

Make an offer on your chosen land and open escrow. Your lender will appraise the property.

5. Apply for construction loans

You may need a construction loan to cover site preparation costs before purchasing the home.

6. Prepare land site

Install utility hookups, pour the foundation, obtain permits.

7. Order home & finalize loan

After the land is ready, order your manufactured home. Convert the construction loan to a traditional mortgage.

8. Transport & setup home

The home will be delivered and installed on the foundation.

9. Final inspection & closing

After a final inspection, close on the loans and land title transfer.

While the process involves extra steps, you’ll save substantially on your overall home purchase with a manufactured home and land loan. Consult a loan officer early on to make financing easy.

Pros & Cons of Manufactured Home Loans

There are some notable advantages and drawbacks of getting a manufactured home loan:

Pros

• Lower home prices and monthly payments
• Possible to buy with low down payment
• Qualify with lower credit scores
• Take out just one loan for home and land

Cons

• Higher interest rates than site-built mortgages
• More difficult to qualify than standard loans
• Shorter repayment terms of 15-20 years
• Low resale value of manufactured homes

Consider both the benefits and drawbacks when deciding if this type of loan fits your homebuying needs and financial situation.

Tips for Getting Approved

To boost your chances of getting approved for a manufactured home loan, follow these tips:

• Put at least 5% down to get better rates
• Select a fixed-rate loan to lock in low rates
• Get pre-approved to show sellers you’re serious
• Improve your credit score before applying
• Lower your debt-to-income ratio as much as possible
• Choose land in an area that allows manufactured homes

Meeting some key requirements upfront will make your loan application process smoother.

Finding the Best Lender

With manufactured home loans, the lender you choose can make a big difference. Here are some factors to look for:

• Offers FHA, VA, and USDA manufactured home loans
• Has loan programs for land-home financing
• Provides services in your state
• No origination or lender fees
• Good customer reviews
• Lower interest rates and fees
• Allows co-borrowers to improve chances of approval
• Local lender with knowledge of manufactured homes

Shop around and get rate quotes from multiple lenders to find the best financing option.

alternatives to Manufactured Home Loans

If you can’t qualify for a manufactured home loan, here are a couple alternatives to consider:

• Personal loans – May be used as down payment funds when combined with home-only financing.

• Renting land – You can finance just the home through chattel loans and rent a lot.

• Owner financing – Some sellers provide their own financing for the land and home sale.

• USDA single-family loan – Newer modular homes on foundations may qualify for standard mortgages.

For those who don’t meet the requirements for a manufactured home loan, these options could help make owning this type of affordable home possible.

The Bottom Line

Financing a manufactured home and land provides a more affordable path to homeownership. Just make sure to choose the right loan type and lender for your situation. Consider both the pros and cons when weighing manufactured home loans versus standard mortgage options. And provide as large of a down payment as possible with good credit to get approved.

With the right preparation and research, you can land favorable financing terms to buy your dream home for less. Consult with a loan officer to get pre-approved and kickstart your journey to owning a manufactured home on land you own.