Can I Buy a Manufactured Home With an FHA Loan?

Manufactured homes, formerly known as mobile homes, provide a more affordable way for many people to achieve homeownership. With manufactured housing, you can often buy a home for substantially less than a site-built home. This makes manufactured homes an attractive option, especially for first-time homebuyers or those on a tight budget. But financing a manufactured home can be tricky. Luckily, FHA loans allow buyers to finance the purchase of a manufactured home under certain conditions. In this article, we’ll take an in-depth look at using FHA loans to buy manufactured housing.

What is Considered a Manufactured Home?

The U,S, Department of Housing and Urban Development (HUD) has specific standards that a home must meet to qualify for FHA financing as a manufactured home These include

• The home must have been constructed after June 15, 1976, when HUD’s Manufactured Home Construction and Safety Standards building code went into effect Homes built before this date are ineligible

• The home must have been constructed off-site, in a factory, in accordance with HUD’s construction and safety standards.

• The home must be built on a permanent chassis and be transportable in one or more sections.

• The home must have a HUD certification label, also known as a HUD tag, attached to each transportable section. This acts as proof that the home meets HUD standards.

Manufactured homes meeting these criteria are still commonly referred to as “mobile homes” but are technically a type of prefabricated housing. They differ from modular homes, which are also factory-built but delivered in modules for assembly on-site.

How Do FHA Loans Work?

FHA loans are government-backed mortgages insured by the Federal Housing Administration. Although you work with private FHA-approved lenders, the FHA provides insurance to protect lenders from losses if borrowers default. This allows lenders to offer FHA loans to borrowers who meet FHA requirements but may not qualify for conventional mortgages.

Some key features of FHA loans include:

• Lower down payments, with options as low as 3.5% of the purchase price.

• More flexible credit score requirements. FHA loans are available to buyers with credit scores as low as 500.

• Lower debt-to-income ratios allowed. FHA sets a maximum limit of 57% for borrowers’ total monthly debt versus monthly income but evaluates borrowers with higher ratios on a case-by-case basis.

• Availability for first-time homebuyers. FHA doesn’t require any prior homeownership experience.

These features make FHA mortgages a popular option for financing manufactured housing.

FHA Requirements for Manufactured Home Loans

To qualify for FHA financing on a manufactured home, certain requirements must be met:

Home Requirements

• The home must have been built on or after June 15, 1976 and have HUD certification tags.

• The home must be attached to a permanent foundation on land owned by the borrower.

• The home must be taxed as real estate, not personal property.

• The home must be served by permanent water and sewer facilities.

• The home must be accessible by roads, regardless of weather conditions.

• The home must undergo a foundation inspection by a certified engineer or inspector.

Borrower Requirements

• Credit score of at least 500, with a minimum down payment that varies based on credit score. Most lenders require at least 580.

• Total monthly debt under 57% of monthly gross income.

• Sufficient income and assets to qualify for the loan amount.

• Intention to use the home as a primary residence.

Loan Limits

FHA sets maximum loan limits based on local home costs. Loan limits for manufactured housing generally follow standard FHA loan limits based on the property’s location.

Pros and Cons of FHA Loans for Manufactured Housing

FHA loans offer benefits but also have some downsides to consider.

Pros

• Lower down payments required.

• More flexible credit score and debt-to-income requirements.

• Loan limits based on local housing costs.

• Can finance first-time homebuyers.

Cons

• Require mortgage insurance, adding to costs.

• Slower loan approval process compared to conventional mortgages.

• Tighter availability from lenders who limit manufactured home lending.

• Limitations on land ownership and home foundation requirements.

What About FHA Title I Loans?

The FHA Title I Loan Program is a separate FHA loan program that offers more flexible requirements for financing manufactured homes:

• The home doesn’t need to be placed on a permanent foundation.

• The land doesn’t need to be owned by the borrower.

• Can be used for a new or used home.

• Lower maximum loan amounts than Title II.

However, Title I loans aren’t as widely available as standard FHA loans. Many lenders don’t offer them.

Should You Use an FHA Loan for a Manufactured Home?

FHA loans allow buyers to finance manufactured homes that meet HUD property standards and FHA borrower eligibility. For buyers unable to qualify for conventional mortgages, FHA loans make owning a manufactured home possible.

That said, FHA financing comes with some limitations, so it’s important to weigh the pros and cons against your individual home buying goals and financial circumstances. Consulting with a loan officer can provide greater insight into whether an FHA manufactured home loan is the right fit for your situation.

While financing manufactured housing takes some extra diligence, FHA loans provide a viable pathway to affordable homeownership for many buyers. With proper research and preparation, you can successfully use an FHA loan to buy the manufactured home of your dreams.