Can You Buy a Manufactured Home with an FHA Loan?

This type of financing can put mobile home ownership within reach for many Part of the Series Federal Housing Administration (FHA) Loans Understanding FHA Loans

Despite the relatively modest cost of a manufactured home (commonly referred to as a mobile home), it can be harder to qualify for a mortgage for one of these dwellings than for conventional houses.

Fewer lenders are in the business of providing loans for manufactured homes, which are built off-site and affixed to a permanent chassis. As a result, would-be mobile homeowners simply don’t have many financing choices.

However, those interested in a manufactured home do have some options if they don’t meet conventional mortgage standards. One is a Federal Housing Administration (FHA) loan, which can be used to cover the home itself, a suitable lot to build it on, or both.

Buying a manufactured home, also known as a mobile home, can be an affordable way to achieve homeownership. With manufacturing efficiencies, these factory-built homes cost 20% less on average than comparable site-built houses. If you’re considering a manufactured home purchase, using an FHA loan is a popular financing option. Let’s look at everything you need to know about buying a manufactured home with an FHA loan.

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 be built to HUD’s Manufactured Home Construction and Safety Standards (MHCSS) building code that went into effect on June 15, 1976 Homes built before this date are ineligible
It must be constructed in a factory on a permanent chassis for transportation on wheels to the site
The manufactured home must have a HUD red certification label attached to each transportable section, usually the outside panel near the electrical box. This serves as proof it was built to HUD standards.
It should have a minimum living space of 400 square feet.
The towing hitch must be removed.

Modular homes are different than manufactured homes in that they are built in sections at a factory but transported and assembled on-site, not on a chassis. Modular homes must meet local building codes rather than HUD standards.

FHA Loan Options for Manufactured Homes

The FHA Title I Manufactured Home Loan program and FHA Title II Mortgage program both allow financing of a manufactured home purchase. Here are the differences:

FHA Title I

The home can be on leased land.
Only requires 5% down payment.
Loan limits up to $92,904 based on geographic location.

FHA Title II

Home must be placed on land that you own.
Minimum 3.5% down payment.
Follows standard FHA conforming loan limits based on county.

For both programs, you must live in the manufactured home as your primary residence. FHA does not insure manufactured home loans for second homes or investment properties.

FHA Manufactured Home Loan Requirements

To qualify for an FHA manufactured home loan, certain criteria must be met:

Credit Score – A minimum credit score of 580 is required, with scores below 640 needing a higher down payment. Many lenders require 640.
Down Payment – Options are 3.5% down for credit scores 580+, or 10% down for credit scores 500-579. Gift funds can be used.
Debt-to-Income Ratio – Your total monthly debt payments, including the new mortgage, cannot exceed 43% of gross monthly income.
Loan-to-Value – The loan amount can be up to 96.5% of the home’s value.
Home Inspection – An engineer’s certification is required stating the home is designed for the geographic area.
Foundation – For FHA Title II loans, the home must be attached permanently to the foundation.

In addition to borrower eligibility, the manufactured home itself must meet HUD requirements stated earlier regarding MHCSS standards, HUD certification labels, etc.

The Pros and Cons of FHA Manufactured Home Loans

Pros

Low down payments, starting at 3.5%
Flexible credit score requirements
Low mortgage insurance premiums
Ability to wrap closing costs into loan amount

Cons

Requires mortgage insurance
Slower loan approval process
Loan limits may be lower than conventional mortgages
Difficulty making competitive offers due to delays
Home depreciates over time unlike site-built homes

How to Apply for an FHA Manufactured Home Loan

Follow these steps when applying for an FHA manufactured home loan:

Find a manufactured home built after June 15, 1976 that meets HUD construction standards. Confirm it has HUD labels attached.
Select a lender approved for FHA loans. Get pre-approved to determine your loan amount and interest rate.
Make an offer and get an FHA home inspection done after offer acceptance.
Agree on a purchase price after inspection negotiations.
Select an FHA appraiser to determine the property’s value.
Finalize loan details like interest rate, monthly payments, and down payment needed.
At closing, provide your down payment and sign loan documents to purchase the home.

Purchasing a manufactured home can be an affordable entry point into homeownership. FHA manufactured home loans provide flexible financing options for those who meet eligibility standards. Just be sure to find a qualifying home and work with an approved FHA lender. If you’re ready to move forward, starting the pre-approval process is the next step toward buying a manufactured home with an FHA loan.

How an FHA Manufactured Home Loan Works

The FHA has two loan programs for manufactured homes⁠: one for borrowers who own the land that the home is on, and another for homes located in a mobile home park.

With an FHA mortgage, the government insures a loan provided by an approved private lender. If you default on your payments, the lender has the assurance that Uncle Sam will reimburse it for all or part of its losses. Because of this, FHA-approved mortgage providers are willing to take on borrowers who have a slightly higher risk profile.

Homeowners fund the mortgage insurance and pay both an upfront premium and an annual premium to the FHA on top of the loan amount. That can potentially make these loans a bit more expensive than other loans. But if a government-insured loan is your only way of moving into a new home, then the extra cost may be worth it.

An FHA mortgage must be used to finance a primary residence.

Find an FHA-Approved Lender

Because the FHA doesn’t actually lend you money for a mortgage—it only guarantees the loan—you must get the loan from an FHA-approved lender, such as a bank or other financial institution.

You’ll need to shop around to make sure that you get the best loan terms and rate for your needs. To find an approved lender, use the search tool on the U.S. Department of Housing and Urban Development (HUD) website.

In general, as with any loan, the lower your credit score and the smaller your down payment, the higher the interest rate that you’ll pay.

If you have questions about the FHA program, HUD operates a voice-assisted hotline that can refer you to local counseling organizations. These housing agencies can help you better understand your options. The 24-hour HUD clearinghouse can be reached at (800) 569-4287, or you can search online for a HUD housing counseling agency.

FHA Mobile Home Requirements

FAQ

What is the oldest manufactured home for an FHA loan?

To qualify for an FHA loan, a manufactured home must have been built later than June 15, 1976, and adhere to certain building standards and government guidelines. The maximum FHA mobile home loan amount is $92,904.

What does FHA consider a permanent foundation for a manufactured home?

For example: The United States Department of Housing and Urban Development (HUD) suggests that permanent foundations are meant to be site-built and constructed of durable materials such as concrete, treated wood or mortared masonry.

Who is the best lender for manufactured homes?

Company	Starting Interest Rate	Loan Terms (range)
Manufactured Nationwide Best Overall	Varies	15, 20, or 30 years
ManufacturedHome.Loan Best for Good Credit	Varies	Varies
21st Mortgage Corporation Best for Bad Credit	Varies	Varies
eLend Best for Low Down Payment	Varies	Varies

What is the loan term for a mobile home?

It depends on the lender. However, if you’re financing a mobile home on a permanent foundation, you’ll likely encounter loans with terms ranging from 15 to 30 years. However, if you’re using a chattel or personal loan, you’ll likely have a shorter repayment term.

Can you get a mortgage on a manufactured home?

Yes, you can get a mortgage on a manufactured home. There are several options, including FHA loans, VA loans, and certain conventional loans. The home usually needs to meet specific requirements, such as being on a permanent foundation and classified as real property. Can you get a reverse mortgage on a manufactured home?

Can a mobile home be approved for an FHA loan?

Mobile home loans guaranteed by the FHA loan program have some unique requirements. One of them? The manufactured-by rule; HUD 4000.1 states that mobile homes manufactured before June 15, 1976 cannot be approved for an FHA mortgage. Then there’s a size restriction–your new home cannot be too small.

Are manufactured homes eligible for FHA financing?

Homes built prior to June 15, 1976, aren’t eligible for FHA financing. You’ll need to meet FHA minimum mortgage standards as a borrower, and your manufactured home and the land it’ll sit on will have to meet special property and construction requirements. What are my FHA manufactured home loan options?

Can a mobile home be too small for an FHA loan?

Then there’s a size restriction–your new home cannot be too small. HUD 4000.1 says your manufactured home must have a floor space of 400 feet or more to be approved for an FHA mortgage. And what about FHA loan limits for mobile homes?