Can You Buy a Mobile Home With a USDA Loan?

Buying a mobile home can be an affordable way to become a homeowner With mobile homes costing much less than site-built homes, they allow buyers to purchase a property without a large down payment. But financing a mobile home purchase can be tricky Many lenders are hesitant to offer mortgages on these properties. This is where USDA loans come in.

USDA loans are a little-known financing option that can make buying a mobile home possible. Offered through the U.S. Department of Agriculture Rural Development division, these zero-down payment loans are available in rural areas. USDA loans can cover the purchase of both new and existing mobile homes.

In this article, we’ll explore using USDA financing for a mobile home purchase. We’ll look at:

• What types of mobile homes qualify for USDA loans
• Requirements for the home and land
• The loan process and costs
• Tips for getting approved

Let’s dive in and see if you can buy a mobile home with a USDA mortgage.

What Mobile Homes Are Eligible for USDA Loans?

Not just any mobile home can be purchased with USDA financing The agency has guidelines on the type of mobile homes they will finance Here are the specifics

• The home must be classified as real property. This means it sits on a permanent foundation and you pay real estate property taxes on it.

• It must be a doublewide or larger. Singlewide homes are not eligible.

• The home cannot have wheels, axles, trailer hitches or running lights. It must be immobile.

• If the home is new, it must have a HUD Data Plate showing it was built to HUD construction standards after June 15, 1976.

• Used mobile homes are okay, but they must have been built after 1976. Homes built before this don’t meet HUD standards.

• The home must be in good condition with no serious defects. An appraisal is required.

As long as your mobile home meets these criteria, it should qualify for a USDA loan. Manufactured homes, modular homes, and kit homes are also eligible, as are mobile home/land packages.

Land and Site Requirements

In additional to home eligibility standards, the land where the mobile home sits must meet USDA location and site requirements:

• The home must be in a USDA-designated rural area. The agency has an eligibility map you can check.

• Properties in suburban or urban areas don’t qualify. But some small towns and communities near cities may still be eligible.

• The site must be large enough to comply with local zoning requirements for mobile homes.

• The land where the home sits must be mortgaged with the home. Separate financing on land is not allowed.

• Site development must comply with HUD standards and local building codes. Permanent foundations and utility hookups are required.

Again, the USDA has specific guidelines here. Work with an approved lender to make sure a property qualifies.

The USDA Mobile Home Loan Process

The USDA mortgage process is similar to other loan programs. Here are the basic steps:

• Get prequalified. This gives you a preliminary loan approval so you know your price range.

• Find a home. Search for USDA-eligible mobile homes in rural locations.

• Make an offer. Submit a purchase agreement once you find the right home.

• Get fully approved. Your lender will verify income, assets, credit and the property’s eligibility.

• Complete the sale. After full approval, complete the transaction and take ownership.

• Make mortgage payments. You’ll make monthly principal and interest payments, plus escrow for taxes and insurance.

USDA loans do have an upfront guarantee fee of 1% of the loan amount. This can be financed into the loan. Closing costs are similar to other mortgages.

The big advantage is that no down payment is required. This helps buyers with limited savings purchase a mobile home.

Tips for Getting Approved for a USDA Mobile Home Loan

Because USDA loans don’t require a down payment, the agency has stricter credit standards. Here are some tips for getting approved:

• Have a minimum 620 credit score. This shows the USDA you are a responsible borrower. Scores below 600 make approval very difficult.

• Lower your debt-to-income ratio. Keep monthly debt payments below 43% of gross monthly income.

• Have stable income. Provide two years of consistent job history and income documentation. Self-employed borrowers must show strong business revenue.

• Save up for closing costs. Plan to have around 2-5% of the purchase price for upfront mortgage fees.

• Consider adding a co-borrower. A co-signer with better credit or income can boost your chances of approval.

• Connect with an approved USDA lender. Not all lenders offer USDA financing. Find one experienced with this loan program.

With reasonable credit, manageable debts, and steady income, your chance of getting a USDA mobile home loan are good.

Pros and Cons of Buying a Mobile Home With a USDA Loan

USDA financing can make buying a mobile or manufactured home affordable. But is it the right option for you? Consider the pros and cons:

Pros

• Requires no down payment or mortgage insurance
• Offers low interest rates and monthly payments
• Allows lower credit scores than conventional loans
• Can cover land/home packages and site development costs

Cons

• Limited to rural locations with smaller home selection
• Strict credit and income requirements
• Upfront guarantee fee adds to closing costs
• Homes may appreciate slower than site-built homes

For buyers who qualify, a USDA loan can be the most affordable route into homeownership. Just weigh the trade-offs based on your home buying goals.

Alternatives if You Don’t Qualify for a USDA Mobile Home Loan

Don’t lose hope if you don’t qualify for a USDA mortgage. Here are some alternative mobile home financing options:

• FHA loans – Require 3.5% down but are available in more areas. Credit scores must be at least 580.

• VA loans – For veterans and service members. No down payment or credit minimums. Can be used in any location.

• Personal loans – From banks and online lenders. May offer lower rates/fees than traditional mortgages.

• Seller financing – The seller carries the loan. Often easier to qualify, but terms vary greatly.

• Cash purchase – If you can pay cash from savings, you avoid financing altogether.

Shop around to find the best mortgage or cash deal on the mobile home you want.

The Bottom Line – USDA Loans Can Finance a Mobile Home

Buying a mobile or manufactured home is an affordable way to become a homeowner, especially with a USDA mortgage. These loans require no down payment and offer low rates. Just be sure the home and land meet eligibility guidelines. And work to meet the program’s credit and income requirements.

While limited to rural locales, USDA loans open up mobile homeownership for buyers on a budget. If you’re ready to stop renting and enjoy homeowner benefits, a USDA-financed mobile home may be the solution. Connect with an approved lender to explore your options.