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.
Buying a mobile home can be an affordable way to become a homeowner, especially for low- to moderate-income borrowers With a mobile home, you can get the space and amenities of a single-family house for a fraction of the cost.
But financing a mobile home purchase can be tricky. Many lenders shy away from lending on manufactured housing due to misconceptions about quality and value. As a result, your options are limited.
One little-known loan program that does finance mobile homes is the USDA home loan. Offered by the U.S. Department of Agriculture (USDA), this 100% financing mortgage is ideal if you want to buy a manufactured home but have limited funds.
In this article, I’ll explain everything you need to know about buying a mobile home with a USDA loan. You’ll learn:
- What types of mobile homes qualify for USDA financing
- Requirements your home must meet
- How to find a lender that offers USDA manufactured home loans
- Tips for getting approved with poor credit or low income
Let’s start with the basics of how USDA loans work for mobile home purchases.
Overview of USDA Loans for Mobile Homes
The USDA Single Family Housing Guaranteed Loan Program (SFHGLP) helps low-income borrowers in rural areas buy a home. You can qualify with no down payment and no mortgage insurance.
With a USDA loan, you can finance
- Purchase of a new manufactured home
- Transportation costs
- Foundation and setup
- Purchase of the home site if you don’t already own land
You can also use USDA to buy just the mobile home if you already own the land
USDA loans have flexible credit and income limits to help more borrowers qualify. You can get approved with a credit score as low as 640 and a debt-to-income ratio up to 29%/41%. Income limits vary by county but are generally quite high.
As of 2022, the purchase price limit for USDA loans is $647,200 in most U.S. counties.
What Types of Mobile Homes Are Eligible?
Not just any mobile home can be financed with USDA. The agency has guidelines manufactured housing must meet to qualify for a loan:
1. The home must be classified as real property.
Real property means the mobile home is considered real estate, not personal property. Here are traits of a real property manufactured home:
- Doublewide or larger
- Placed on a permanent foundation
- Has a HUD Certification label
- Taxed as real estate, not personal property
2. The home must be located in a USDA-designated rural area.
USDA loans are only available in small towns and rural locations as defined by the agency. You can check your address online to see if you’re in an eligible area.
3. New (not used) mobile homes are preferred.
USDA guidelines state that loans on new manufactured housing are preferred. However, you may be able to buy an existing home if it meets all other requirements.
4. The home must meet HUD manufacturing standards.
All new mobile homes should have a HUD Certification label indicating it meets the latest safety, construction, and energy standards. USDA will also want to see that a used mobile home has HUD tags if it was built after 1976 when standards went into effect.
5. The home must be on a permanent foundation.
Manufactured housing on wheels or temporary blocking does not qualify. USDA requires that mobile homes be permanently affixed and anchored to a foundation.
How To Find a USDA Mobile Home Lender
The tricky part about USDA loans for manufactured housing is that not all lenders offer them. You’ll need to search for a lender that does “chattel” lending or specifically advertises USDA mobile home loans.
Here are some tips for finding a lender:
-
Check with local banks and credit unions. Community lenders are more likely to finance manufactured homes.
-
Search online loan directories. Various sites compile lenders by loan type, making it easy to find ones offering USDA manufactured housing loans.
-
Ask housing dealers for recommendations. Manufactured home dealers may know lenders in the area that provide financing options for buyers.
-
Look for lenders advertising USDA chattel mortgages. Some lenders specifically promote USDA loans for mobile homes rather than real estate mortgages.
-
Work with a mortgage broker. Brokers have access to a wide array of loan programs from different lenders. They can help match you with a lender offering USDA mobile home financing.
Cast a wide net in your search, and you should find several lenders willing to finance a mobile home purchase with USDA.
Tips for Getting Approved for a USDA Mobile Home Loan
If you have past credit issues or low income, getting approved for any mortgage can be challenging. But the USDA program is more flexible than conventional loans. Here are some tips that can help you get approved:
Improve your credit score. Requirements vary by lender, but most want at least a 640 FICO score. Pay down balances, dispute errors to boost your score.
Lower your debt-to-income ratio. Lenders look at your total monthly debt payments compared to income. The lower the better. Pay off cards and loans to lower this ratio.
Save up a down payment if possible. Even though USDA requires no down payment, a 3-10% down payment can improve your approval odds and interest rate.
Bring a co-signer. Adding a co-signer with better credit or higher income can help you qualify if your own finances are marginal.
Apply with a local lender. Community banks and credit unions are more likely to overlook credit flaws or borderline income compared to national lenders.
Prepare documents upfront. Gather income verification, tax returns, bank statements beforehand to speed up the application process.
Explain past issues. If you had a past bankruptcy or foreclosure, be ready to provide documentation and explain the circumstances to the lender.
With some preparation and searching, it’s possible to get approved for a USDA mobile home loan even with financial challenges. The program provides a great opportunity for lower income and more credit-challenged borrowers to achieve homeownership.
Financing the Purchase in Steps
Another strategy is to break the purchase into two parts:
-
Finance just the mobile home first with a personal loan or consumer financing from the dealership.
-
After securing the home, apply for the USDA loan to repay the initial loan and cover foundation, transportation, and land costs.
This approach allows you to buy the home quickly while taking more time to find the right land and secure USDA financing.
A personal loan can provide a fast way to purchase a mobile home if you are having trouble getting approved for USDA right away. Then you can work on improving your finances to better your chances of ultimately getting the USDA loan.
Pros and Cons of USDA Mobile Home Loans
USDA loans have many benefits that make them ideal for financing a mobile home purchase. But there are also a few potential disadvantages to consider.
Pros:
- 100% financing available
- No mortgage insurance required
- Low minimum credit scores accepted
- Below-market interest rates
- Flexible income limits
- Can finance land purchase, transportation, and setup
Cons:
- Limited availability in urban areas
- New (not used) homes preferred
- Manual underwriting required
- Limited lender options
- 1% upfront guarantee fee
- Must meet property condition standards
The pros generally outweigh the cons, especially if you need low down payment financing. Just shop around for the best lender fit for your situation.
Alternatives If You Don’t Qualify for USDA
What if you find the perfect mobile home but don’t qualify for a USDA loan? You still have some options:
FHA loans – Allow low down payments and lower credit scores. The max loan amount is lower than USDA at just over $300,000.
VA loans – For veterans and service members. Can be used for manufactured homes but with stricter requirements than USDA. No down payment or credit minimums.
Personal loans – From a bank, credit union, or online lender. Amounts up to $100k, fixed rates, and faster approvals than mortgages. Can be used to purchase a manufactured home.
Dealer financing – Some mobile home dealers offer in-house financing programs that may be an option if you don’t qualify for other loans. The interest rates are usually much higher than traditional mortgages.
Owner financing – If you’re buying a used mobile directly from an owner, they may agree to finance the sale themselves. You repay the loan directly to the
USDA Loan Process for Modular Homes
The USDA loan process for modular homes isn’t starkly different than that of any other loan products. But you’ll typically need a construction loan to make these work.
In addition, the property must meet a few additional requirements, be covered by a warranty and meet other eligibility standards before the loan can be approved.
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.
What are USDA Manufactured Home Loan Guidelines?
FAQ
What is the oldest manufactured home that can be financed?
What is the USDA pilot program?
Can I buy a mobile home with a USDA home loan?
USDA Rural Development (RD) Single-Family Housing Direct Program loans may be used to finance the purchase of an eligible new manufactured home, including the transportation, set-up costs, and acquisition of an eligible site (if the site is not already owned by the applicant).
Can you buy a home using a USDA loan?
USDA Rural Development (RD) Single-Family Housing Direct Program loans can be used to finance the purchase of an eligible new manufactured home, including the transportation, set-up costs, and acquisition of an eligible site (if the site is not already owned by the applicant).
What are the USDA requirements for buying a mobile home?
The applicant must use the property as their primary residence and cannot use it to produce income. The manufactured home you’re buying must also meet certain USDA requirements, including: Must be at least 400 square feet and 12 feet wide (for a single wide mobile home) or 20 feet wide (for a double wide mobile home).
How do I get a USDA manufactured home loan?
Homebuyers with lower credit may be able to use alternative references such as landlords. The application process for a USDA manufactured home loan begins with talking to a lender that issues USDA loans.