Modular homes are becoming an increasingly popular housing option for many buyers. They provide the customization and quality of site-built homes with the affordability and efficiency of factory-built homes But when it comes to financing, modular homes occupy a bit of a gray area between traditional site-built homes and manufactured homes So can you get a mortgage to buy a modular home?
The short answer is yes, you can get an FHA loan to buy a modular home. FHA loans are a type of government-backed mortgage that allows for low down payments and more flexible credit requirements. Below I’ll explain exactly what modular homes are, FHA loan guidelines, and tips for financing your modular home purchase.
What is a Modular Home?
Modular homes are prefabricated homes that are built in sections or modules in a factory The modules are then delivered to the building site and assembled on a permanent foundation Modular homes must meet all local building codes and regulations,
Here are a few key things that distinguish modular homes:
- Built to the same local codes as site-built homes
- Individual modules are transported to the site and assembled
- Considered real property like traditional site-built homes
Modular homes differ from manufactured homes (often called mobile homes) in a few important ways
- Manufactured homes are built on non-removable steel chassis
- Built to federal HUD code standards, not local codes
- Considered personal property, not real estate
- Modular homes adhere to local codes and are considered real property
- Manufactured homes adhere to federal codes and are considered personal property
This distinction is important when it comes to getting a mortgage.
FHA Loan Guidelines for Modular Homes
FHA loans are a popular financing option, especially for first-time homebuyers. They require lower down payments and have more flexible credit standards than conventional mortgages.
The U.S. Department of Housing and Urban Development (HUD) has guidelines on what types of properties can be financed with FHA loans. The good news is HUD considers modular homes the same as site-built homes.
That means modular homes clearly meet the criteria for FHA-eligible properties. You can get an FHA loan for a modular home that meets these general requirements:
- Primary residence only
- Minimum credit score of 580
- Down payment as low as 3.5%
- Must be on a permanent foundation
As long as the modular home meets local building codes and is considered real property, it is fully eligible for FHA financing.
Tips for Financing a Modular Home Purchase
If you want to buy a modular home using an FHA loan, here are some tips:
Check zoning regulations. Make sure modular homes are permitted in the neighborhood or community where you want to buy. Some areas prohibit modular homes.
Find modular-friendly lenders. While FHA treats modular like site-built homes, some lenders still shy away from lending on these properties. Ask potential lenders upfront if they will finance modular homes.
Get the foundation inspected. The home must be permanently attached to the foundation to qualify for FHA financing. Arrange for an inspector to verify proper installation.
Confirm property classification. Ensure the modular home and land are classified as real estate, not personal property. This guarantees it will meet FHA guidelines.
Shop for a dealer who can handle financing. Many modular home dealers are not set up to help buyers go through the mortgage process. Seek out dealers that have experience with lending.
Buy the home and land together. FHA requires that the modular home and land are purchased together in one real estate transaction.
Budget for transportation costs. Factor in the cost of transporting the modules from the factory to your building site. This is usually paid separately to the modular home manufacturer.
Account for customization. Modulars allow buyers to customize floor plans, features, and finishes. Keep in mind any upgrades will add to the total purchase price.
Plan for assembly time. Depending on the size of the home, it can take anywhere from a few days to a few weeks to assemble the modular home on site.
Pros and Cons of Modular Homes
Modular construction offers many benefits compared to site-built homes:
Pros
- More affordable than site-built homes
- Faster to build than stick-built homes
- Quality construction in a controlled environment
- Customize floorplan, finishes, features
- Flexible financing options like FHA loans
Cons
- Limited to a box-shaped design
- No basements due to transportation limitations
- Needs a modular-friendly contractor for assembly
- Not ideal for steep slopes or unusual lots
- Restrictions on roof design based on transit
For buyers who prioritize quality, customization, and affordability, modular homes can be an excellent option. And FHA loans provide flexible financing so you can buy a modular home with a low down payment even if you have imperfect credit.
Partner With a Knowledgeable Lender
The key to successfully financing a modular home is working with a lender experienced with this type of property. As a leading lender, [Company] has financed thousands of modular homes over the years. Our loan officers understand the unique process involved with buying a modular home.
We can walk you through each step from finding the right modular home, budgeting for transportation and assembly costs, inspecting the foundation, and securing an FHA loan tailored to your financial situation.
Buying a modular home involves some extra considerations compared to a traditional site-built purchase. But with an FHA loan and guidance from a modular financing expert, you can achieve the dream of owning a high-quality, customized home at an affordable price.
To learn more about financing a modular home with an FHA loan, contact [Company] today to speak with one of our specialists. We’re here to make the process simple and help you get into your perfect modular home.
What Is Considered A “Mobile Home”?
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FHA Mobile Home Requirements
FAQ
Will an FHA loan cover a manufactured home?
How can I tell the difference between a modular home and a manufactured home?
Can you get an FHA loan twice?
What does your credit score have to be for Clayton Homes?
Can I buy a manufactured home without a conventional mortgage?
A Federal Housing Administration (FHA) loan is an option for those seeking to buy a manufactured home who cannot qualify for a conventional mortgage. The government insures an FHA mortgage to protect the lender in case of default. FHA loans require homeowners to pay an up-front and annual premium on top of the loan amount.
Can you buy a manufactured home with an FHA loan?
Yes, you can buy a manufactured home with an FHA loan.The Federal Housing Administration (FHA) offers a government-backed mortgage option called the **FHA manufactured home loan program** .This program
Can you finance a mobile home through FHA?
If you’re looking for an alternative to a traditional, site-built home, you may want to consider financing a mobile home through the FHA manufactured home loan program. Sometimes called an FHA loan for a mobile home, this government-backed mortgage option allows borrowers with imperfect credit to purchase an affordable home.
What are the FHA loan approval guidelines for manufactured homes?
FHA loan approval guidelines for manufactured housing usually require a minimum credit score of 640 in most cases, acceptable debt-to-income ratios and other typical FHA requirements. As with any loan program, certain lenders may have more rigid requirements, especially when it comes to manufactured home financing.