Buying a Manufactured Home with an FHA Loan: Everything You Need to Know

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.

Manufactured homes, formerly known as mobile homes, provide a more affordable way for many buyers to own a home. With an average price tag of around $85,000 for a new manufactured home, it’s no wonder why they are so popular. And contrary to popular belief, you can get financing to purchase a manufactured home, even with low income or credit challenges. The FHA loan program allows borrowers to buy a manufactured home with as little as 3.5% down payment.

In this comprehensive guide, we will cover everything you need to know about using an FHA loan to buy a manufactured home.

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 as a manufactured home under their guidelines. Here are the requirements:

Built in a factory in accordance with HUD’s Federal Manufactured Home Construction and Safety Standards building code
Constructed after June 15, 1976 when the HUD code went into effect
Bears a red certification label on each transportable section to prove compliance with codes
Built on a permanent chassis to allow transport

Manufactured homes may be single-wide or multi-section homes. They provide a more affordable option than site-built homes, but still must meet stringent building standards.

How Do FHA Loans Work?

FHA loans are government-backed mortgages insured by the Federal Housing Administration When you work with an FHA-approved lender, the FHA promises to pay the lender back if you default on the loan This security allows lenders to offer mortgages to buyers who may not qualify for conventional loans, but still meet FHA requirements.

Some key points about FHA loans

Down payments as low as 3.5% of the purchase price
Lenient credit score requirements – minimum 580 FICO score
Low debt-to-income ratio allowed – up to 57%
Mortgage insurance is required

FHA Title I vs. Title II Loans for Manufactured Homes

You can finance a manufactured home with an FHA loan through either the Title I or Title II program. Here’s an overview of each:

FHA Title I

Manufactured home does NOT need to be attached to a permanent foundation
Can be used to finance a new or used manufactured home
Can finance a manufactured home on leased land
Maximum loan amount of $92,904

FHA Title II

Home must be placed on land that you own
Must be attached permanently to the foundation
Foundation must comply with FHA guidelines
Loan limits follow conventional FHA loan limits
Easier to resell than Title I home

FHA Loan Requirements for Manufactured Housing

To be eligible for FHA financing on a manufactured home, both you as the buyer and the home itself must meet FHA guidelines. Here are the basics:

Home Requirements

HUD Code compliant
Affixed permanently to an approved foundation
At least 400 square feet of living space
Connected to water, sewer, electricity utilities

Borrower Requirements

Minimum credit score of 580
Debt-to-income ratio below 57%
Sufficient income to afford mortgage payments
Home will be your primary residence

In addition to the standard requirements, there are a few other unique rules for manufactured housing:

Home must have been built after June 15, 1976
You must own or lease (in some cases) the land the home sits on
FHA appraiser must inspect foundation

The Pros and Cons of FHA Loans for Manufactured Housing

FHA loans provide a great financing solution for manufactured housing, but they aren’t perfect. Here are some of the key pros and cons to weigh:

Pros

Low down payments, starting at just 3.5%
Available for lower credit scores
Low mortgage insurance rates
Affordable monthly payments
Can sometimes finance land too

Cons

Requires mortgage insurance
Slower loan approval process
Tough to make competitive offers
Some restrictions on newer models
Lower maximum loan amounts

Even with a few drawbacks, FHA loans open up financing for buyers who may not be able to qualify through conventional loans.

Tips for Getting Approved for an FHA Manufactured Home Loan

If you’re considering applying for an FHA loan to finance a manufactured home, keep these tips in mind:

Shop for homes that meet HUD codes
Make sure home is 400+ square feet
Check that home was built after 1976
Get inspections done early
Be ready to prove income and assets
Explain any credit issues upfront
Consider adding a co-signer if needed
Research and prepare for closing costs

With proper preparation, buyers can overcome the unique hurdles of financing a manufactured home with an FHA loan.

Alternative Financing Options for Manufactured Housing

FHA loans are the most popular choice for financing manufactured homes, but not your only option. Here are a few other routes to explore:

VA loans – For qualifying veterans, VA home loans can also be used.
USDA loans – In rural areas, USDA rural housing loans are a possibility.
Conventional loans – Some conventional lenders offer manufactured home mortgages too.
Personal loans – Can be used for a used manufactured home purchase.
Dealer financing – The home seller may offer in-house financing.
Land-home financing – Combines land and home in one loan.

Government-backed loans tend to offer the best terms, but shop around to find the right fit.

Find the Right FHA Lender for Your Manufactured Home

The lender you choose can make or break your FHA home loan experience. Here’s how to pick the right FHA lender:

Look for an FHA-approved lender
Check their manufactured housing loan experience
Ask about their average FHA approval times
See if they sell loans to other servicers
Compare interest rates and estimate costs
Read online reviews from past borrowers
Get personalized loan estimates before applying

Take the time to research multiple lender options to find the best FHA loan experience.

Buying a Manufactured Home Can Be Affordable with an FHA Loan

Don’t let the stereotypes about financing manufactured housing deter you. With an FHA loan, buying a manufactured home can actually be an affordable path to homeownership, even with a low income or credit challenges. Just be sure to select a home that meets HUD guidelines and find an experienced FHA lender to guide you through the mortgage process.

What Is a Manufactured Home?

The U.S. Department of Housing and Urban Development (HUD) defines a manufactured home, also known as a mobile home, as one that is built to HUD code and displays a red certification label on the exterior. Manufactured homes are built in a plant, then transported and placed on a permanent foundation.

Pros and Cons of FHA Loans

There are several advantages and a few disadvantages to keep in mind when getting an FHA loan.

FHA Mobile Home Requirements

FAQ

Will an FHA loan cover a manufactured home?

A Federal Housing Administration (FHA) loan can finance a manufactured home, a lot to build it on, or both. These loans are available for borrowers who own the land that the mobile home will be on and for homes that will be located in a mobile home park.

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 oldest manufactured home that can be financed?

The question of financing older manufactured homes often puzzles buyers, as lenders typically have strict criteria regarding the age and condition of the property. Generally, the oldest manufactured home that can be financed is one built after June 15, 1976.

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 I buy a manufactured home with an FHA mortgage?

Buying a manufactured home with an FHA mortgage is definitely an option for those who qualify. But the home must meet minimum FHA requirements as well as state or local code. FHA home loan rules for manufactured housing don’t just list the credit score requirements and other financial qualifications needed to approve the loan.

Can a mobile home be approved for an FHA loan?

Mobile homes that are not FHA loan program approved have some unique requirements. One of them is the manufactured-by rule, according to HUD 4000.1, which states that mobile homes manufactured before June 15, 1976 cannot be approved for an FHA mortgage. There’s also a size restriction–your new home cannot be too small.

What is an FHA manufactured home loan?

An FHA manufactured home loan is a mortgage backed by the Federal Housing Administration (FHA) that you can use to purchase a home built in a factory. You may also use the loan to buy a plot of land for the home to sit on. It is called an FHA manufactured home loan by the FHA, but you might know the type of house as a ‘mobile home’.

Are single-unit manufactured homes eligible for FHA?

Single-unit manufactured homes are eligible for FHA loans. The eligibility criteria for FHA loans depend on factors such as the area’s average income level, the average cost to purchase property, and market demand.