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.
For many homebuyers especially in rural areas, a manufactured or mobile home can provide an affordable pathway to homeownership. These factory-built homes offer the benefits of new construction at a lower price point. But finding financing can be tricky since manufactured homes are classified as personal property not real estate. This is where USDA loans can help.
The US. Department of Agriculture (USDA) guarantees home loans for low-income borrowers in small towns and rural communities These government-backed mortgages require no down payment and offer below-market interest rates. And yes, under certain conditions, USDA loans can be used to purchase manufactured housing.
Keep reading to learn more about the availability, requirements, and processes for obtaining a USDA manufactured home loan.
What Types of Homes Qualify for USDA Loans?
The USDA Single Family Housing Guaranteed Loan Program provides mortgage financing to eligible buyers purchasing homes in approved rural locations. Properties must meet design, quality, and safety standards.
The following types of homes are generally eligible:
- Single-family homes
- Townhomes and condos
- Manufactured homes
- Modular homes
Mobile homes (those with axles and wheels) are specifically excluded from USDA financing eligibility.
So manufactured housing and modular homes can potentially qualify, while mobile homes cannot. But extra steps are required to meet the USDA’s manufactured housing guidelines.
USDA Manufactured Home Requirements
Manufactured homes built in factories, transported in sections, and installed on permanent foundations can be financed with a USDA loan. However, they must adhere to these key criteria:
- Home must be new (built within last 12 months) and never previously installed on another site
- Minimum 12 feet wide for single section, 20 feet wide for multi-section homes
- Minimum 400 square feet in size
- Must be attached to permanent foundation
- Must meet federal and local standards, codes, and regulations
- Must be taxed as real property, not personal property
In addition, the home site and land must be located in a USDA-eligible rural area. Income and credit requirements for borrowers also apply.
Modular homes can also qualify, but only if already fully assembled on site. USDA loans cannot be used just to purchase land for a modular home to be installed later.
Overall, manufactured and modular housing have more hurdles to clear than site-built homes when applying for a USDA loan. Working with an approved USDA lender familiar with these guidelines is advised.
How to Get a USDA Loan for a Manufactured Home
Follow this general process when pursuing a USDA mortgage to buy a manufactured home:
1. Find an eligible property
Select a manufactured home and location that meets USDA rural area definitions and property standards. The home must be new and not previously lived in.
2. Choose a USDA approved lender
Work with a lender familiar with manufactured housing loans. They will guide you through program requirements.
3. Get prequalified
The lender will evaluate your income, debts, and credit to see if you preliminarily qualify for a USDA loan and potential loan amount.
4. Select a home and land
With prequalification in hand, you can shop for a manufactured home model plus land to place it on.
5. Find a contractor
You’ll need to hire a contractor to handle transporting and installing the manufactured home on the property.
6. Submit plans for approval
Provide the lender with drawings, plans, costs, and details on the home and land for approval.
7. Complete loan application
Now formally apply for the mortgage by supplying all required income, employment, and financial documents.
8. Obtain appraisal
The lender will order an appraisal on the manufactured home and land to ensure value supports the purchase and loan amount.
9. Close on loan
At closing, sign all final loan documents and pay any closing costs not financed. Now you can work with the contractor to get your new home delivered and installed on the land.
10. Occupy the home
Once the manufactured home is secured on its foundation, you can complete the move-in process and start enjoying your new place.
Pros and Cons of USDA Manufactured Housing Loans
Benefits of USDA loans for manufactured homes include:
- Requires no down payment or minimum cash reserve
- Offers below market interest rates
- Flexible credit score requirements
- Fixed rates and long 30-year terms available
- Can wrap land costs into mortgage
Potential downsides to weigh:
- Must meet strict manufactured home requirements
- 1% upfront guarantee fee and annual mortgage insurance
- Limited to purchasing new manufactured homes
- Modular homes must already be assembled on site
- Must be located in an eligible rural area
- Income and purchase price limits apply
- Inventory may be limited
As with any mortgage program, understand all the costs, criteria, limitations, and steps involved before pursuing a USDA manufactured home loan.
What Other Financing Options Exist?
Beyond a USDA loan, you may also qualify for:
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FHA manufactured home loan – Requires 3.5% down payment plus mortgage insurance premiums. More flexible on home age and quality.
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VA manufactured home loan – For qualifying veterans. No down payment or mortgage insurance required. Must still meet VA borrower and property guidelines.
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Conventional manufactured home loan – Higher credit scores and down payments usually needed. Uses automated underwriting, so requirements vary by lender.
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Personal property loan (chattel loan) – Finances just the home, not the land. Shorter terms and higher rates. Home still considered personal property.
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Home-only mortgage – Finances home without land, but both are classified as real estate. May require higher down payment. Offered by some banks/credit unions.
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Personal loan – Unsecured loan with higher rates, shorter repayment terms.
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Seller financing – Some manufactured home sellers offer in-house loans. Requires significant down payment.
Shop multiple lenders to compare rates and see which loan programs you’re eligible for based on your financial situation, the home, and land. This can help you identify affordable financing options for purchasing a manufactured or mobile home.
Frequently Asked Questions
Can you get a mortgage for a mobile home?
Mobile homes with axles/wheels cannot be financed with a traditional mortgage, including USDA loans. They are considered personal property. You would need to explore chattel loans or other alternative financing options.
What is the difference between a manufactured home and a modular home?
Manufactured homes are built entirely off-site in a factory, then delivered and installed on a property. Modular homes are constructed in sections at a factory, transported to the site, and assembled on location. Both can potentially qualify for USDA loans if requirements are met.
Do manufactured homes appreciate in value?
Manufactured homes generally appreciate more slowly than site-built homes. Their value depends on age, quality, community/site features, local market conditions, and whether the home is attached to owned land. Newer manufactured homes in desirable communities gain value more like traditional homes.
How much does it cost to install a manufactured home?
The cost to install a manufactured home can range from $10,000 to $25,000, including transport, foundation, hookups, permitting and site preparation. Exact costs vary based on the home’s size, location specifics, foundation type, and who does the work.
Can a manufactured home be moved after it is installed?
Once installed, manufactured homes can technically be moved again but it is very expensive. They must be disconnected, raised from the foundation, and transported to a new site where the process starts over. This costs tens of thousands of dollars, making relocation impractical in most cases.
The Bottom Line
USDA home loans provide a mortgage financing option for buyers interested in purchasing new manufactured housing in rural locations. Although eligibility guidelines exist, the program gives buyers with limited funds or imperfect credit access to affordable home financing.
Comparing all available loan programs for manufactured homes can help you identify the most suitable for your financial situation. Be sure to fully understand the costs, criteria, and steps involved before committing to a mortgage to finance your factory-built home.
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.
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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.