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.
Getting financing to buy a mobile home can be tricky. Unlike traditional homes, mobile homes are often overlooked by mainstream mortgage lenders. However FHA loans provide a viable option for borrowers looking to purchase a mobile or manufactured home. In this comprehensive guide, we’ll explore everything you need to know about using an FHA loan to buy a mobile home in 2024.
What is Considered a Mobile Home?
First, let’s clarify what qualifies as a mobile home. The U.S. Department of Housing and Urban Development (HUD) has specific standards that a home must meet to be eligible for FHA financing.
According to HUD a “mobile home” is technically a type of manufactured housing. It must be
- Constructed off-site in accordance with HUD’s Manufactured Home Construction and Safety Standards code
- Built after June 15, 1976 when the code went into effect
- Built on a permanent chassis so it can be transported
- Have at least 400 sq ft of living space
- Display a red HUD certification label on the exterior of each section
If the home meets these requirements, it is considered a HUD-approved manufactured home, even though we commonly refer to them as mobile homes. Modular homes and single-wide to triple-wide trailer homes may also qualify, as long as they meet HUD criteria.
How Do FHA Loans Work for Mobile Homes?
FHA loans are government-backed mortgages insured by the Federal Housing Administration (FHA). They help borrowers with lower credit scores or incomes purchase homes by requiring lower down payments and credit standards than conventional loans.
When using an FHA loan for a mobile home, you work with an FHA-approved lender who will submit your loan for insurance by the FHA. The two main FHA loan programs used are:
FHA Title I – Does NOT require the home be permanently fixed to land you own. However, the borrower must lease the land for a minimum 15-year term.
FHA Title II – DOES require the home be permanently attached to land owned by the borrower. This is the most common FHA loan type used for manufactured homes.
FHA Loan Requirements for Mobile Homes
To qualify for an FHA manufactured home loan, there are requirements for both the borrower and the property:
Borrower Requirements
- Minimum credit score of 500
- Maximum debt-to-income ratio of 57%
- At least 2 years of steady income/employment
Property Requirements
- Home must meet HUD construction standards
- Home must be taxed as real estate and affixed to owned land
- Foundation certification required
- Must be used as primary residence
FHA loans offer more flexible guidelines than conventional mortgages, making them a good option for those that may not qualify for other loan types.
Pros and Cons of FHA Loans for Mobile Homes
FHA loans come with unique advantages and disadvantages:
Pros
- Lower downpayments, as low as 3.5%
- Available for lower credit scores starting at 500
- Lower debt-to-income ratios allowed
- Easier to qualify than conventional loans
Cons
- Require mortgage insurance payments
- Have lower loan limits than other loans
- Slower loan approval process
By understanding both the pros and cons, you can determine if an FHA loan aligns with your homebuying needs and financial situation.
FHA Loan Limits on Mobile Homes
With an FHA loan, maximum loan limits apply depending on whether you purchase just the mobile home or both the home and land:
- Land Only – Up to $23,226
- Home Only – Up to $69,678
- Home and Land – Up to $92,904
These limits are in place for both single-wide and multi-section mobile homes. The limits may be lower than purchasing a traditional site-built home.
Manufactured Home Foundation Requirements
For the home to be eligible for FHA financing, the mobile home must be permanently attached to owned land that has the proper water/sewer utilities.
A certified engineer must perform a foundation inspection of the property. This involves verifying that:
- The foundation can properly support the home
- The home is securely anchored to the permanent foundation
- The foundation has proper access and drainage
The inspection will provide a certification that the lender requires before approving the FHA loan. If you’ve had a previous inspection for an FHA loan, the lender may be able to use that existing certification.
Proper foundation skirting and the removal of any moving parts like tow hitches are also required.
Getting an FHA Manufactured Home Loan
The process of getting approved for an FHA manufactured home loan involves:
1. Find an Approved Lender
Work with a lender that offers FHA loans for manufactured housing. Not all lenders will do these types of loans.
2. Have Home Inspected
The home must be inspected by a certified engineer to issue the permanent foundation certification required.
3. Apply for Loan Pre-Approval
Submit your loan application and needed documents to get a pre-approval letter from the lender.
4. Shop for Homes
With financing pre-approval, you can shop for manufactured homes within your affordable price range.
5. Make an Offer
Once you find a home you want to buy, make an offer contingent on securing financing.
6. Finalize Loan Approval
Work with your lender to finalize the FHA loan approval after the purchase agreement is signed.
7. Close on Home
At closing, you’ll sign the final loan documents to purchase the mobile home!
While the process involves extra steps like the foundation inspection, an FHA loan provides a cost-effective financing option for manufactured home buyers.
Alternative Financing Options for Mobile Homes
If an FHA loan doesn’t fit your needs, here are some other financing options to consider:
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USDA loans – For homes in eligible rural areas, these $0 down payment loans can help finance manufactured homes.
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VA loans – For qualifying veterans and service members, VA loans offer flexible credit guidelines and 100% financing.
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Conventional loans – Some lenders like credit unions offer conventional financing for mobile homes.
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Personal loans – Higher interest unsecured loans for borrowers that may not qualify for other financing.
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Seller financing – The home seller carries the mortgage, which requires a larger down payment.
Depending on your financials and the type of home, one of these alternative loan programs may be a better solution for purchasing your mobile home.
The Bottom Line
FHA loans provide a viable financing option for buying a mobile or manufactured home. They offer more flexible borrowing guidelines than conventional mortgages. If you’re interested in purchasing a mobile home, connect with an FHA lender to start the loan process today. With the right lender, you can qualify for an affordable FHA loan to own your own manufactured home.
How an FHA Manufactured Home Loan Works
The FHA has two loan programs for manufactured homes: one for borrowers who own the land that the home is on, and another for homes located in a mobile home park.
With an FHA mortgage, the government insures a loan provided by an approved private lender. If you default on your payments, the lender has the assurance that Uncle Sam will reimburse it for all or part of its losses. Because of this, FHA-approved mortgage providers are willing to take on borrowers who have a slightly higher risk profile.
Homeowners fund the mortgage insurance and pay both an upfront premium and an annual premium to the FHA on top of the loan amount. That can potentially make these loans a bit more expensive than other loans. But if a government-insured loan is your only way of moving into a new home, then the extra cost may be worth it.
An FHA mortgage must be used to finance a primary residence.
Understand Your Other Options
Keep in mind that the FHA is not your only option for U.S. government-insured loans. You also may be eligible for a Department of Veterans Affairs (VA) loan or one from the Department of Agriculture’s Rural Housing Service (RHS). In some cases, these may be better paths for those looking to buy a manufactured home, so it’s worth doing your research.
FHA loans are a good choice for many people, but be aware that you don’t have to get a government-backed loan to avoid discrimination. Also, don’t let outdated stereotypes about mobile home owners discourage you from pursuing a cost-effective path to homeownership.
Most mobile homes are sold through local retailers and dealers, which typically are good sources of referrals for both conventional and FHA mortgage providers.
Mortgage lending discrimination is illegal. If you think that you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps that you can take. One such step is to file a report with the Consumer Financial Protection Bureau or HUD.
Can You Get an FHA Mortgage on a Manufactured Home? | Mobile Home Financing
FAQ
Will an FHA loan cover a manufactured home?
What will disqualify an FHA loan?
Why would a home not qualify for an FHA loan?
What is the loan term for a mobile home?
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.
Can you get a mortgage on a mobile home?
Yes, many banks and credit unions finance mobile homes on land. These are usually considered real property loans. Some government-backed loan programs, like FHA Title II loans and certain VA loans, also allow for the financing of mobile homes along with the land they sit on. Can you get a mortgage on a manufactured home?
Can a FHA loan be used to buy a manufactured home?
FHA loans can also be used to purchase manufactured homes and/or modular homes. Manufactured homes are often sold and transported in sections to be assembled on-site. Some buyers may wonder if the assembly counts as “construction”, and would such “construction” reclassify the manufactured home in the eyes of the FHA?
What are the FHA guidelines for mobile homes & manufactured homes?
The FHA guidelines for both mobile homes and manufactured homes have loan limits plus foundation and appraisal rules that must be followed. FHA eligible manufactured homes must be occupied as a primary residence and must have been built after June 15, 1976 on a permanent foundation.