Using a USDA Loan to Buy a Mobile or Manufactured Home

The USDA loan program offers many benefits for buyers of rural properties, including the ability to finance manufactured or mobile homes. USDA loans require no down payment and offer competitive interest rates. If you’re looking to buy a mobile or manufactured home in a rural area, a USDA loan can be a great option.

In this comprehensive guide we’ll cover

• What is a USDA loan and who qualifies
• Requirements for financing manufactured homes
• Steps to getting a USDA manufactured home loan
• Pros and cons of USDA loans
• Alternative options if you don’t qualify

Overview of USDA Home Loans

USDA stands for the United States Department of Agriculture. They offer special mortgages for low and moderate income buyers in rural areas. Key benefits include:

• No down payment required – 100% financing means you can buy a home with no money down

• Low mortgage insurance – An upfront 1% guarantee fee and ongoing 0.35% annual fee. Lower than FHA.

• Flexible credit guidelines – Credit scores as low as 640 may qualify. Manual underwriting available.

• No income limits – No maximum income limits to qualify based on loan amount.

• Low rates – USDA loans often have lower interest rates than even conventional loans.

You’ll need to meet eligibility requirements such as:

• Property must be in a USDA designated rural area
• Household income must be 115% or less of area median income
• Applicants must be U.S. citizens or permanent residents
• Sufficient income and credit score to qualify

Requirements for Financing Manufactured Homes

You can get a USDA loan for manufactured or mobile homes, provided they meet certain criteria. Here are the key requirements according to USDA guidance:

• Home must be classified as real property, not personal property
• Must be on a permanent foundation on land owned by the borrower
• Needs HUD Certification Label or tag verifying it meets building codes
• Minimum 400 square feet of living space
• Built after June 15, 1976 when HUD building standards went into effect
• Have a durable perimeter enclosure from ground to roof
• Cannot have been previously installed or occupied at any other site

The home must also be located in an eligible rural area. An older mobile home or one without permanent foundations generally won’t qualify for USDA financing.

Steps to Getting a USDA Manufactured Home Loan

If you’ve found a manufactured home that meets the criteria above, here are the main steps to going through the mortgage process:

• Get prequalified – Work with a USDA approved lender to get prequalified so you know your budget.

• Find a home and lot – Identify the manufactured home you want as well as land to place it on. They can be purchased together.

• Make an offer – Make an offer once you’ve located the ideal manufactured home and lot.

• Secure financing – Work with your lender to complete the USDA loan application and documentation.

• Complete inspection – An appraisal will be done to assess the value of the home and property.

• Close on home – Finally, close on your new manufactured home and land.

Your lender will guide you through every step of the process.

Pros of USDA Loans for Manufactured Homes

USDA loans offer homebuyers many advantages:

• Affordability – 100% financing means you can buy now even if you can’t save a down payment yet. Closing costs can be wrapped into the loan.

• Favorable rates – Interest rates on USDA loans are extremely competitive, often lower than conventional loans.

• Low mortgage insurance – At just 0.35% of the loan amount per year, USDA mortgage insurance costs are cheap.

• No income limits – Your income can be as high as you want. No maximums based on family size or location.

• Flexible credit – Requirements allow credit scores as low as 640. Manual underwriting available for thin credit files.

For manufactured homes specifically, USDA loans open up financing possibilities that may not exist with conventional loans. The 100% financing and flexible credit help those with limited funds buy a home.

Cons of USDA Loans on Manufactured Homes

While they offer nice benefits, USDA loans also come with drawbacks:

• Strict home eligibility – Manufactured homes must meet all HUD construction requirements to qualify, limiting options.

• Upfront fees – You’ll pay a 1% upfront guarantee fee and likely lender fees at closing.

• Home insurance – Insurance premiums may be higher for manufactured homes.

• Rural locations – Home and land must be in an eligible rural area, which can limit selection.

• Home value appreciation – Manufactured homes often appreciate more slowly than site built homes.

• Limited lenders – Not all lenders offer USDA loans, so fewer options to shop rates.

Make sure to weigh the pros and cons before committing to a USDA manufactured home loan.

Alternative Loan Options if You Don’t Qualify

If you don’t qualify for a USDA loan or want to look at other possibilities, here are some alternative financing options:

• FHA loans – Allow down payments as low as 3.5% and have more flexible credit requirements. Can be used for manufactured homes.

• VA loans – Offer 100% financing for veterans and service members. Limited to 1-4 unit primary residences.

• Conventional loans – May require higher down payments and credit scores above 700. Some lenders finance manufactured homes.

• Personal loans – Unsecured loans based on creditworthiness. Higher rates and lower loan amounts, but can be easier to qualify.

• Dealer financing – Some mobile home dealers offer in-house financing which may be an option if you don’t qualify elsewhere.

Be sure to shop multiple lenders and loan programs to find the most affordable financing option for your situation.

Explore USDA Loans for Your Mobile Home Purchase

For buyers of manufactured or mobile homes in rural locations, a USDA loan can make buying a home possible with no money down and competitive rates. Just be sure the home meets all eligibility criteria. Consider both the benefits and drawbacks before committing to a USDA manufactured home loan.