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.
Buying a manufactured home with a USDA loan is absolutely possible, but there are some specific requirements and guidelines potential borrowers need to understand. As a leading provider of home loans in rural areas, the USDA Rural Development department offers attractive financing options for manufactured homes that make them an affordable option for many buyers.
In this comprehensive guide, we’ll cover everything you need to know about getting a USDA loan for a manufactured home, including:
- What are manufactured homes?
- USDA loan overview
- Requirements for financing a manufactured home with a USDA loan
- Eligibility for USDA manufactured home loans
- The lending process
- Benefits of using a USDA loan for a manufactured home
- Tips for choosing the right manufactured home and lender
What Are Manufactured Homes?
Manufactured homes, sometimes referred to as mobile homes, are prefabricated houses that are built in a factory and then transported to a site where they are installed and connected to utilities. They come in different designs and floorplans and are an affordable homeownership option.
There are a few key things that distinguish manufactured homes from site-built houses:
- They are built to meet federal and state building codes for manufactured housing.
- They are constructed on non-removable steel chassis that allow transportation.
- They can be customized with finishes and features like site-built homes.
- They are often more affordable than site-built homes.
Manufactured homes offer the benefits of a traditional single-family home at a lower price point. They can be an ideal option for rural areas where site-built housing is limited or expensive.
Overview of USDA Loans
USDA home loans are mortgage products guaranteed by the United States Department of Agriculture (USDA) and issued by approved lenders. They help lower income borrowers in rural and suburban areas obtain affordable financing to purchase, build, repair, renovate or relocate a home.
Some key facts about USDA loans
- Require no down payment and have flexible credit requirements
- Offer low interest rates and up to 100% financing
- Can be used to purchase existing homes or newly built homes
- Are available for single family homes, manufactured homes, modular homes and more
- Have income limits set by county and property location
In addition to purchase loans, the USDA also offers refinance loans, grants and other programs to help rural residents obtain quality housing.
Requirements for Financing a Manufactured Home with a USDA Loan
The USDA Single Family Housing Guaranteed Loan Program allows borrowers to finance the purchase or refinance of a qualified manufactured home. Here are some of the key criteria:
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New Unit Requirement The manufactured home must be new and not previously installed or occupied at another site This includes newly built units or dealer inventory that has never been lived in,
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Construction Standards: The unit must be designed to meet HUD Manufactured Home Construction and Safety Standards and have certification from the manufacturer.
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Minimum Size: The home must be at least 400 square feet of living space.
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Foundation: The home must be attached to a permanent foundation certified by an engineer to meet local codes and anchored per HUD guidelines.
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Wheels, Axles and Trailer Hitches: These must be removed upon installation on the foundation.
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Thermal Requirements The manufactured home builder must certify that thermal requirements meet standards for local climate conditions,
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Warranty: The home must have a warranty from the manufacturer covering construction defects for at least a year.
In addition to these home requirements, the purchase transaction must meet all standard criteria for the USDA loan program.
Eligibility Requirements for USDA Manufactured Home Loans
To qualify for a USDA loan for a manufactured home, there are a few borrower eligibility requirements to meet:
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Location: The home must be located in an eligible rural area as defined by the USDA. You can check your address on their property eligibility site.
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First-Time Homebuyer Status: At least one borrower must be a first-time homebuyer who hasn’t owned a primary residence in the past three years.
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Citizenship: At least one borrower must be a U.S. citizen, U.S. non-citizen national, or qualified alien.
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Income Limits: The household income must not exceed the maximum set for the area, typically 115% of median income for the county.
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**Credit History:**borrowers must meet minimum credit requirements with a history that demonstrates willingness and ability to repay debts.
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Repayment Ability: Applicants must qualify based on their debt-to-income ratios, assets, employment history and other financial factors.
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Occupancy: Borrowers must make the home their primary residence and occupy it within 60 days of closing.
The lender will verify eligibility and creditworthiness as part of the application process. Having a steady income, manageable debts and some savings will help applicants get approved.
The Lending Process for USDA Manufactured Home Loans
Getting a USDA-backed loan for a manufactured home involves the typical mortgage lending process, with a few extra steps related to the home itself:
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Find a lender: Work with a bank or mortgage company approved to offer USDA home loans. Get pre-approved to see likely loan amounts and terms.
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Select your home: Choose a qualified new manufactured house that suits your needs and meets USDA criteria. Work with retailer.
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Inspections and appraisal: The lender will send out an inspector to examine the home and ensure it is structurally sound, without damages or defects. An appraisal is done to determine the market value.
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Site preparation and foundation: Your site needs to be prepped with utilities, driveway, etc. The permanent foundation has to be designed and installed before the home is placed.
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Placement: The home is delivered and installed on the foundation. Attachment points are secured per engineering plans.
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HUD Certification: Upon completion, a HUD inspector verifies proper installation and certifies the home can be occupied.
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Closing and move-in: Once the build is certified, you can close on your USDA mortgage and move into your new manufactured home!
The Benefits of Using a USDA Loan for a Manufactured Home
There are many advantages to financing a manufactured home with a USDA-guaranteed mortgage:
Affordability
- Requires no downpayment
- Offers competitive interest rates
- Lowers upfront costs significantly
Accessibility
- Flexible credit score and income requirements
- Allows higher debt-to-income ratios
- Designed for low-to-moderate income borrowers
Special Programs
- Construction loans require one closing after home is set
- Refinancing available for existing manufactured homes
- Can include land costs and site development
Rural Housing
- Targeted for rural areas with limited housing inventory
- Allows more households to achieve homeownership
Overall, USDA loans make factory-built manufactured homes a viable option for buyers in rural communities who may not qualify for conventional mortgages. They open up homeownership opportunities and support housing markets in small towns and remote areas.
Tips for Choosing the Right Manufactured Home and Lender
If you’re considering applying for a USDA loan to finance a manufactured house, keep these tips in mind:
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Compare multiple manufacturers and floorplans to find a comfortable, quality home suited to your needs. Look for durable construction and energy efficient features.
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Only consider new homes that have the proper certification tags and have never been occupied. These meet program requirements.
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Inspect the home inside and out before purchasing to check for defects, damages or missing items.
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Research sites ahead of time to pick a location with proper zoning and utilities. Consider delivery route access.
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Look for licensed lenders familiar with USDA loan guidelines. Compare interest rates and fees before applying.
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Understand all costs involved: home price, delivery, site prep, foundation, installation, etc. Factor in your loan amount.
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Hire an independent inspector to examine the home and foundation before closing. Verify all work meets standards.
With the right manufactured home and lender, a USDA loan can make your dream of owning your own place achievable. By following program rules and loan requirements closely, you can get approved for affordable financing that fits your budget.
USDA home loans allow buyers to purchase new manufactured houses with 100% financing and no down payment. By meeting eligibility criteria for income, credit, and location, and finding a properly constructed and installed unit, you can become a homeowner with much lower upfront costs. Although there are specific guidelines for manufactured housing, USDA mortgages provide a great opportunity to buy these affordable factory-built homes. With a reputable retailer and experienced lender, the process can go smoothly. If owning a quality manufactured home in a rural setting appeals to you, explore how USDA loans can make it a reality.
Differences Between Manufactured, Mobile and Modular Housing
We use manufactured and mobile interchangeably. However, there is a slight difference. The naming convention depends solely on the manufactured date. The Department of Housing and Urban Development (HUD) considers factory-built homes manufactured before June 15, 1976, as mobile homes. Homes built after that date are manufactured homes.
Manufactured homes are single or multi-width units that are constructed offsite and transported to the property. To be eligible for a USDA loan, these homes need to be attached to a permanent foundation. A red certification label must also be displayed on the exterior of each transportable section. The certification label must be affixed in a visible location and remain visible to complete the installation of the home at the designated site.
Modular homes are pre-fabricated houses comprised of multiple modules that are typically shipped to the home site in pieces and assembled there by professionals.
The ability to use USDA loans for modular housing and manufactured properties further expands home buying opportunities for lower-income Americans, ensuring they have access – and a way to finance – affordable, safe and high-quality housing.
The USDA loan process includes:
- Warranty Requirements – The home’s dealer must provide proof of warranty for the home to the lender. This warranty must comply with all HUD requirements.
- Lender Requirements – The lender should have a copy of all manufacturer warranties on file. They will also require a guarantee fee and an annual fee (similar to PMI) if the loan is for 80 percent or more of the sales price.
- Certification Requirements – The dealer and buyer must sign a document certifying that the home sustained no damage during transport or assembly.
- Lien Requirements– You’ll need to ensure all contractors have been paid and that there are no liens attached to the property for work performed.
- Real Estate Tax – The home needs to be taxable as real estate under state law.
- Title and Lien – The title and lien must be recorded in local land records as including both the property and the site itself. The mortgage must have a title insurance policy, and you, as the buyer, must acknowledge that the home, though movable, needs to be secured to the site to be eligible for USDA financing.
Once all these requirements have been met, the home is constructed on its permanent foundation, and all liens are removed on the property, the loan can be approved and your funds dispersed.
One of the biggest hurdles in using a USDA loan on a modular or manufactured home can be finding a lender.
Not all lenders make loans for manufactured housing or offer financing for new construction.
If you’re interested in modular or manufactured homes, make sure to look for lenders who not only offer USDA loans on these properties but who also have deep experience with them. This will ensure your loan process goes smoothly and without error.
What are USDA Manufactured Home Loan Guidelines?
FAQ
What is the oldest manufactured home that can be financed?
What is the USDA pilot program?
Can I buy a mobile home with a USDA home loan?
Loading Can I purchase a mobile home using a USDA home loan? USDA Rural Development (RD) Single-Family Housing Direct Program loans may be used to finance the purchase of an eligible new manufactured home, including the transportation, set-up costs, and acquisition of an eligible site (if the site is not already owned by the applicant).
What are USDA manufactured housing loans?
USDA loans are low-interest and zero down payment loans that are intended to help people in rural parts of America afford quality housing. There are three major types of USDA manufactured housing loans: Guaranteed Loans: Mortgages originated by a private lender and guaranteed by the USDA (much like FHA loans ).
Can borrowers finance a manufactured home?
Yes, borrowers can finance a manufactured home through the U.S. Department of Agriculture’s Single Family Housing Guaranteed Loan Program (SFHGLP). They must still meet general USDA requirements for property location and income limits.
How do I get a USDA manufactured home loan?
Homebuyers with lower credit may be able to use alternative references such as landlords. The application process for a USDA manufactured home loan begins with talking to a lender that issues USDA loans.
Can you get a mortgage on a manufactured home?
Yes, you can get a mortgage on a manufactured home. There are several options, including FHA loans, VA loans, and certain conventional loans. The home usually needs to meet specific requirements, such as being on a permanent foundation and classified as real property. Can you get a reverse mortgage on a manufactured home?
Can you buy a home with a USDA loan?
The USDA mortgage program is intended for home buyers with low-to-average household incomes. In order to qualify, you must also purchase a home in a “rural area” as the USDA defines it. Those who are eligible can use a USDA mortgage to buy a home or refinance one they already own. How do USDA loans work?