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.
Buying a mobile home can be an affordable way to own a home. With mobile home prices significantly lower than site-built homes in many markets, these factory-built homes offer an accessible entry point to homeownership. However, financing a mobile home purchase can be tricky. It’s often more difficult to get a mortgage for a mobile home compared to a traditional single-family house.
Luckily, FHA loans can provide a viable mortgage option for buying a mobile home. If you’re considering purchasing a mobile home and want to use financing, an FHA loan is one route to explore. Keep reading to learn all about utilizing an FHA loan to buy a mobile home.
What is Considered a “Mobile Home”?
First, it helps to understand what constitutes a mobile home In general terms, a mobile home can refer to any housing structure built off-site with chassis and wheels designed to be towed to a location However, for FHA loan purposes, mobile homes have a more specific definition.
The US. Department of Housing and Urban Development (HUD) sets specific standards for the construction and safety of mobile homes HUD uses the term “manufactured home” rather than mobile home. A HUD-approved manufactured home must be
- Built in a factory in accordance with HUD’s Manufactured Home Construction and Safety Standards code
- Constructed to be permanent once installed onsite
- Built after June 15, 1976 when the HUD code went into effect
- Has a HUD red certification label attached to each transportable section
How Does An FHA Loan Work?
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). Although you work with an FHA-approved lender, the FHA provides insurance on the loan in case of default. This insurance gives lenders more protection when working with buyers who may not qualify for conventional mortgages.
To get an FHA loan, you must meet certain eligibility criteria set by the FHA. Your property also has to meet HUD requirements. FHA loans allow for lower down payments and credit scores compared to conventional mortgages. However, you will have to pay mortgage insurance.
FHA Loan Options For Mobile Homes
If you want to buy a mobile home with an FHA loan, you have two options – the Title II FHA loan program or the Title I FHA loan program.
The main difference between these two types of FHA loans for mobile homes is the land requirement.
Title II FHA Loan
With a Title II FHA loan:
- The mobile home must be permanently affixed on land that you own
- Allows for financing up to 97.75% of the purchase price and land costs
- Down payment can be as low as 3.5% with a minimum credit score of 580
Title I FHA Loan
With a Title I FHA loan:
- The mobile home does not need to be permanently installed on land you own
- Can be used to finance the mobile home only or the land only
- Down payment is at least 10% with a minimum credit score of 500
Title I has more flexible land requirements but Title II has lower down payment options.
FHA Mobile Home Loan Requirements
When applying for an FHA mobile home loan, you must meet all general FHA loan eligibility standards. Here are some key criteria to be aware of:
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Manufactured Home Requirements – The mobile home must have HUD certification label and conform to HUD construction standards. A foundation inspection is required.
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Land Requirements – For Title II loans, the mobile home must be affixed to land you own. With Title I loans, you can own or lease the land.
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Credit Score – Minimum credit scores are 500 for Title I and 580 for Title II. The higher your score, the better mortgage rates you can qualify for.
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Down Payment – At least 10% down for Title I or as low as 3.5% down for Title II. Gift funds can be used.
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Debt-to-Income Ratio – Your DTI must be below 43%. Higher DTIs may be acceptable with strong compensating factors.
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Occupancy – You must occupy the home as your primary residence.
The Pros and Cons of FHA Mobile Home Loans
FHA loans for mobile homes have advantages and disadvantages to weigh.
Pros
- Low down payments, starting at 3.5%
- More flexible credit requirements
- Lower mortgage insurance compared to conventional loans
Cons
- Requires upfront and annual mortgage insurance premiums
- Have to occupy home as primary residence for at least 1 year
- Loan limits may cap borrowing amount
While FHA loans offer more accessible financing, it comes with costs like mortgage insurance. Run the numbers to see if an FHA loan provides the best financial move for your mobile home purchase.
How to Find an FHA Lender For Mobile Homes
The first step is finding an FHA-approved lender that provides mobile home loans. Here are some tips for locating a lender:
- Check HUD’s list of approved lenders and search for options near you
- Reach out to multiple lenders to compare mortgage rates and terms
- Ask about the loan officer’s specific experience with FHA mobile home loans
- Consider lenders that specialize in mobile home financing
It’s smart to get quotes from 3-5 lenders to find the best FHA loan offer. This loan type has unique requirements, so choose a knowledgeable lender.
Alternative Financing Options For Mobile Homes
Beyond FHA loans, here are some other financing options that may work for a mobile home purchase:
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Conventional Loans – Some conventional loan programs like Freddie Mac CHOICEHome loans can be used for manufactured homes. You’ll need a higher credit score but with potentially lower mortgage insurance.
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VA Loans – Eligible military buyers can use their VA home loan benefit to buy a manufactured home. Must be attached to land you own.
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USDA Loans – For moderate income buyers in rural locations, USDA loans can provide 100% financing for manufactured homes.
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Personal Loans – If you can pay cash for the mobile home, a personal loan may help cover purchase and installation costs.
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Dealer Financing – Many mobile home dealers offer in-house financing which may provide simpler terms compared to mortgages.
The Bottom Line
Purchasing a mobile or manufactured home can be an affordable way to become a homeowner. FHA loans allow buyers with lower credit scores or savings to finance a mobile home purchase. Just be sure to find an FHA lender experienced with manufactured home loans to guide you through the mortgage process.
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.
Cons
- There are limits on how much you can borrow.
- FHA mortgages will require mortgage insurance, both up front and annually, and often for the entirety of the loan term.
Can You Get an FHA Mortgage on a Manufactured Home? | Mobile Home Financing
FAQ
What is the oldest mobile home FHA will finance?
What does FHA consider a permanent foundation for a mobile home?
What is the minimum acceptable size for a manufactured house for an FHA insured loan?
What is the minimum FICO score for an FHA manufactured home?
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.
Can you get a mortgage for a mobile home?
Yes, many banks and credit unions finance mobile homes on land and 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.
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’.
What are the FHA guidelines for mobile homes & manufactured homes?
The FHA guidelines for 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.