Everything You Need to Know About Getting an FHA Loan for a Manufactured Home on Land

Buying a manufactured home on land with an FHA loan can be a great way for first-time homebuyers or those with limited savings to purchase a home. FHA loans require just a 35% down payment and have flexible credit requirements, making them one of the most accessible mortgage programs

In this comprehensive guide we’ll cover everything you need to know about getting an FHA loan for a manufactured home on land including

• FHA Loan Overview
• FHA Manufactured Home Requirements
• FHA Loan Limits for Manufactured Homes
• FHA Down Payment Options
• FHA Credit Score Requirements
• FHA Debt-to-Income Ratio Limits
• FHA Interest Rates
• FHA Manufactured Home Appraisal
• Finding an FHA Lender for Manufactured Homes

Let’s get started!

What is an FHA Loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA) It is designed to help low-to-moderate income borrowers and first-time homebuyers purchase a home with less stringent credit and down payment requirements than conventional loans

Some key features of FHA loans include:

• Down payments as low as 3.5% of the purchase price
• More flexible credit score requirements – usually 500+
• Higher debt-to-income ratios allowed
• Lower mortgage insurance premiums than conventional loans

FHA loans can be used to purchase or refinance single-family homes, condos, manufactured homes, and multifamily properties of up to 4 units.

FHA Requirements for Manufactured Home Loans

The FHA has specific requirements that manufactured homes must meet to be eligible for an FHA loan. Here are some of the key criteria:

• HUD Certification – The manufactured home must have an affixed HUD Certification Label that verifies it was built to HUD’s National Manufactured Housing Construction and Safety Standards after June 1976.

• Permanent Foundation – The manufactured home must be attached to a permanent foundation system according to FHA guidelines. This is required for structural stability.

• Property Classification – The manufactured home must be legally classified as real property, not personal property. This means it is taxed as real estate.

• Tow Hitch – Any towing hitch, wheels, and axles must be removed. The home must be immobile.

• Utility Connections – The manufactured home must have permanent water, sewage, electricity, and heating connections.

• Zoning Laws – The home must conform to any applicable local zoning laws for manufactured housing.

• Minimum Size – The home must be at least 400 square feet.

• Engineer’s Certification – A structural engineer’s inspection certifying the home’s structural integrity may be required.

FHA Loan Limits for Manufactured Homes

The maximum FHA loan amount for manufactured homes depends on whether you are purchasing just the home or both the home and land:

• Manufactured Home Only: Up to $69,678
• Manufactured Home + Land: Up to $92,904

These limits apply nationwide. However, the FHA also sets maximum “floor” loan limits for each county – so you will be limited to the lower of the national manufactured home loan limit OR your county’s floor.

For example, if your county has a floor limit of $150,000, your maximum FHA loan would be $150,000 since that is lower than the national limit.

FHA Down Payment Options

One of the biggest advantages of an FHA loan is the low down payment requirement. Here are some options for funding your down payment:

• Minimum 3.5% Down – Borrowers with a credit score of 580+ can qualify for 3.5% down on an FHA loan. This is significantly lower than the typical 20% down required for conventional loans.

• Gift Funds – Your down payment can come as a gift from a family member, employer, or nonprofit. Gifts do not have to be repaid.

• Seller Contributions – The home seller can contribute up to 6% of the purchase price toward your closing costs and down payment.

• Down Payment Assistance – Check if your state or local government offers down payment assistance programs for FHA borrowers. These provide grants or loans to help cover the down payment.

FHA Credit Score Requirements

To qualify for the best terms on an FHA loan, you’ll need a minimum credit score of 580. Here’s a breakdown:

• Credit Scores 500-579: At least 10% down payment required
• Credit Scores 580+: Minimum 3.5% down payment
• Credit Scores 620+: Will qualify for the lowest interest rates

The FHA looks at your entire credit profile, not just your score. You can qualify with less-than-perfect credit as long as you have sufficient income, assets, and down payment funds.

FHA Debt-to-Income (DTI) Ratio Limits

The FHA looks at your total monthly debt payments in relation to your pre-tax monthly income. This debt-to-income ratio typically cannot exceed:

• 43% DTI with a credit score of 580+
• 47% DTI with credit scores 620+ and certain compensating factors
• 50% DTI with credit scores 640+ and certain compensating factors

A loan officer will calculate your DTI and determine the maximum ratio you qualify for based on your credit profile and down payment amount. Staying under 43% improves your chances of approval.

Current FHA Interest Rates

FHA interest rates are very competitive with conventional mortgage rates. Here are current estimates as of March 2024:

• 30-year fixed: 4.5% – 5.25%
• 15-year fixed: 3.75% – 4.25%
• 5/1 ARM: 3.25% – 4.0%

Interest rates are at historic lows in early 2024, so it’s a great time to get an FHA loan. Actual rates vary daily and depend on market conditions. Connect with a lender to get personalized quotes.

FHA Manufactured Home Appraisal

To qualify for FHA financing, a manufactured home must be appraised to ensure it meets all HUD property requirements. Key items the appraiser looks at:

• HUD tags present on home sections
• Adequate foundation and permanent utility hookups
• Structural integrity
• Interior and exterior condition
• Comparable property values

The appraised value must equal or exceed the purchase price. Any deficiencies or repairs needed will have to be addressed before closing.

Finding an FHA Lender for Manufactured Homes

The challenge with FHA manufactured home loans is that not every lender offers them. Although they are FHA-eligible, lenders can choose whether or not to provide this type of financing.

Here are some tips for finding an FHA lender for your manufactured home purchase:

• Get quotes from several lenders to compare interest rates and fees. Online lenders like Quicken Loans often have some of the best FHA loan offers.

• Look for lenders familiar with manufactured housing. Specialized experience helps streamline the process.

• Ask upfront if the lender finances manufactured homes on land – not all will!

• Consider small local lenders and credit unions. Their qualification guidelines may be more flexible than big banks.

• If you need to improve your credit, ask for recommendations on steps you can take to qualify in the future.

• Get pre-approved to show sellers you are a serious buyer ready to move quickly.

The Bottom Line

An FHA loan can be a great financing option for purchasing a manufactured home on land if you don’t have access to a large down payment or don’t meet conventional credit standards. Just be sure to find a lender experienced with manufactured home loans. This will help ensure a smooth underwriting process.

With an FHA loan, you can finally achieve the dream of homeownership, even on a limited budget. Start researching your options today!