Getting an FHA Loan for Your Mobile Home – Everything You Need to Know

Mobile homes offer an affordable housing option for many buyers. With their factory construction and movability mobile homes provide homeownership opportunities not available with traditional site-built houses. However financing a mobile home purchase can be tricky. An FHA loan is one option for buyers wanting to purchase a mobile or manufactured home. In this article, we’ll break down everything you need to know about getting an FHA loan for a mobile home.

What is Considered a Mobile Home?

Not all mobile living structures qualify for FHA financing. The U.S. Department of Housing and Urban Development (HUD) has specific mobile home requirements for their loan programs.

HUD uses the term “manufactured home” instead of mobile home A HUD-approved manufactured home must be

• Built in a factory after June 15 1976 when HUD building code (HUD Code) went into effect.

• Constructed on a permanent chassis so it can be transported.

• Have an attached HUD certification label on the exterior of each transportable section.

The HUD Code regulates the home’s construction, plumbing, heating and electrical systems. The federal standards aim to make manufactured housing more durable and energy-efficient.

How Do FHA Loans Work?

FHA loans are government-backed mortgages insured by the Federal Housing Administration (FHA). When you get an FHA loan, you work with an FHA-approved lender. The lender funds the loan, and the FHA provides insurance.

FHA insurance protects the lender from losses if you default on the mortgage. The insurance encourages lenders to give mortgages to borrowers who meet FHA criteria but may not qualify for conventional loans.

FHA loans offer benefits like:

• Low down payments, with options as low as 3.5% with a credit score of at least 580. We require a 580 minimum score.

• More flexible debt-to-income (DTI) ratios, with many lenders allowing up to 57% DTI.

• Lower credit score requirements of just 500, although higher scores get better terms.

Along with buyer eligibility, the property must meet FHA lending standards.

Getting an FHA Manufactured Home Loan

FHA has two loan programs for manufactured homes – Title I and Title II.

Title I

With a Title I loan, the home does not need to be attached to land you own. However, Title I has lower borrowing limits.

Title II

Title II FHA loans require your manufactured home be permanently affixed to land that you own. Title II follows regular FHA loan limits and guidelines.

At our company, we offer FHA loans for manufactured housing under the Title II program. The home must be:

• Permanently attached to owned land that’s taxed as real estate.

• Have access to water, sewer, electric and other utilities.

• Built to FHA specifications with HUD code compliance.

• Have a HUD-approved inspection of the permanent foundation.

• Be used as your primary residence.

FHA loans can finance the purchase of both the manufactured home and land as a package. Or you can use FHA for just the home if you already own the land.

Pros and Cons of FHA Loans for Mobile Homes

FHA manufactured housing loans offer appealing benefits but also have some drawbacks to consider.

Pros

• Low down payments, with options as low as 3.5% of the purchase price.

• More flexible debt-to-income ratios than conventional loans.

• Lower minimum credit scores starting at 500.

Cons

• Required mortgage insurance drives up costs. You’ll pay an upfront 1.75% insurance premium and ongoing monthly premiums.

• Loan limits and borrowing caps may apply, especially with Title I loans.

• Slow loan approval makes it hard to make competitive offers on homes.

Overall, FHA loans provide an affordable financing option for buyers of HUD-approved manufactured housing. But shop around to make sure it’s the optimal loan program for your situation.

How to Qualify for an FHA Mobile Home Loan

If you want to purchase a mobile home with an FHA loan, make sure you meet the eligibility basics:

• Credit score – At a minimum, you’ll need a credit score of 500 for an FHA loan. But scores of 580 and above get better terms. Our company requires a minimum score of 580.

• Down payment – Options range from 3.5% to 10% down based on your credit score. Savings, gifts and grants can be used.

• Debt-to-income ratio – Your total monthly debt divided by gross monthly income should be below 57% in most cases.

• Occupancy – You must use the home as your primary residence to qualify for FHA owner-occupant financing.

• Home requirements – The manufactured home must meet all HUD manufactured housing standards.

Shop around with a few lenders to see what FHA programs you prequalify for. Then you can home shop knowing your likely loan options and price range.

Finding the Best FHA Lender for Your Mobile Home Loan

Choosing the right FHA lender is key to getting the best financing on your manufactured home. Here are some tips for picking a top FHA mortgage lender:

• Compare interest rates and fees to find the most competitive pricing. Lower is better.

• Look for fast processing and closings to make your purchase offer more appealing to sellers.

• Choose an FHA specialist with manufactured housing loan experience. Not all lenders do these loans.

• Ask about their FHA down payment assistance programs that may help you buy.

• See if they offer both Title I and Title II loans to get the optimal loan type for you.

• Read online reviews to gauge customer satisfaction ratings with the lender.

Shopping around with a few lenders gives you leverage to negotiate the best manufactured home loan.

Next Steps to Getting an FHA Mobile Home Mortgage

If you’re ready to move forward, here are some next steps to take:

• Get prequalified to see potential FHA loan amounts, rates and terms you may qualify for.

• Make a list of must-have home features and desired options to guide your home search.

• Research manufactured housing communities, if you plan to rent a lot instead of buying land. Look at lot rental rates, fees, terms and community amenities.

• Start looking at available mobile and manufactured homes in your target price range and area.

• Draft a monthly household budget factoring in your estimated payment for an FHA loan on the home purchase.

• Gather needed documents for your loan application like bank statements, tax returns, pay stubs, and identification.

With some advance planning and preparation, you can make the financing process smooth when you’ve found your ideal mobile home. Get started now so you can join the many homeowners enjoying the affordability and flexibility of factory-built housing.