FHA Manufactured Home Loan Guidelines: Everything You Need to Know

Buying a manufactured home can be an affordable way to become a homeowner, especially with an FHA manufactured home loan FHA loans make homeownership possible for buyers with lower credit scores and smaller down payments However, there are specific guidelines that apply to FHA loans for manufactured housing.

In this comprehensive guide we will explain all the key details requirements, and steps for getting an FHA mortgage to finance a manufactured home.

What is a Manufactured Home?

First, let’s clarify what constitutes a manufactured home. Manufactured homes, once commonly known as mobile homes, are factory-built residences that are transported to a site and installed.

They differ from regular site-built homes because they are not constructed entirely on-site from the ground up. Manufactured homes come in single double, or triple-wide modules that are joined together on location.

FHA Manufactured Home Loan Advantages

An FHA loan offers home buyers several advantages for financing a manufactured home:

• Low down payment – FHA allows a down payment as low as 3.5% of the purchase price. For a $100k home, that’s just $3,500 needed upfront.

• Flexible credit guidelines – FHA approves borrowers with credit scores as low as 580 if other underwriting criteria are met.

• Low mortgage insurance – FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount and an annual premium of 0.85% of the loan balance. On a $100k loan that equals $1,750 upfront and $850 per year.

• Fixed interest rate – FHA manufactured home loans offer fixed rates so your monthly payment remains constant.

• Long repayment terms – FHA allows loan terms up to 30 years on manufactured homes to keep payments affordable.

FHA Manufactured Home Requirements

While FHA insures loans for manufactured housing, these homes must meet certain requirements outlined in HUD Handbook 4000.1:

• The home must have been built on or after June 15, 1976 when the HUD building code went into effect.

• Minimum size of 400 square feet of living space.

• The home must be attached to a permanent foundation system.

• The home must have a HUD Certification Label attached inside the home.

• The home must be classified and taxed as real property, not personal property.

• FHA requires a warranty of 1 year minimum for brand new manufactured homes.

• The home must be a single family residence and the borrower’s primary residence.

Manufactured Home Foundation Requirements

A crucial criteria is that the manufactured home must be erected on an FHA approved permanent foundation system. The home’s foundation must be inspected by a licensed professional engineer or registered architect prior to mortgage approval.

The foundation system must be appropriate for the soil conditions for structural support and properly attached to the manufactured home per HUD regulations. Concrete perimeter wall foundations and piers are common.

The space beneath the home must be properly enclosed with materials like concrete, masonry, or pressure-treated skirting. Any hitches, wheels, and axles must be removed.

FHA Loan Limits on Manufactured Homes

FHA has specific loan limits on the maximum they will finance depending on what you are purchasing:

• Land Only – $23,226 max loan amount

• Home Only – $69,678 max loan amount

• Land and Home – $92,904 max combined loan amount

These limits can vary by state and county. Your lender can check the exact limits.

FHA Manufactured Home Appraisal

To qualify for FHA financing, the manufactured home must be appraised by a licensed appraiser following FHA guidelines. The appraisal establishes the home’s value to ensure the loan-to-value ratio complies with FHA limits.

The appraisal will examine:

• Fair market value of the home based on sales of comparable manufactured homes.

• Condition of the home, site, and foundation.

• Proper installation per HUD regulations.

• Compliance with zoning and building codes.

• Proper certification labels and if home is classified as real vs personal property.

Finding an FHA Lender

The challenge can be finding a lender that is willing to underwrite FHA manufactured home loans. Although FHA approves this type of financing, lenders have discretion on what types of properties they will finance.

Many lenders shy away from manufactured housing loans because they are perceived as higher risk. Be sure to ask lenders specifically if they handle FHA loans on manufactured homes before applying.

Mortgage brokers that have relationships with smaller local lenders are often good options for getting approved financing on a manufactured home.

Manufactured Homes on Leased Land

FHA does allow financing manufactured homes on leased land in landlord-tenant situations where the borrower does not own the land. This occurs frequently in some areas. The key requirements are:

• The land lease must have a minimum original term of 10 years.

• There must be options to renew the lease, each for a minimum of 5 years.

• The total remaining lease term must equal or exceed the loan’s term.

• The borrower must have the right to occupy the site for residential use only.

• The lease terms must be typical for the area with annual payments competitive with other manufactured home land leases.

FHA Mortgage Process for Manufactured Homes

Here is an overview of the typical process to purchase a manufactured home with FHA-financing:

1. Get pre-approved – This shows sellers you are qualified and serious. Your lender will review your income, assets, credit, and downpayment.

2. Find your home – Search for FHA approved manufactured homes built after 1976 that will meet loan requirements.

3. Make an offer – Make an offer contingent on getting an acceptable appraisal and securing FHA financing.

4. Inspections – Your lender will arrange for a foundation certification inspection by an engineer as well as an appraisal. The appraiser must confirm the home meets HUD requirements.

5. Underwriting – The lender evaluates all factors to confirm your loan approval. This includes debt-to-income ratios, credit report review, employment and income verification.

6. Loan approval – After underwriting you should receive a clear-to-close and have a closing date set.

7. Closing – This is when you sign all final loan documents and take ownership!

Tips for FHA Manufactured Home Loans

If you are considering purchasing a manufactured home using an FHA loan, keep these tips in mind:

• Stick to newer homes built after 1976 to meet requirements. Older homes should be avoided.

• For the best financing terms, pick a multi-width home of at least double or triple width. Single wide homes often have higher rates and costs.

• Have an engineer’s certification on the foundation before making an offer, if possible, to identify any issues early.

• Be sure the home can be taxed as real estate not personal property before proceeding.

• Get quotes from multiple lenders as rates and fees can vary significantly.

• Seek out brokers or lenders that specialize in manufactured home loans.

• Leasing land can provide an affordable alternative if buying land is too costly. Just be sure lease terms comply with FHA policies.

• Review zoning laws in the area to be sure manufactured homes are permitted and the home complies with codes.

The Bottom Line

With the right lender, FHA financing can make buying a manufactured home an affordable option even with lower credit scores and savings. Just be sure to follow the specific guidelines for manufactured housing loans outlined above. With a compliant home and loan application, your path to homeownership awaits!