Everything You Need to Know About FHA Mobile Home Loans

Mobile homes provide a more affordable way for many people to own their own home. An FHA mobile home loan can help make financing the purchase of a mobile home easier. In this comprehensive guide, we’ll explain everything you need to know about using an FHA loan to buy a mobile home.

What is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). The FHA is part of the United States Department of Housing and Urban Development (HUD).

FHA loans allow borrowers to buy a home with a low down payment and flexible credit requirements. You work with an FHA-approved lender but the loan itself is backed by the FHA. If the borrower defaults the lender can file a claim with the FHA to recoup their losses. This backing encourages lenders to provide mortgages to buyers who may not qualify for conventional loans.

FHA Loan Benefits

There are several key benefits that come with an FHA home loan

• Low down payments – Only 3.5% is required for buyers with a credit score of 580 or higher.

• Lenient credit requirements – FHA loans are available for borrowers with credit scores as low as 500.

• Low mortgage insurance – FHA loans require mortgage insurance. But the costs are lower than with conventional loans.

• No income limits – FHA doesn’t set limits on your income to qualify.

• Flexible guidelines – FHA offers more flexible approval guidelines than conventional mortgages.

These features make FHA loans ideal for first-time home buyers and buyers with less-than-perfect credit. FHA loans can also be used to refinance an existing mortgage.

Using an FHA Loan to Buy a Mobile Home

FHA loans can be used to finance the purchase of mobile homes that meet HUD requirements. This includes new factory-built manufactured homes as well as existing mobile homes.

There are two main FHA loan programs that apply:

• Title I – Title I FHA loans can be used to finance a mobile home with or without land. You can use the loan to buy just the home, just the land/lot, or both together.

• Title II – Title II FHA loans finance the purchase of a mobile home and land together. The home must be attached permanently to land that you own.

Rocket Mortgage offers Title II FHA loans for buyers looking to purchase a mobile home and land.

FHA Mobile Home Loan Requirements

To qualify for an FHA mobile home loan, the property and borrower must meet certain criteria set by the FHA:

Home Requirements

• Built after June 1976 when HUD building codes took effect
• Bears a HUD “red tag” certifying it meets codes
• At least 400 sq. ft. of living space
• Fixed permanently to a foundation on land owned by borrower

Borrower Requirements

• Minimum credit score of 580
• Debt-to-income ratio below 57%
• Sufficient income and assets for down payment
• Intend to use home as primary residence

The mobile home must also be installed properly and meet HUD’s manufactured housing installation standards.

FHA Mobile Home Loan Terms

FHA mobile home loans come with the following terms:

• Down payments as low as 3.5% for buyers with 580+ credit scores
• Loan amounts up to $453,100 depending on local limits
• Interest rates based on market rates and your credit score
• Fixed interest rates and monthly payments
• Loan terms up to 30 years

As with all FHA loans, you’ll pay an upfront mortgage insurance premium of 1.75% of the loan amount. You also pay an annual mortgage insurance premium built into your monthly payments.

Finding an FHA Mobile Home Lender

The first step is connecting with an FHA-approved lender. We recommend starting your mobile home loan search with online lenders like Rocket Mortgage.

Rocket Mortgage offers a fully digital mortgage experience. You can apply, get approved, and track loan progress completely online. This streamlined process makes it easy to get a competitive rate and low costs.

Working with an online lender also gives you access to more loan options. Many local lenders only offer conventional financing. Large national lenders like Rocket Mortgage provide extensive FHA loan programs.

Shopping for Your Mobile Home

Once pre-approved, you can start shopping for mobile homes. New manufactured homes can be purchased directly through retailers or mobile home dealerships. You can also consider resale homes through private sellers or real estate agents.

Have the mobile home inspected before buying to ensure it meets HUD standards and is properly installed. The retailer or seller can provide documentation on the home’s origins and HUD compliance.

Be sure to shop for homeowners insurance at the same time. Lenders require insurance on the home before approving the loan.

Tips for Getting Approved

Here are some tips to boost your chances of getting approved for an FHA mobile home loan:

• Shop for lenders that advertise FHA mobile home loans. Not all lenders offer them.

• Get pre-approved first so you know your budget before shopping.

• Work to improve your credit score above 580 if possible. This gets you the best rates and terms.

• Save up money for a down payment of at least 3.5% of the purchase price.

• Calculate your DTI based on the loan amount and monthly payments. Get it below the 57% cap if you can.

• Gather all required documentation early in the process to speed up approval.

• Be prepared to provide details on the mobile home’s compliance with HUD codes.

Alternatives to FHA Mobile Home Loans

If you don’t qualify for an FHA loan, here are some other financing options to consider:

Chattel Loans

Chattel loans are offered by retailers to finance the mobile home itself. You pay rent or have a land lease for the lot space.

VA Loans

VA loans help eligible military buyers purchase a mobile home. Requirements are less strict than FHA loans.

USDA Loans

USDA guarantees loans for low-income buyers in rural areas. These can apply to mobile homes.

Personal Loans

Banks and credit unions offer shorter-term personal loans. These help cover a down payment if you have equity.

Dealer Financing

Many mobile home dealers offer in-house financing. This usually comes with higher rates and stricter terms.

The Bottom Line

FHA mobile home loans provide an affordable financing solution for buying a manufactured home. If you’re looking to purchase a mobile or manufactured home, an FHA loan is a great option to make it more budget-friendly. Just be sure to find a reputable FHA lender and shop for homes that meet all HUD requirements. This helps guarantee a smooth buying process from start to finish.