Everything You Need to Know About FHA Title 2 Manufactured Home Loans

FHA Title 2 manufactured home loans allow buyers to finance a manufactured home and the land it sits on with a low down payment, These government-backed mortgages make buying a factory-built home more affordable,

In this comprehensive guide we’ll explain what an FHA Title 2 manufactured home loan is, who qualifies and how the program works. Read on to learn everything you need to know to decide if this type of mortgage is right for you.

What is an FHA Title 2 Manufactured Home Loan?

An FHA Title 2 manufactured home loan is a type of government-backed mortgage insured by the Federal Housing Administration (FHA). It allows borrowers to finance the following:

• A new manufactured home
• The cost of transporting the home to its site
• Any installation costs
• The purchase of land to place the home on

With an FHA Title 2 loan, the manufactured home must be attached permanently to land you own. These loans help make financing a factory-built home similar to financing a site-built home.

Manufactured homes were previously called “mobile homes.” But today, FHA uses the term “manufactured home” for any home built entirely in a factory after June 15, 1976, and meeting HUD standards

FHA Title 2 manufactured home loans have similar approval requirements and benefits as other FHA loans. But there are some unique criteria related to the home and land.

FHA Title 2 Loan Requirements

To qualify for an FHA Title 2 manufactured home loan, you must meet certain borrower requirements. The home and land must also meet FHA criteria.

Borrower Requirements

As the borrower, you’ll need to meet these qualifications:

• Credit score – At least 500 credit score with 10% down payment. 580+ score needed for 3.5% down payment.

• Down payment – Minimum 3.5% down payment required. Can be rolled into the loan.

• Debt-to-income ratio – Your DTI must be below 43%. But may be higher with compensating factors like excellent credit or cash reserves.

• Occupancy – You must use the home as your primary residence for at least 1 year.

• Mortgage insurance – Pay an upfront mortgage insurance premium (UFMIP) of 1.75% of loan amount and monthly mortgage insurance premium (MIP) between 0.45% – 0.85% of loan amount.

• Loan limits – Loan amounts follow national conforming loan limits set annually by HUD based on median home prices.

• CAIVRS check – No outstanding federal debts reported in the CAIVRS federal debt database.

Manufactured Home Requirements

The manufactured home itself must meet these FHA criteria:

• Built entirely in a factory after June 15, 1976.

• Has a HUD tag clearly displayed showing it meets HUD construction standards.

• Minimum 400 sq. ft. of living space.

• Carries a 1-year manufacturer warranty if new.

• Installed according to HUD standards and local installation codes.

Land Requirements

The land the home sits on must also meet specific FHA requirements:

• You must own the land the home is installed on.

• The land must have all-weather access roads.

• Access is available to water, sewer, electricity, and gas utilities.

• The land meets HUD standards for site suitability.

• The home must be attached permanently to the land per HUD guidelines.

The Key Benefits of an FHA Title 2 Manufactured Home Loan

FHA Title 2 manufactured home loans offer several advantages that make financing a factory-built home easier, including:

• Low down payment – Only 3.5% down payment required in most cases. This is much lower than the typical 20% down payment needed for conventional mortgages.

• Flexible credit guidelines – FHA approves borrowers with credit scores as low as 500, which is lower than most conventional loans allow.

• No pre-payment penalties – You can pay off an FHA loan early without penalty.

• Lower interest rates – FHA loans typically have lower interest rates than other non-conforming mortgages borrowers with less than perfect credit may qualify for.

• Low mortgage insurance – FHA mortgage insurance premiums are lower than with many other loan types designed for buyers with poorer credit.

• Assumable financing – FHA loans can be assumed by a new buyer when you sell, making the home easier to sell.

• Customizable terms – Choose from a range of loan terms from 15 to 30 years.

• Purchase and refinance options – FHA Title 2 loans can be used to purchase a new manufactured home or refinance an existing property.

• Nationwide availability – FHA lenders are available in most areas across the country.

How to Get Approved for an FHA Manufactured Home Loan

If you think an FHA Title 2 manufactured home loan may be right for you, follow these steps:

1. Check your credit. Getting a copy of your credit report and your FICO credit scores from the three major bureaus is important. This will help you determine if you meet the minimum FHA credit score requirements. You can check your credit for free.

2. Determine affordability. Review your budget to see how much you can afford in monthly mortgage payments while still paying other living expenses. Try an online mortgage calculator to estimate payments on different loan amounts.

3. Find the right home. Search for FHA-eligible manufactured homes built after 1976 that meet HUD standards from an approved retailer.

4. Research land options. Decide whether you want to buy land or place the home on land you already own. Review costs for land leasing if needed.

5. Get pre-approved. Apply with a few FHA lenders to get pre-approved. This shows sellers you’re serious. Compare the loan terms and fees each lender offers.

6. Make an offer. Once your offer is accepted, proceed to the loan application process. Your lender will guide you through the documentation and home appraisal required.

7. Close on your mortgage. At closing, you’ll sign final loan documents and take ownership once funds are disbursed. Then you can move into your new manufactured home!

Finding the Best FHA Title 2 Manufactured Home Lender

Shopping around for the right FHA lender is key to getting the best FHA Title 2 manufactured home loan for your situation.

Here are some tips for finding the top lenders:

• Get rate quotes from several lenders to compare costs.

• Ask lenders about their experience with manufactured home loans specifically. Look for a lender who does these loans regularly.

• Compare origination fees and closing costs in each lender’s Loan Estimate. Lower is better.

• Ask about each lender’s average time to close a loan. The shorter the better.

• Read online reviews to see what other borrowers say about each lender.

• Check the HUD website for a full list of approved FHA lenders.

Some of the top FHA Title 2 manufactured home lenders include Quicken Loans, loanDepot, Fairway Independent Mortgage Company, and Guild Mortgage Company.

Pros & Cons of FHA Title 2 Manufactured Home Loans

FHA Title 2 loans have many benefits that can make financing a manufactured home easier. But there are also some potential drawbacks to consider.

Pros:

• Low down payments of just 3.5%
• Available with lower credit scores
• Lower interest rates than other non-prime mortgages
• Lower mortgage insurance costs
• Customizable 15 to 30-year loan terms
• Assumable loans
• Purchase and refinance options

Cons:

• Monthly mortgage insurance premiums required
• Higher interest rates than conforming mortgages
• Stricter home condition requirements
• Permanent foundation required
• Upfront and annual mortgage insurance premiums
• Can only have one FHA loan at a time

Carefully weighing the pros and cons will help you decide if an FHA Title 2 manufactured home loan is your best option.

Alternatives to FHA Title 2 Manufactured Home Loans

FHA Title 2 loans aren’t your only option for financing a factory-built home. Some other alternatives include:

• FHA Title 1 loans – Can be used for manufactured homes not on a permanent foundation. More flexibility but lower loan limits.

• Conventional loans – May offer better rates and terms for borrowers with good credit (700+ scores).

• USDA loans – For low-income borrowers in rural areas buying modestly priced homes. 100% financing available.

• VA loans – For eligible military homebuyers. No down payment required.

• Personal loans – May help cover a down payment if you don’t have sufficient savings.

• **MH Advantage loans