Getting the Best Modular Home Loan Rates in 2023

Interest rates are on the rise across America for all types of loans. Modular home interest rates are no different in that regard. However, these homes can still be a more accessible path to homeownership—provided that the buyer knows what makes buying a modular home a unique process.

Let’s explore the differences, similarities, and a few surprising rules and exceptions for modular home loans that buyers may find valuable.

Modular homes, also known as prefabricated homes, combine the cost-effectiveness of manufactured homes with the customization of site-built houses. This makes them an appealing option for many homebuyers. When it comes to financing a modular home, it’s important to find the best loan rates. In this comprehensive guide, we’ll explore what modular homes are, how they can be financed, and tips for securing the most competitive modular home loan rates.

What are Modular Homes?

Modular homes are factory-built homes that are transported to the site in sections and assembled on a permanent foundation They differ from mobile homes and manufactured homes in some key ways

They must adhere to local building codes rather than federal standards This makes them more similar to site-built houses
They can be customized with options like multiple stories, garages, porches, and more Manufactured homes have more limited designs.
They appreciate in value like traditional site-built homes, whereas manufactured homes usually depreciate over time.
Modular homes qualify for traditional mortgages, while manufactured homes require specialized financing.

When it comes to modular home loan rates, buyers can qualify for the same loans as site-built houses. This gives modular home buyers more options than those purchasing manufactured homes.

Modular Home Loan Options

Modular homes are classified as real property like traditional houses, so they are eligible for conventional mortgages. Here are some of the most common loan programs modular home buyers can consider:

Conventional Loans

These conforming mortgages meet the underwriting criteria set by Fannie Mae and Freddie Mac. They offer competitive interest rates and down payments as low as 3% for first-time buyers. Modular homes must be permanently affixed on land that you own to qualify.

FHA Loans

FHA loans are ideal for those with lower credit scores or limited funds for a down payment. You may qualify with a credit score as low as 580 and down payment of just 3.5%. Modular homes must be on foundations attached to owned land.

VA Loans

For veterans, active-duty military, and surviving spouses, VA loans offer 100% financing with no down payment or mortgage insurance required. Credit and income requirements are also relatively lenient.

USDA Loans

In suburban and rural areas, USDA loans can offer 100% financing for low- to moderate-income buyers. There is no down payment requirement, and the home must be in an eligible rural location.

Jumbo Loans

For luxury modular homes above conventional loan limits, a jumbo loan can provide the financing needed. Jumbo loans start at $647,200 in most areas and go up to several million dollars.

Tips for Getting the Best Modular Home Loan Rates

While modular homes open up lots of options for mortgage programs, rates can still vary between lenders. Follow these tips to make sure you get the lowest possible modular home loan rate:

Shop around: Compare quotes from at least 3 lenders to find the best terms and rates. Online lenders tend to offer very competitive pricing.
Check your credit: Good credit of at least 680 will qualify you for the lowest rates. Review your credit reports and resolve any errors beforehand.
Lower your debt: Lenders will check your debt-to-income ratio. Pay down debts and consolidate bills to lower your ratio.
Make a larger down payment: Down payments as low as 3% are available but making a 20% or higher down payment will score you the best interest rates.
Pick shorter terms: Opt for a 15-year fixed-rate over a 30-year mortgage to get a lower rate.
Consider an ARM: Adjustable-rate mortgages often start with very low introductory rates for the first few years.
Compare quotes frequently: Modular home loan rates change daily. Check rates often to snag the best deals as they pop up.
Improve the land: Investing in landscaping or exterior upgrades can increase the appraised value of your modular home.

Taking these steps will put you in a great position to get approved for one of the lowest modular home loan rates available. Be sure to weigh the pros and cons of different loan types and terms to choose the financing strategy that best fits your budget and financial situation.

Modular Home Loan Rates Outlook for 2023

In 2023, modular home loan rates are expected to remain competitive, supported by a strong economy and high demand from homebuyers. Here are some forecasts:

Conventional loan rates around 6.5%, slightly higher than 2022 but still relatively low historically.
FHA loans averaging 6.25%, up from 5.5% last year but with low down payments still available.
VA loan rates projected around 6%, a bit higher than 2022 but with zero down payment requirements.
ARM rates lower, around 4% to start, but with the risk of increasing adjustable rates.
Jumbo loan rates forecast to be about 6.25% on average for high-balance loans.

The Federal Reserve’s actions influence rate trends. More hikes are expected in 2023 to curb inflation, meaning modular home loan rates are likely to rise but remain affordable compared to recent decades’ averages.

Shopping around and improving your credit can help offset rising rates. Locking in your rate once you find a competitive lender will protect you from volatility.

Finding the Best Lender for Your Modular Home Loan

Not all mortgage lenders are equipped to handle loans for modular construction. Be sure to find one familiar with underwriting these types of factory-built homes.

Here are some good options to consider:

Online lenders like Rocket Mortgage, loanDepot, and Lenda specialize in affordable home loans with fast processing.
Credit unions offer personalized service and competitive borrowing costs.
Banks like Chase and Wells Fargo provide a range of mortgage products and financial services.
Modular home retailers may have financing partnerships in place to help buyers, but shop rates.

Talk to trusted local real estate agents to see if they have relationships with lenders experienced in modular home lending. Be sure to get rate quotes from multiple lenders before committing to give yourself the best shot at finding the lowest rate.

Ready to Start Your Modular Home Loan?

The keys are shopping around, improving your credit, and finding an experienced modular home lender. By following these tips, you’ll be in a great position to secure low rates and personalized service on your new modular house. Don’t hesitate to reach out if you need any help getting started on making your modular home ownership dreams a reality!

Modular Home Interest Rates on VA Loans

For home buyers and their spouses who served in any branch of the U.S. military, there are opportunities to qualify for a loan with a lower interest rate than conventional options. While Veterans Affairs (VA) home loans come with requirements for the type of home being purchased—most mobile and many manufactured homes will be denied—modular homes are typically approved for these special government loans.

Like FHA loans, VA loans come with a unique set of eligibility requirements, both for the home and for veterans or current service members:

As the direct borrower, you or your spouse must meet the minimum active-duty service requirements. The amount of time required can vary depending on when you served, whether you were an officer, and the branch in which you served, but typically requires a minimum of 90 days of consecutive service.
To be eligible, you must also have received an honorable discharge or the equivalent thereof.
The home you want to buy must undergo a VA appraisal and inspection to ensure the property meets the department’s requirements. Note that these requirements can be different from those required for an FHA loan.

There are other steps to take when applying for a loan from the VA, especially if you belong to certain groups or organizations. Credit unions that serve military members, veterans, and their families, have extensive details and expertise on the requirements to help you determine if you or your spouse qualify for a VA-backed home loan.

While there is some room for variation depending on where you live and other factors, your VA loan will typically have a lower interest rate than a conventional mortgage.

Modular Home Loans vs. Traditional Home Loans

The process of applying for a loan on a modular home is very similar to what you can expect with buying an existing house or building one new. In both cases, you may end up working with a bank, credit union, or other lender. You’ll also typically have to present the lender with tax documents, bank statements, your driver’s license or other state-issued ID, and other paperwork that proves you’re a good borrower.

Another unfortunate similarity: Modular home interest rates are increasing, along with their stick-built counterparts. However, there are some differences as well that can still make modular home loans an attractive option for buyers.

In many cases, modular homes are less expensive than traditional, stick-built houses, especially if you were otherwise planning on having your home built for you. Because of this, they come with a lending option that traditional homes do not: Personal loans.

Typically, when applying for pre-approval on a traditional home loan, banks and credit unions will try to push flexible-rate mortgages to buyers. This is because flexible-rate mortgages make them more money. Most savvy home buyers will choose a fixed-rate mortgage for this very reason, but the option is also available for personal loans.

Unlike traditional home loans, personal loans are only available at fixed rates.

Therefore, if you choose a personal loan for buying a modular home, you won’t have to worry about paying a king’s ransom on your monthly mortgage payment if interest rates spike like they did in the 1980s.

However, there’s a caveat with using a personal loan over a traditional home loan: Interest rates are higher on modular homes. Although individual interest rates can vary depending on multiple factors and conditions—including whether the home comes from an authorized dealer—this rule of thumb is something to consider when looking at a personal loan as an option for purchasing your new home.

Financing a Manufactured Home: What you need to know

FAQ

Why are mortgage rates higher for manufactured homes?

Manufactured home loans often have higher interest rates than traditional home loans because they are considered higher risk. Additionally, borrowers may need to make a larger down payment and have a shorter loan term.

Who is the best lender for manufactured homes?

Company	Starting Interest Rate	Loan Terms (range)
Manufactured Nationwide Best Overall	Varies	15, 20, or 30 years
ManufacturedHome.Loan Best for Good Credit	Varies	Varies
21st Mortgage Corporation Best for Bad Credit	Varies	Varies
eLend Best for Low Down Payment	Varies	Varies

How long are most mobile home loans for?

Type of loan	Average rates	Typical terms
Fannie Mae	Varies	Up to 30 years
Freddie Mac	Varies	Up to 30 years
Chattel	7.60%	Up to 20 years
Personal	11.53%	Up to 84 months

Will interest rates go down in 2024?

So far this year, inflation hasn’t slowed as much as expected, keeping mortgage rates high. But as the economy continues to normalize throughout 2024 and 2025, rates should slowly trend down. In the near term, borrowers should expect rates to stay near their current levels.

What is a manufactured home mortgage?

A manufactured home mortgage is a type of loan used to finance both the purchase of the manufactured home itself and the land it will be placed on, or just the home only if it will be located in a rented lot or mobile home park. These mortgages may have higher interest rates, shorter loan terms, and different down payment and credit score requirements.

What is a modular home loan?

Modular homes are classified exactly the same as traditional stick-built homes, so modular home loans are unique in that they qualify for traditional loan options, such as FHA, VA, or USDA loans. In many cases, a construction loan is required for the purchase of a new modular prefab home.

What is a VA modular home loan?

VA modular home loans are loans designed for veterans (VA loans). Many lenders offer these loans to qualifying veterans with a credit score of about 620 or higher. One unique feature of VA loans is that they can cover 100% of the loan cost, which means $0 down payment. Keep in mind that some VA modular home loans require a VA funding fee that can be financed.

How can I find the best modular home loan?

Finding the best modular home loan for you doesn’t have to be difficult. As a broker with access to more investors than any other lender in the country, NEXA Mortgage is uniquely positioned to provide you and your family with the best options for modular home financing.