USDA loans make homeownership possible for thousands of low-income Americans in rural areas. These low-interest, zero-down mortgages arent as well-known as their FHA or VA loan counterparts, but they include many perks that can make them a great option for eligible borrowers.
In many cases, homebuyers can use a USDA home loan to purchase a manufactured home — one thats constructed off-site before being transported and attached to an on-site, permanent foundation. Even some modular homes, which are built in sections and then assembled on location, may qualify for USDA loans.
Read on to learn more about USDA manufactured home loans and how to make sure your property qualifies.
It’s important to understand that Neighbors Bank does not offer USDA loans for manufactured or mobile housing.
The USDA offers special mortgage programs to help rural residents achieve homeownership These loans can be used to purchase manufactured homes, also known as mobile or modular homes This financing makes owning a quality factory-built home possible for low-to-moderate income borrowers.
In this comprehensive guide, we’ll explain what USDA loans cover for manufactured housing and who qualifies for this affordable financing option.
Overview of USDA Rural Housing Loans
The USDA Rural Development department administers multiple home loan programs designed to serve rural communities. These mortgages feature:
- 100% financing requiring no down payment
- Below-market interest rates
- Low mortgage insurance costs
- Flexible credit and income requirements
Additionally, USDA loans can be used to purchase new manufactured homes or finance the cost to install a manufactured home on private property. This financing helps boost affordable housing supply in rural areas nationwide.
The most popular USDA mortgage option is the Single Family Housing Guaranteed Loan Program The agency guarantees these loans made by approved private lenders rather than directly lending funds
What is a Manufactured Home?
Manufactured homes are built entirely in a factory environment under controlled conditions. They are transported to the home site once fully constructed. These prefabricated homes must meet Federal building code standards.
Other common terms for manufactured housing include:
- Mobile home
- Modular home
- Prefab home
- Factory-built home
Modular homes adhere to the same local building codes as site-built houses. Sections are joined on-site and often difficult to distinguish from conventional construction.
USDA Loan Options for Manufactured Homes
The USDA offers two distinct loan programs tailored to the unique needs of manufactured home buyers:
1. Section 502 Direct Loan
- Direct mortgage financing from the USDA
- Fixed interest rate below current market rates
- 1% upfront guarantee fee and annual 0.35% fee
- Must be unable to obtain credit elsewhere
2. Section 502 Loan Note Guarantee
- USDA guarantees loans by private lenders
- Must meet income and credit requirements
- Low fixed interest rate and guarantee fee
- Lender sets specific terms and requirements
Both loans permit financing a new manufactured home and/or the cost of the land, with flexibility to meet individual circumstances.
USDA Manufactured Home Loan Requirements
While requirements vary by lender, the USDA imposes these general eligibility standards to qualify for a manufactured home loan:
- The home must be a new manufactured house, not used or previously installed.
- Minimum 400 square feet of living space.
- Placed on a permanent foundation.
- Built after June 15, 1976 to HUD safety standards.
- Located in an eligible rural area.
- Home will be your full-time residence.
- Have sufficient income and repayment ability.
- Good credit history.
- Debt-to-income ratio typically below 41%.
- Must be U.S. citizen or legally present permanent resident.
Meeting these criteria makes purchasers eligible for 100% financing from the USDA with no down payment. Loan limits vary by local real estate values.
Using a USDA Loan for a Modular Home
Modular homes are factory-built to state and local codes offsite, then delivered in sections to be joined on your property. They are sometimes referred to as prefabricated or precut homes.
Modular housing is eligible for USDA financing, including:
- Single-wide, double-wide, or multi-section modular homes
- Stick-built style modular construction
- Custom floor plans and designs
As long as the modular home meets program rules, USDA loans can cover all related costs:
- The manufactured house itself
- Delivery and installation
- Permanent masonry foundation
- Site development, grading, excavation
- Water and septic systems
- Land purchase or financing
This flexibility makes modular homes accessible and affordable with 100% USDA financing.
Combination Construction-to-Permanent USDA Loans
The Combination Construction-to-Permanent program offers a streamlined process for buyers of manufactured or modular homes.
With this option:
- One loan covers construction and permanent financing.
- The agency guarantees 95% of the home’s value.
- No escrow required for construction.
- Only one closing for the combined loan.
- Lowers upfront costs and time to get financing.
Lenders can obtain the loan note guarantee upfront. The borrower then converts to the permanent mortgage once construction is complete.
Partnering With an Approved USDA Lender
To obtain a USDA loan, you must apply through approved lending partners. Local banks, credit unions, and mortgage companies participate in these programs.
Be sure to shop around and compare multiple lenders on:
- Interest rates and fees
- Loan terms and amounts
- Customer service and reviews
Inquire with each lender about their specific USDA manufactured home loan guidelines, documentation required, and loan process. Finding the right lending partner ensures you get the best financing deal.
Some top national USDA lenders include Guild Mortgage, Allen Tate Mortgage, and Prospect Mortgage. But many regional and community lenders also offer USDA loans.
Tips for Getting Approved
Follow these tips to boost your chances of successfully qualifying for a USDA manufactured home loan:
- Find a home and site meeting all USDA requirements
- Estimate your total purchase and construction costs
- Review your credit reports for accuracy
- Pay down existing debts to lower your DTI ratio
- Gather all required income and employment documentation
- Consider adding a co-signer if your credit needs improvement
- Ask sellers for any contribution or closing cost assistance
- Shop around for the best rates and USDA approved lenders
- Complete applications fully and accurately
- Respond promptly to any requests from lenders
- Be upfront about your financial situation and challenges
The right lender will help you put your best foot forward. Their expertise navigating the USDA loan process can make your dream of owning a quality, affordable factory-built home a reality.
Alternative Financing Options
In case you don’t qualify for a USDA loan, here are some other financing options for manufactured housing:
- FHA loans – Allow for lower credit scores and higher debt ratios
- VA loans – For qualifying military members and veterans
- Conventional loans – Require higher credit scores and down payments
- Retailer financing – Offered directly through manufactured home builders
- Personal loans or credit cards – Higher rates and origination fees
Be sure to compare rates and terms across multiple lenders to find the most affordable alternative loan or finance offer.
Buying Land for a Manufactured Home
You can use a separate USDA home loan product to purchase land only for your manufactured home. The Single Family Housing Direct 502 Loan allows up to 100% financing of the purchase price plus these costs:
- Legal, survey, and title fees
- Grading, installation, excavation
- Water and septic systems
- Driveways, parking, landscaping
With no down payment requirement, this loan makes it possible to find and buy an ideal property even before choosing the manufactured home.
Let USDA Loans Make Your Dream Home Possible
Don’t let limited funds prevent you from buying the quality affordable home you deserve. USDA financing makes modular, manufactured, and mobile homes attainable on any budget. These factory-built homes provide comfort, luxury, and energy efficiency. With innovative construction methods, you can design the perfect custom home at a fraction of the cost and construction time.
Understanding all the USDA loan options available allows you to tap into 100% financing specially designed for manufactured housing. Partner with an approved lender to qualify and land the right loan terms to fit your needs. Take the first step toward enjoying the many benefits of manufactured home ownership.
Frequently Asked Questions
What requirements must a manufactured home meet to qualify for USDA financing?
Are Modular Homes USDA Eligible?
Like manufactured homes, modular homes are primarily constructed in a factory. They’re built-in prefabricated “modules,” which are then moved to a specific location, where they are assembled and attached to a permanent foundation.
Manufactured homes are held to federal standards set by the Department of Housing and Urban Development (HUD). Modular homes must conform to the same local, state and regional building codes required for on-site homes, which means they will vary depending on the area.
There is also one important caveat for using a USDA loan to finance a modular home. You cant use the loan to buy land and then install a modular home on it. In other words, your modular home is only eligible for USDA financing after its been built and installed in its permanent location.
USDA Loan Property Requirements
Here are key USDA manufactured home guidelines:
- Age and construction: Your manufactured home must be new stock, built within the last 12 months and never installed on another site. It cannot be modified except for adding porches, decks or similar structures, as approved and inspected by local code officials. You must also have a copy of all manufacturer warranties and dealer and contractor certifications. The home must also display a red certification label on the exterior of each transportable section. This MUST remain visible after all necessary work is finished to complete the installation.
- Size: Manufactured single-wide homes must be at least 12 feet wide. Double-wides must be at least 20 feet wide. All manufactured homes must have an area of at least 400 square feet.
- Safety: Manufactured homes must meet Federal Manufactured Home Construction and Safety Standards (FMHCSS). These regulations ensure that the housing is safe for occupancy. They also vary, depending on where the home will be placed.
- Location: The home must be installed on land in an approved, USDA-eligible area and affixed to a permanent foundation. The site must meet current floodplain requirements and include proper waste disposal systems and water access.
- Tax status: For tax purposes, the manufactured home must be classified as real estate, and its site must be zoned the same.
As with any mortgage, the lender will require a property appraisal to evaluate the above issues and to determine the total value of the manufactured home and its land. This is necessary to determine your maximum loan amount. The closing process for manufactured homes will also include title transfer and any necessary documentation.