How to Get a USDA Loan to Buy a Manufactured Home

The USDA loan program helps make homeownership affordable for low-to-moderate income borrowers in rural areas. One of the key benefits of USDA loans is that you can use them to purchase a new manufactured or modular home.

With a USDA manufactured home loan, you can buy a factory-built home and finance the cost of transporting and installing it on a foundation. USDA loans offer flexible credit and income requirements plus the ability to purchase with zero down payment.

Below is a guide on the eligibility, requirements, and process for obtaining USDA financing on a manufactured home.

Overview of USDA Manufactured Home Loans

The U.S. Department of Agriculture’s Single Family Housing Guaranteed Loan Program, also called the Section 502 Direct Loan Program, issues USDA home loans to eligible borrowers in rural locations. Here are some key details on using these mortgages to buy a manufactured home:

• 100% financing: USDA loans allow 100% financing for the purchase price plus delivery and setup costs. No down payment is required.

• Low mortgage insurance: Upfront and annual mortgage insurance is 1% of the loan amount versus 1.75% for FHA loans.

• Fixed rates: USDA loans come with fixed interest rates, which currently average around 5% to 6%.

• Flexible credit requirements Minimum credit scores between 580 and 640 are often acceptable,

• Low income thresholds: Income limits vary but can be as high as $108,600 for a family of 4 in some counties.

• Rural locations only: Homes must be in rural designated areas, not major metropolitan cities.

A USDA loan can cover purchasing a manufactured home, transportation to your site, foundation work, and installation costs You can also use it to purchase just the home if you already own the land

Requirements for Buying a Manufactured Home with USDA

For USDA to insure a loan on a manufactured home there are certain requirements the property must meet

• The home must be new and not previously installed on any site.
• It must be transported directly from the manufacturer/dealer to your site.
• The home must be at least 400 square feet in size.
• It must be built to meet HUD manufacturing standards and have HUD certification tags.
• The home must be placed on a permanent foundation built to FHA guidelines.
• It must meet federal thermal requirements and be certified as such by the home builder.

In addition, the home site itself must be located in an eligible rural area as designated by USDA. You can check eligibility by address on the USDA site.

The USDA Manufactured Home Loan Process

Here are the main steps to obtain and close on a USDA mortgage for your manufactured home:

• Find a USDA approved lender who offers manufactured home loans. Not all lenders do, so this is key.

• Get pre-qualified to check you meet credit, income, and other eligibility requirements.

• Select your manufactured home and receive a purchase agreement from the dealer/manufacturer.

• Choose a suitable site in a USDA eligible rural area if you don’t already own land.

• Apply for the USDA loan and provide all required documentation to verify your eligibility.

• Obtain loan approval from USDA and your lender after underwriting.

• Coordinate transportation and setup of the manufactured home after loan closing.

• Make your first mortgage payment within 30 days after the home is installed and ready for occupancy.

The USDA requires the home be new, so you can’t use this financing to buy a used or existing manufactured home. But the process is streamlined since USDA loans come with no appraisal or minimum credit score requirements.

Alternatives if You Don’t Qualify for USDA Financing

If you don’t qualify for a USDA manufactured home loan, here are some alternative financing options to consider:

• FHA loans – Allow lower credit scores and 3.5% down payments but have higher mortgage insurance costs.

• VA loans – Offer 100% financing for veterans and service members with no down payment or mortgage insurance.

• Personal loans – May offer lower rates than other bad credit options if you have decent income and credit.

• Secured loans – Allow you to use the manufactured home as collateral for financing if you own the home outright.

• Dealer financing – Some dealers offer in-house financing programs that may be an option if you fail to qualify elsewhere.

• Hard money loans – Asset-based loans at higher interest rates that use the home as collateral.

• 401(k) or IRA loans – Can borrow up to $50,000 from your own retirement savings penalty-free.

Carefully shop around and compare rates and fees across multiple lenders to find the most affordable loan option that best fits your financial situation.

Pros and Cons of Buying a Manufactured Home with USDA

Here are some key advantages and potential drawbacks of using USDA financing for a manufactured home purchase:

Pros

• Requires no down payment or minimum cash reserves
• Offers lower mortgage insurance costs than FHA
• Features fixed interest rates and monthly payments
• Qualifying credit and income requirements are more flexible
• Can finance full cost including transportation and setup
• Streamlined process with no appraisal or minimum credit score

Cons

• Limited to rural designated areas only
• Must use loan to buy new construction, not existing homes
• Fixed rates may be slightly higher than conventional loans
• Home and land are financed together, not separately
• Limited ability to negotiate manufacturer pricing
• Potential equity may appreciation slower than site-built homes

The Bottom Line

USDA home loans provide a viable zero-down financing option for purchasing new manufactured housing in rural locales. They offer more flexible credit and income requirements than conventional loans alongside lower mortgage insurance costs than FHA.

Just be sure to find a lender familiar with USDA manufactured home lending. Checking your eligibility, researching manufacturers, and comparing loan quotes will help ensure you get the best financing deal. While not a fit for every buyer, USDA loans give lower-income borrowers a path to affordable homeownership.