Getting a USDA Loan to Finance a Manufactured Home – All You Need to Know

A manufactured home (also known as a mobile home) can be an affordable way to achieve the dream of homeownership. With a USDA loan, financing the purchase of a manufactured home is possible for eligible homebuyers in rural areas. In this comprehensive guide, we will explore everything you need to know about getting a USDA loan to buy a manufactured home.

What is a USDA Loan?

The US Department of Agriculture (USDA) has several loan programs to help low-to-moderate income individuals and families buy homes in rural areas. The most commonly used USDA home loan program is the Single Family Housing Guaranteed Loan Program.

With this program, the USDA guarantees loans made by private lenders for eligible home purchases in approved rural locations. The guarantee allows lenders to provide 100% financing with no down payment required. USDA home loans offer competitive interest rates and can be used to finance site-built homes, modular homes, and manufactured homes.

Benefits of USDA Loans for Manufactured Homes

Here are some of the main benefits of using a USDA loan to finance a manufactured home purchase:

• 100% Financing – No down payment is required for USDA loans This helps buyers on a budget cover the full cost of the manufactured home and land

• Low Rates – USDA loans offer fixed interest rates that are very competitive, which keeps monthly payments affordable.

• Lower Credit Requirements – The credit score requirements for USDA loans are more lenient than conventional mortgages. Minimum credit scores can be as low as 640.

• Flexible Usage – USDA loans can be used to purchase both new and existing manufactured homes. The funds can cover land costs, closing fees, delivery, and installation too.

• Rural Locations – Manufactured homes are common in rural areas where USDA loans can be used, USDA has a property eligibility tool to check if a location qualifies

USDA Loan Requirements for Manufactured Homes

While USDA loans offer great benefits for manufactured home buyers, there are certain requirements that must be met to qualify for financing:

• Location – The manufactured home must be located in an eligible rural area. The USDA has an eligibility map to check.

• Income Limits – Total household income must be below the limit set based on family size and location. These range from $60,000 to $108,000 approximately.

• Credit History – Applicants should have a credit history demonstrating ability and willingness to repay debts. Minimum scores are often 640.

• First-Time Homebuyer – At least one borrower must be a first-time homebuyer, with some exceptions like military service or displacement.

• Permanent Foundation – The manufactured home must be securely attached to a permanent foundation according to HUD/FHA guidelines.

• Compliance – The manufactured home must comply with Federal Manufactured Home Construction and Safety Standards and have the HUD Certification Label.

• Land Ownership – Applicants must own or have a leasehold interest in the land where the home will be located.

• Principal Residence – The manufactured home must be used as the borrower’s principal residence.

• Debt-to-Income – Total monthly debt payments typically cannot exceed 41% of gross monthly income.

Meeting all the eligibility criteria is key for approval of a USDA loan on a manufactured home. Working with a lender familiar with these loans can help navigate the process.

How to Apply for a USDA Manufactured Home Loan

If you’ve determined that your situation meets all the requirements, follow these steps to get a USDA loan for your manufactured home:

• Find a Lender – Connect with USDA approved lenders in your area. Credit unions, banks, and mortgage companies offer USDA loans.

• Select a Home – Choose a manufactured home that fits your needs and meets USDA criteria. Focus on HUD code certified units built after 1976.

• Determine Eligibility – Have the lender verify you meet location, income, credit, and other eligibility standards.

• Select Land – Identify a suitable site in an eligible rural location. Consider factors like zoning and utilities access.

• Apply for Pre-Approval – Submit your application, income documentation, and credit history to get pre-approved for financing.

• Make an Offer – With pre-approval secured, you can make an offer to purchase the selected manufactured home.

• Final Approval – The lender will process final approval once they get the purchase contract, appraisal, and other required documents.

• Close on the Loan – At closing, you’ll sign the final loan documents and can then complete the purchase.

With proper planning and working with an experienced lender, getting USDA approval for a manufactured home loan is very feasible.

Using a USDA Construction-to-Permanent Loan

The USDA also offers Construction-to-Permanent loans that provide an all-in-one option for financing the full manufactured home purchase process.

This loan program allows buyers to combine the construction loan to cover the initial site prep work and delivery costs together with the permanent end loan for the full purchase amount in a streamlined mortgage.

With Construction-to-Permanent USDA loans:

• No second loan or refinancing is required once construction is complete.

• The interest rate remains fixed throughout the process.

• Finance land, site development, delivery, and all installation costs.

• Requires no down payment or equity.

• Obtain loan approval upfront before making an offer on a manufactured home.

Construction-to-Permanent USDA loans simplify financing and make buying a manufactured home even more affordable.

What Does the USDA Loan Cover?

USDA home loans are very flexible and can cover almost all costs associated with a manufactured home purchase, including:

• Purchase price of the manufactured home itself.

• Cost of transporting the home from factory to site.

• Site preparation work such as grading, excavation, and ground covering.

• Foundation materials and labor for permanent attachment.

• Hooking up utilities like electric, water, sewer, gas, etc.

• Land acquisition if not already owned.

• Various one-time closing costs and finance fees.

• Any applicable taxes and insurance set-up costs.

This comprehensive cost coverage makes USDA loans an appealing single source for financing manufactured homes.

Finding Manufactured Homes Eligible for USDA Loans

Not all manufactured homes qualify for USDA financing. Here are tips for finding units that meet the requirements:

• Focus on new manufactured homes built after 1976 that feature the HUD Certification Label.

• Check that the home complies with the Federal Manufactured Home Construction and Safety Standards (HUD Code).

• Look for homes with quality features like drywall, sloped roofs, and durable exterior finishes.

• Select multi-width units a minimum of 16 feet wide for the most financing options.

• Consider factory-built “modular” homes that resemble site-built houses.

• Work with manufactured home retailers familiar with USDA financing programs.

Thoroughly researching units upfront will ensure you select an eligible home worth investing in.

Securing the Manufactured Home Foundation

Properly installing the manufactured home on a permanent foundation is key for both USDA approval and the home’s structural stability.

As part of the USDA loan process, the foundation must be designed, evaluated, and approved by a licensed engineer or architect.

For foundation types, manufactured home installations typically use:

• Poured concrete footings and perimeter walls.

• Concrete block piers installed below the frame.

• An anchoring system securing the home to the ground.

Proper site drainage and vapor barriers should also be incorporated in the foundation design.

A sturdy permanent foundation will help a manufactured home retain its value and stand the test of time.

Manufactured Home Loan Terms to Understand

Navigating loan options for manufactured homes involves some unique terminology. Here are some key terms to know:

• Chattel Loan – Financing secured using the home only as collateral, not the land. This is riskier for lenders.

• Land-Home Loan – A mortgage with the home and land used together as collateral. USDA loans are this type.

• Personal Property – How manufactured homes are classified when not attached to owned land yet.

• Real Property – Becomes real property once permanently affixed on land owned by the homeowner.

• Title Elimination – The process of converting a manufactured home title from vehicle title to real property title.

Having a handle on these definitions will help you make sense of the financing process.

Main Takeaways on USDA Loans for Manufactured Homes

Some key points to remember about using USDA financing for a manufactured home purchase:

• Offers 100% financing with no down payment requirement.

• Features competitive fixed interest rates.

• Allows lower credit scores than