Will VA Loans Cover Manufactured Homes?

Many homebuyers consider manufactured homes as an affordable housing option. Also known as mobile homes manufactured homes can provide a lower cost alternative to site-built houses. But financing manufactured homes can be tricky. A common question from veterans is “will VA loans cover manufactured homes?”

The short answer is yes, VA loans can be used to purchase manufactured homes in certain cases. However, VA guidelines on manufactured homes are quite strict. Not all homes or properties will qualify for VA financing. So it is important understand the specifics if you’re considering a VA loan for a manufactured house.

What are Manufactured Homes?

Manufactured homes, as defined by the US Department of Housing and Urban Development (HUD), are houses built entirely in a factory in accordance with federal building codes administered by HUD. They are transported to the site and installed on a permanent foundation.

Manufactured homes differ from modular homes, which are also factory-built but must meet local building codes rather than federal HUD codes. From a mortgage financing perspective, modular homes are treated the same as site-built homes, while manufactured homes have special guidelines.

VA Loan Requirements for Manufactured Homes

The U.S. Department of Veterans Affairs has specific requirements in order for a manufactured home to be eligible for a VA-backed mortgage. These requirements focus on ensuring the home is classified and taxed as real estate rather than personal property. Here are some key criteria:

• The manufactured home must be attached to a permanent foundation and be classified as real property under state law This means it cannot be considered a vehicle or retain its vehicle title

• The home must conform to VA minimum property requirements and meet all applicable building codes and zoning regulations for real estate.

• Single-wide homes must be at least 12 feet wide and have a minimum of 400 square feet of living space. Double-wide homes must be at least 20 feet wide and have at least 700 square feet of living space.

• The manufactured home must be permanently affixed and connected to all conventional utilities like electric, water, sewer/septic, and heating systems.

• The home must be built after June 15, 1976 when the HUD building code went into effect. Older mobile homes are ineligible.

• The land where the home is installed must be purchased with the home. VA loans on manufactured homes require both the home and land as collateral.

Essentially, the home must be a permanent part of the real estate on a foundation, not a mobile structure. These requirements aim to ensure the home can be resold just like a conventional site-built home.

Can I Buy Just the Home or Just the Land?

No, the VA has clear rules prohibiting separate loans on just the manufactured home or just the land:

• You cannot obtain a VA loan only for the manufactured home. The land must be included.

• You cannot obtain a VA loan only for the land, with plans to move a manufactured home to it. The home must already be permanently installed on the land.

Both the home and land must be purchased together in one VA loan transaction. The home must be fixed to the foundation on the land before closing the loan.

What Properties are Eligible?

VA loans can only be used to purchase certain types of properties involving a manufactured home:

• A new manufactured home and land: This is the most common scenario. The VA loan covers purchasing both a new manufactured unit and the land it is affixed to as the collateral.

• A used manufactured home and land: It is possible to buy an existing manufactured home already installed on land with a VA loan, but stricter requirements may apply. The home must meet VA minimum property standards.

• A manufactured home on land you already own: If you own the land free and clear, you can use a VA loan to buy a manufactured unit to be permanently installed on the land.

• Refinance an existing manufactured home: VA loans can be used to refinance an existing manufactured home loan to obtain a lower interest rate, change terms, or take cash out if eligible.

Other scenarios, like financing just the land or home separately, are not allowed with VA loans. The home and land must be financed together.

How Much Can I Borrow?

The maximum VA loan amount for manufactured housing is the same as other homes – up to $647,200 for a single-family home in most counties. High-cost areas have VA limits as high as $970,800.

However, there are additional limitations on manufactured homes:

• The loan amount is capped at the lesser of the VA county limit OR the purchase price plus allowable costs.

• The loan amount cannot exceed the appraised value. Manufactured homes often depreciate, so purchase price may exceed market value.

• The total debt on the property cannot exceed the reasonable value of the home and land.

While VA does not set a maximum purchase price for manufactured housing, the financing is restricted to the appraised value. This often limits loan amounts compared to site-built homes.

What About Construction Loans?

The VA does not offer construction loans for manufactured housing. However, you may be able to obtain a short-term construction loan to finance the purchase and installation of a new manufactured unit on land you already own.

Once construction is complete, this loan can potentially be refinanced into a long-term VA mortgage. You’ll need to find a lender willing to offer the initial construction financing and VA refinance.

Finding a Lender Will Be The Biggest Challenge

The VA guidelines allow manufactured homes, but finding a lender willing to finance them is difficult. Most lenders shy away from manufactured housing loans because they are seen as higher risk.

Only a small portion of VA lenders will consider these loans. You will need to thoroughly research lenders familiar with VA manufactured home guidelines. This financing niche has very limited options.

Be prepared for the home and land purchase to take longer with extra hoops to jump through compared to a site-built home. But the VA requirements ensure the collateral meets standards to qualify for favorable loan terms.

The Takeaway

VA loans can be used to purchase manufactured housing in certain situations if all requirements are met. But significant challenges exist finding an approved lender and home that will qualify. Veterans interested in financing manufactured homes with a VA loan need to research the guidelines closely and temper expectations.

While possible in limited cases, VA loans are not a free pass to buy any manufactured home. The program aims to provide affordable financing options for veterans, while responsibly managing lending risks. Manufactured homes present greater risks which leads to tight requirements from both the VA and its approved lenders.

But for buyers who need an affordable alternative to site-built homes, VA loans can make owning manufactured housing an option when requirements are met. Understanding the guidelines ahead of time will prepare veterans for the realistic roadblocks they may face.