Mobile & Manufactured Home Loan Guide
Although manufactured home loans aren’t as abundant as traditional mortgages, demand for alternative housing continues to rise. With a widening gap between housing and affordability, many Americans are turning to manufactured homes as a replacement for traditional, single-family residences.
According to the Manufactured Housing Institute, nearly 22 million Americans live in manufactured homes. The 2018 median sales price of a new manufactured home is $70,600, which is well below the first quarter 2018 national median sales price of $302,000 for new houses sold. With such a discrepancy between the median sales price of a manufactured home and a traditional home, it’s no wonder why alternative housing is gaining traction.
Finding the right financing for your manufactured home can present a challenge. Many lenders aren’t willing to let you borrow money to buy a mobile home. In many cases, you have to get your financing through the home seller.
The good news is you still have several options. Specially tailored programs exist for manufactured homes, and you can find them from Fannie Mae and Freddie Mac, the Federal Housing Administration and the United States Department of Veterans Affairs.
Keep reading to discover the differences between mobile, manufactured and modular homes. Next, explore some of the home loan options for manufactured housing — including conventional financing and government-backed financing — and how you can find lenders who offer mobile home loans.
|Manufactured, mobile and modular homes: What’s the difference?|
|Manufactured Home||Mobile Home||Modular Home|
|Definition||A transportable structure built in a factory containing one or more sections that will be affixed to a permanent chassis.
||Homes that were built in a factory before June 15, 1976. Today, we call them manufactured homes.
||A systems-built home (built in a controlled environment) that conforms to the same building codes as site-built houses.
(Note: Lenders typically don’t offer loans on mobile homes built before 1976.)
|Maximum Loan Amount||Title 1 Loans
||Mobile homes built before 1976 not eligible for HUD-sponsored programs||Title 1 Loans
Financing a manufactured home
Many lenders across the country are expanding their financing options for manufactured homes. As manufactured homes’ features and quality are starting to improve, lenders are beginning to recognize that alternative housing — and manufactured homes — is rising in popularity because of the shortage of affordable housing in the country.
Since manufacturers now build “mobile homes” with features such as energy-efficient appliances, porches and luxurious interiors, more lenders are willing to take on a little more risk in an underserved market. This is great news if you can’t find affordable housing and you’re considering exploring the manufactured housing market.
For example, American Financial Resources now offers financing for manufactured homes through Fannie Mae’s MH Advantage for manufactured homes program. Here’s a closer look at the program.
Fannie Mae MH Advantage for manufactured homes
Fannie Mae offers several different home loan programs, including the MH Advantage for manufactured homes. The program offers 30-year, fixed-rate mortgages or 7/1 and 10/1 adjustable-rate mortgages with lower interest rates and fees than you might find with a retail installment contract. For purchase transactions, you loan-to-value ratio can be as high as 97%.
Fannie Mae, however, has certain requirements you must meet before to qualify:
- The home must title with the land, and you must own the land.
- Your home must have an “MH Advantage sticker,” which identifies it as having certain features similar to site-built homes. Visit this link and click on “Participating Manufacturers.”
- Your home must be 12 feet wide and have a minimum of 600 square feet.
- The dwelling must have a permanent chassis and be installed on a concrete foundation.
- You must take out mortgage insurance.
- Single-wide homes are not eligible.
Fannie Mae does offer a standard manufacturing housing program for purchase and limited cash-out refinances for principal residences. You might qualify if you plan to buy a standard single- or double-wide, manufactured home that doesn’t quite meet the MH Advantage program’s financing guidelines.
Freddie Mac manufactured home mortgages
Freddie Mac, another government-sponsored enterprise, also offers loan programs for manufactured homes. The good thing about Freddie Mac manufactured home loans is you can tie the loan into some of its other programs that are generally for traditional homes. For example, you could tie it into Freddie Mac’s HomePossible mortgage and try to qualify using that program’s guidelines.
Here are some of Freddie Mac’s manufactured home loan highlights:
- You must own the land the home sits on and it must be taxed as real property.
- Single-wide homes qualify only if they’re in a planned-unit development.
- The home must have a HUD Certification Label and it must be built on a permanent chassis.
- Homes built before 1976 are not eligible.
- Primary residences and second homes qualify, but investment properties do not.
- 7/1 and 10/1 adjustable-rate mortgages are allowed.
- You must make at least a 5% down payment and it has to come from your personal funds.
FHA loans for manufactured homes (Title 1 programs)
If you own the land or plan to buy the land on which you want to place your manufactured home, you might qualify for financing under the Title 1 program from an FHA-approved lender. Although the FHA does not provide the actual loan, the agency insures your loan in the event you default. Using this program, you might qualify for a manufactured home loan, a manufactured home lot loan or a combination of the two.
The program insures up to 90 percent of the loan amount — the lender agrees to take a 10% loss if your loan goes into default. You can also refinance your manufactured home loan and lot using this program.
Here are some of the basic FHA requirements:
- You can only have a single-family dwelling and you must occupy it as your primary residence.
- The property must be real property, classified as real estate.
- You are allowed only one transfer, from the manufacturer to the site.
- The “HUD seal” must be affixed to the home certifying it is compliant with safety and livability standards.
- If your credit scores is 500 or lower you must make a 10% down payment; however, there is no minimum credit score to qualify for the program.
- If your credit score is above 500, you must make at least a 5% down payment.
- View the maximum loan amounts and terms in the table above.
USDA manufactured home loans
Although most people associate the USDA with farmers and agriculture, the agency offers several home loan programs for single-family residences. The only caveat is the home must be located in a rural area.
USDA-backed loans offer up to 100% financing, so in many cases, you don’t need a down payment. Additionally, manufactured homes qualify for USDA-backed mortgages.
Here are some of the program details for manufactured homes:
- Manufactured homes must be less than one year old.
- The unit can’t be less than 400 square feet.
- Your home must sit on a permanent foundation that meets FHA guidelines.
- The home must be taxed as real property.
- You can move the home only from the dealer or manufacturer to the site.
- You must own or finance the site where the home will sit.
VA manufactured home loans
If you’re a veteran of the U.S. military, you can use your home loan benefit to finance a manufactured or modular home. The VA has many of the same requirements you’ve already read about. For example, the home must sit on a permanent foundation and it must be taxed as real property.
Additionally, the loan cannot exceed 95% of the manufactured home’s sales price. Keep in mind that the terms for VA-backed manufactured home loans are much different from traditional mortgages’.
Here is a breakdown of the VA’s maximum loan terms for manufactured homes:
- 20 years and 32 days for a single-family manufactured home and lot
- 23 years and 32 days for a double-wide manufactured home
- 25 years and 32 days for a double-wide manufactured home and lot
- 15 years and 32 days for a lot purchase if you already own the home
A chattel loan is one of the most common ways to finance mobile homes that sit on land-leased properties. Because you don’t own the land you lease, you can’t use a traditional mortgage because you can’t fix the home permanently to a foundation. Instead, your manufactured home falls under the designation of “personal movable property.” The term “chattel” actually refers to a personal possession or movable property other than real estate.
When you get a chattel mortgage for a manufactured home, the home acts more like personal collateral. The lender takes legal ownership of the “chattel”, which is the manufactured home. Once you pay off the chattel mortgage, you take back legal ownership of the home. Many banks specialize in chattel mortgages for mobile homes.
Retail installment contract
A retail installment contract is the most common method for financing a manufactured home, according to the United States Department of Housing and Urban Development. Many manufactured home retailers offer installment contracts that require you to pay the cost of financing directly to the retailer. Keep in mind this is not a traditional loan that would require you to pay the cost of financing a home to a third-party mortgage lender or bank.
You might need to make a down payment and pay closing costs — the requirements for these installment loans vary by retailer. Your income, credit score, debt-to-income ratio, collateral and other factors affect the terms of your loan.
How to finance a modular home
One of the key benefits of modular homes is they hold their value better than manufactured/mobile homes. Because most modular homes are permanently attached to a concrete foundation, they often appreciate in value just like traditional, single-family properties. Additionally, modular homes are built to high standards with many of the modern amenities single-family homes feature. For this reason, it’s easier to get a loan for a modular home using a conventional mortgage.
Visually, the difference between a modular home and a site-built home are minimal. Most modular homes qualify for the loan programs listed. To receive the same loan benefits you would from buying a single-family home, however, your modular home must be permanently affixed to a solid foundation and you can never move it again.
Where to find a lender for a mobile, manufactured or modular home
So, now it’s time to find a lender for your manufactured or modular home. Fortunately, there are several helpful links that can get you started.
- HUD offers a lender list search page that provides a breakdown of FHA-approved lenders — you just need to answer some simple questions.
- The Manufactured Housing Institute provides a lender search tool and a detailed list of lenders and manufacturers.
- Fannie Mae has a list of manufactured housing lenders if you can’t find what you’re looking for from the other links.
The bottom line
Remember that lenders charge different interest rates and loan terms — and just like it would with a traditional mortgage, your credit and your income affect how much you pay. It literally pays to shop around — make sure you check with a number of retail locations that sell manufactured homes. Most of the retail locations you visit will have a list of lenders they work with to help you finance your manufactured home. That doesn’t mean, however, that you have to settle for the first loan estimate you see from the retailer’s list of lenders.