How to Finance a Mobile or Manufactured Home: FHA & USDA Programs

Manufactured homes are a smart choice for homeowners looking to a newly built modern home with an affordable mortgage payment.

While the term “mobile home” is still used widely, these single, double and triple-wide prefabricated homes are now referred to as manufactured homes.

Can I Finance a Manufactured Home?

Yes, you can finance the purchase of a manufactured home. In fact, it can be much easier to get financing for a manufactured home than for a traditional frame house.

Getting a Loan from a Bank or Credit Union

If you own the land under your manufactured home, you are in luck. Banks, credit unions and other lenders usually require you to own the land in order to get a mortgage. In this case, financing a manufactured home is fairly similar to financing a traditional home. You’ll need a credit score in the mid-600s, a downpayment of 10-20% (as low as 3.5% with an FHA loan), and income that is roughly three times the the mortgage.

While 80% of manufactured homes are owned by their inhabitants, only 14% of those people also own the lot on which their unit is placed, according to Housing Assistance Control, a nonprofit organization that tracks affordable housing.

If you don’t plan on purchasing land for your manufactured home, you can still finance the purchase with a bank or credit union lender, but through a government program. There are government programs designed to help consumers get mortgages on manufactured homes, which account for 6% of the U.S. housing market. That’s almost 8 million homes.

Department of Agriculture Programs

It began in the New Deal when the government wanted to provide better homes for the rural population. Almost 44% of 622,000 farm houses did not have indoor water in 1934, and only 30% had electricity.

Housing assistance programs were geared toward on-farm housing, so they were placed under the USDA.

The best thing about a USDA loan (also known as a Rural Development loan) is that there is no down payment required. You are also allowed to finance 100% of the home’s appraised value.

The house must meet geographical requirements, but that doesn’t mean you have to live 20 miles from your nearest neighbor. About 97% of the U.S. land mass is USDA loan eligible, an area encompassing 109 million people.

Interest rates fluctuate with the market but are usually less than conventional loans. The downside to a USDA loan is a Guarantee Fee of 2% is added to the total loan amount, and an annual fee of .5% gets added to your monthly payment.

The minimum credit score to qualify is 640. And unlike traditional mortgages, you can be disqualified for making too much money. The maximum limit is 115% of the median income for the county or area you want to live in.

Check with your bank or credit union to see if they can help you with a USDA loan application for a manufactured loan.

Features of a USDA Manufactured Home Loan

  • No downpayment required
  • Can finance 100% of appraised value
  • Minimum credit score required: 650
  • Must meet geographic requirement: rural location
  • Can’t make 115% or more of county’s median income
  • Fees: 2% fee added to the total loan, and .5% to monthly payment

Federal Housing Administration Programs

If you exceed the USDA’s income limit, you should consider an FHA loan as they have no wage maximums. The FHA doesn’t actually give you money for house. It insures the loan, which entices lenders to finance mortgages since they are backed by the government.

It’s up to the homebuyer to find an FHA-approved lender and negotiate terms. There are three types of FHA loans and each has maximum limits.

  • If you’re buying the home and the land, the maximum mortgage is $94,904.
  • If you’re buying the home without the land, the maximum is $69.687.
  • If you already own the home and are buying just the land, the maximum is $23,226.

Loans typically are for 20 years or less. The minimum down payment is 3.5%, and all FHA loans are assumable. That means if you decide the sell your home, the buyer can just take over the payments. That’s a great feature if interest rates have risen since you got the mortgage.

Like a USDA loan, the biggest downside is mortgage insurance. The upfront premium is 1.75% and the monthly fee is .85%, which is divided equally into 12 installments per year.

As for credit, the score requirement varies from lender to lender, but the minimum score that will qualify for an FHA loan is 580.

Scores between 580 and 669 are considered fair. Anything below that is considered poor. But if you are in that range, don’t give up the dream.

There are programs designed to help financially strapped consumers with bad credit. Nonprofits like InCharge Housing Counseling have counselors who work to improve your credit and find out if you qualify for down payment assistance.

The bottom line is that if you want to own a home, a manufactured one might be the way to go. To get an FHA loan, find a bank, credit union or mortgage lender who works with FHA-loans.

Features of an FHA Manufactured Home Loan

  • Term is typically 20 years
  • Minimum downpayment: 3.5%
  • Maximum loan for home+land: $94,904
  • Credit score must be above 580
  • Future buyer can assume your mortgage at your interest rate
  • Fees: 1.75% of purchase price, monthly fee of .85%

Should I Buy a Manufactured Home?

The biggest lure is the cost. The average prices of a manufactured home is $71,300, while the average price of a site-built home sold in April of 2018 was $407,300, according to the U.S. Census Bureau.

The costs for manufactured homes varies  greatly depending whether it’s a single wide (about $40,000 for a new one), double-wide (about $75,000 new) or triple-wide ($100,000 and up).

Compared to traditional homes, they are decidedly less expensive. But contrary to that reputation, mobile homes are not necessarily “cheap” or worthy of being in a Hank Williams Jr. song.

In fact, they’re not even “mobile homes,” much less “trailers.” That term started in the 1920s as automobiles gained popularity. People would hitch small campers that “trailed” behind their cars.

The industry boomed in the 1930s. Trailers became larger and began being used as permanent residences.

The industry changed in 1976. New HUD rules mandated safer construction and installation standards.

In short, the wheels came off.

Nothing made after July 15, 1976 is classified as a “mobile home.” They officially became “manufactured homes.”

They are constructed in sections and delivered to the home site, where they are joined and set on a concrete foundation or block pillars. The improvements were apparent after three hurricanes hit Florida in 2004.

Manufactured homes have proven themselves as safe and sturdy during hurricanes. The state government said 12% of the manufactured housing was damaged or destroyed by the storms. But none of the modular homes built after 1994 were seriously damaged.

Sources

NA ND. Financing Manufactured (Mobile) Homes. Retrieved from:https://www.hud.gov/program_offices/housing/sfh/title/repair

NA (2017, September 1). Mobile Home Prices And The Average Cost Breakdown. Retrieved fromhttps://www.mobilehomesell.com/mobile-home-prices/

NA ND. FHA Loan Articles. Retrieved from: https://www.fha.com/fha_article?id=209

(Belden, J.) (ND). So Why Are Those Rural Housing Programs at USDA Anyway? Retrieved from: http://www.ruralhome.org/whats-new/blog-posts/609-rflns-rural-housing-programs-usda