Unlocking the Secrets: How to Secure a Mortgage for Your Mobile or Manufactured Home

How to Secure a Mortgage for Your Mobile or Manufactured Home

Manufactured homes have become one of the fastest ways to have your own house at a more affordable price point. Over the decades, they have evolved from your usual trailers to more customizable properties with a variety of features, designs, and optional add-ons that really make it your own.

While the flexibility and accessibility make the purchasing decision easier, many wonder “Can you get a mortgage on a mobile home?” The answer is yes, but it may take a little more time to find the right options for you.

In this guide, we discuss the best-kept secrets on how to secure a mortgage for your manufactured home, choose the right financing option, and what the basic requirements are to get approved.

Understanding the Basics of Mobile Home Mortgage

A mobile home mortgage is not as accessible and widely offered compared to those for a site-built home. Before we dive into the specifics, let’s cover all the basics.

What Is a Manufactured Home Loan?

A manufactured home loan is money borrowed from a financial institution or organization. The amount should be used to buy a new or used manufactured home or renovate an existing one. The amount is borrowed at a specific interest rate and should be repaid within the terms agreed upon, which often includes monthly installments within a set number of years.

Differences Between Mobile Home and Traditional Home Mortgages

Differences Between Mobile Home and Traditional Home Mortgages

Despite the rapid growth in demand, mortgages for manufactured homes are not as easy to come by compared to those designed for traditional homes. Because manufactured properties come at a much lower cost than traditional houses and they tend to depreciate faster, financing options can be limited.

Many banks and lending companies opt not to offer a loan program to finance a mobile home mainly because of the general value the mobile home holds. Another reason is because of the unique conditions it has when it comes to owning land.

More often than not, manufactured homeowners only lease the land their house sits on, thus only requiring a loan for the structure itself. This can significantly limit the number of loan options available since traditional mortgages often include a clause stating that the home must be placed on a permanent foundation.

All things considered, the available mortgages for a mobile home purchase today are usually lower amounts with shorter terms compared to what you can get for a traditional house.

Types of Loan Options Available for Mobile Homes

If you are looking to get a loan for a mobile home, there are currently 6 different loan options available for a new manufactured home, and a used modular home, and some may be able to finance both the home and the land.

#1 FHA Loans

FHA Loans

Federal Housing Administration Loans, also known as FHA loans, are offered in two ways: Title I and Title II.

Title I loans are available for those who want to buy manufactured homes (used or new), refinance a manufactured home, buy a lot where your manufactured home will be placed, or buy a home and lot together. Title I loans are quite flexible with their terms, allowing individuals to also finance repairs and extensions.

Title II loans, on the other hand, have a little less wiggle room. This mortgage requires that the homeowner owns the land that the manufactured house sits on, it must be their primary residence and not just a second home, the floor area should be a minimum of 400 square feet, and that manufactured homes are built on a permanent foundation. The Title II loan is only applicable to finance both the home and land on which the manufactured home sits.

#2 Fannie Mae

Fannie Mae

Fannie Mae offers an MH Advantage program and those who fit the criteria can apply for a manufactured home mortgage. Some ways to qualify include installing a driveway to the home and a sideway connecting to the driveway or a detached garage. Qualified homes must also meet the necessary construction and design standards, as well as reach a certain level of energy efficiency.

#3 Freddie Mac

Freddie Mac

Freddie Mac also has its own program called Home Possible. Through the program, homeowners can get conventional financing via a fixed-rate mortgage of 15, 20, or 30-year terms, and either a 7/6 or 10/6 adjustable-rate mortgage.

#4 VA Loans

VA Loans

VA loans are insured by the Department of Veteran Affairs. These are only granted to individuals within the military community, including service members, National Guard, and reserve members. It’s important to note that to be eligible, you must complete the minimum active-duty service requirements as well. This mortgage loan can be used to purchase a manufactured home or finance the land to put the structure on.

#5 Chattel Loans

Chattel Loans

The specific purpose of chattel loans is to finance expensive vehicles. The loan may be used to buy a manufactured home, as well as planes, boats, and large farm equipment.

#6 Personal Loans

Personal Loans

Personal loans have the least number of requirements to check off in order to use them for a manufactured home. However, they often come with higher interest rates.

Choosing the Right Financing Options for Your Manufactured Home

With six options to consider, it can be overwhelming to weigh out all the pros and cons. Below, we give you a quick and straightforward guide to choosing the right financing option for your manufactured home that meets your needs.

Conventional Loans vs. Chattel Loans for Mobile Homes

Conventional loans for manufactured homes are offered by Fannie Mae and Freddie Mac. To qualify, the home must be placed on a permanent foundation, classifying it as real estate property. It must also meet the minimum size requirement of 12 feet wide and 400/ 600 square feet. Moreover, the borrower must own the land it sits on and have utilities connected to the home, and other conditions.

Chattel loans, on the other hand, have fewer prerequisites to consider. For one, the land is not tied to the loan, which can be beneficial for those who are only renting the land and do not have their structure sitting on a permanent foundation. Moreover, chattel loans offer faster processing times, similar interest rates, and require a lower down payment.

Exploring FHA and VA Loan Options for Manufactured Homes

FHA and VA are both insured by the government and serve as affordable alternatives to other loans. They are preferred by most low-income borrowers and those with mediocre credit scores. The three main differences between the two are:

  • FHA loans are available to the general public while VA loans are only for those who have served the country.
  • Unlike FHA loans, VA loans don’t require mortgage insurance. However, the latter has a funding fee instead.
  • VA loans do not require a down payment, while FHA loans come with a minimum down payment of 3.5%.

Advantages of Personal Loans for Mobile Home Financing

If neither of the 5 choices above matches up for you, perhaps personal loans are the best way to go. The advantages to using personal loans to finance the purchase of your manufactured home include:

  • They are generally faster to process.
  • They do not require home inspections, appraisals, or closing costs.
  • You are not required to own land.
  • There is no need for collateral.

What Lenders Look for in Mobile Home Financing

What Lenders Look for in Mobile Home Financing

Depending on the kind of loan you apply for, there will be certain requirements to gather and criteria you will have to meet. It is best to check your terms and conditions as these can vary based on the lender.

Requirements for Getting a Mobile Home Loan

While these do not apply to every single loan, some of the most common requirements to get a mortgage for your manufactured home include:

  • A good credit score
  • Minimum size of manufactured home
  • A down payment
  • Must adhere to HUD code
  • Some require the home on a permanent foundation
  • Some require you to own the land the home is placed on

The Role of Credit Scores and Loan Terms in Mobile Home Loans

Your credit score can play a huge role in the conditions of your mortgage. In fact, it’s significant enough to get your application for a loan denied should your credit score not meet the lender’s standards. This is because lenders need to have ample proof that you are financially capable enough to pay back the money you owe in a timely manner.

Even loans backed by the government, which are designed for low-income households, will require a minimum credit score. Those averaging a higher credit score can benefit from lower down payment rates and better loan terms.

Why the Manufactured Home Must Meet Specific Standards

Manufactured homes that meet certain standards are regarded to be more durable, of higher quality, and practical enough for the lender to loan a certain amount. These are standards set by both the lender and the Department of Housing and Urban Development.

Buying a Mobile Home: Understanding the Process

Buying a Mobile Home

With enough information on your financing options and the need for a positive credit score, it’s time to take the first steps into purchasing your manufactured home.

Steps to Finance a Mobile or Manufactured Home

Step 1: Review your financial situation

Your first move should be to check your credit score and if it needs improvement. Also take a look at your income, and how your savings are looking, and optimize these in a way that can get you better loan terms.

Step 2: Research lenders and their loan offerings

Know the specifics of your chosen manufactured home and research lenders where it fits the criteria. This should narrow down your list enough for you to compare the different terms, interest rates, down payment required, and others. Also, look into their customer reviews to ensure they are a trustworthy company.

Step 3: Get prequalified

If you are eligible for multiple loan types by different lenders, get prequalified. This puts you at an advantage to negotiate for better terms.

Step 4: Review offers

Once you gather the final offers, compare each of them, taking into consideration your financial priorities and deciding which one is most beneficial for your situation. In this step, calculate the total cost of the loan, including any closing costs, insurance, interests, and fees.

Step 5: Submit an application

If you have found your winning loan offer, submit a final loan application complete with all necessary documents.

Considerations for the Mobile Home Community or Lot

If you do not have land of your own, you may want to consider a manufactured home community or mobile home park. Here’s a short list of all things to consider:

  • Monthly rental cost
  • Rules and regulations of each park
  • Amenities within the park
  • Check if there are any health or safety issues in the area such as ample disposal bins, drainage systems, street lights, security staff, and so on
  • Whether or not the park grounds are clean and organized
  • Whether or not the park has a good history of keeping homes filled
  • If the management has been accommodating and communicative
  • History or pattern of lease rate increases in recent years

Pros and Cons of Financing a Manufactured Home

Pros and Cons of Financing a Manufactured Home

Financing a manufactured home, or all types of homes for that matter, has its advantages and drawbacks. Some little-known benefits of getting financing for manufactured homes are that it boosts your credit score over time, there is a chance of getting a tax benefit through mortgage debt, and you can use some of your existing money for other investments.

However, some drawbacks include incurring debt, paying interest, and in some cases, paying more over time.

The alternative to getting a loan on a manufactured home is to pay it all in cash. Unless you have hundreds of thousands of extra cash in the bank, this can evidently be difficult to pull off.

Benefits of Owning vs. Renting a Mobile Home

Whether you opt to rent a manufactured home or purchase it as your own, you can expect a set of pros and cons. In some instances, you can even own the home itself yet rent the land it is placed on, making manufactured home living very versatile.

If you are on the fence about which way to go about it, here are some advantages to owning instead of renting:

Owning a mobile home and renting the land:

  • No need to prepare the land
  • Control over home improvements
  • Builds equity
  • Less expensive compared to also purchasing the land
  • Community

Owning both the mobile home and land:

  • Builds most equity
  • Full control over home improvements, including expansions and lawn upgrades
  • No restrictions from landlords

Challenges in Securing Loans for Manufactured Homes

The most evident challenge to securing loans for a manufactured home is limited financing options. Many conventional mortgage lenders are usually too hesitant to provide financing for mobile homes, which drives the market towards a few specialized manufactured home lenders. This includes credit unions and home manufacturers.

Other challenges are:

  • Higher interest rates compared to financing traditional houses
  • Shorter loan terms, typically needing to pay in full in a shorter period of time
  • Stricter age and condition restrictions
  • Some lenders require land ownership and for the mobile home to be permanently affixed on top of the land
  • Insurance costs are typically higher than those of traditional mortgages
  • Manufactured homes depreciate faster than traditional houses

Making an Informed Decision: Is a Mobile Home Right for You?

Is a Mobile Home Right for You?

Mobile home life can seem liberating to some, while others find it less than appealing. How do you know if it’s right for you?

If the budget is tight, purchasing a mobile home is more affordable than a single-family traditional home. Despite this, mobile homes can still be very spacious and packed with all the necessary amenities. Especially if you live in a more expensive state, purchasing a manufactured home and renting land could be an easier way to get your own property. Moreover, most manufactured homes are not affixed to a permanent foundation, giving you the freedom to move around as you please (at a cost).

On the downside of things, mobile homes tend to depreciate faster than traditional ones. It can also be difficult to find the best financing options.

Frequently Asked Questions About Mobile Home Loans

Can You Refinance a Mobile Home Loan?

You can refinance a mobile home loan if the structure is permanently affixed to a foundation.

What Are the Down Payment Requirements?

The down payment requirements of mobile home loans vary on the lender, often ranging between 3.5% to 10%, depending on one’s credit score.

Are There Government Programs Available for First-Time Mobile Home Buyers? 

Yes, the FHA loan is a government-backed mortgage designed for low-income households and first-time mobile home buyers alike.

Why is it hard to get a mortgage on a mobile home?

Mobile homes depreciate faster than traditional houses and are also often considered personal property rather than real property, which plays a huge role in whether or not you can get a mortgage on a mobile home.

What is the oldest mobile home that can be financed?

Manufactured homes built after the HUD standards are the oldest ones that can be financed, on top of age and condition restrictions.

Who is the best lender for manufactured homes?

The best lender for manufactured homes depends on your needs and eligibility. Compare offers from several lenders to see who fits your situation best.

How to buy a mobile home with no money down near me?

The best way to buy a mobile home with no money down is through USDA Rural Development Loans, unsecured personal loans, VA loans, and several leasing options.

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