Manufactured homes are considered a different product entirely when it comes to lending and insurance. They are a much more affordable solution for homeownership, however, so they remain a popular choice for many. If you’re thinking about investing in a manufactured home, this guide will tell you everything that you need to know about lenders, rates, and how you can qualify for a loan.
What Is a Manufactured Home Loan?
According to classifications, there are three categories of non-traditional homes in this group:
- Manufactured homes
- Mobile homes
- Modular homes
For the sake of this guide, we’ll specifically be discussing manufactured homes. These homes can be financed by a few different programs or types of loans, including those from the FHA (Federal Housing Administration) and VA (Veterans Administration).
A manufactured home loan is available as a:
- Retail installment contract
- Title I Loan through FHA
- VA loan
- Fannie Mae MH Advantage Mortgage
- Freddie Mac manufactured home insurance and loan
Title I Loans have specific loan limits based on the conditions of the loan. At the time of this writing, those are as follows:
- Home Only: Max 20-year loan, $69,678 maximum loan amount
- Lot: 15-year term maximum, $23,266 maximum amount for loan
- Home and Lot: $92,904 maximum loan with maximum 20-year term
As the quality and popularity of manufactured homes continue to grow, lenders are continuing to expand their financing solutions. Because many manufacturers build these homes with energy-efficient upgrades and luxury features, more lenders are willing to invest in them for those who need a more affordable housing solution.
There are several financing options available.
Modular Home Loan Requirements
Although the various rules and specific guidelines vary depending on the circumstances of your loan and financing needs, there are some standard requirements from each loan type or lending program that you can expect to have to follow or adhere to in order to qualify.
Retailer Installment Loan
This is the most common financing for manufactured homes today. It works much the same as “buy here, pay here” financing for a car or furniture– you pay the monthly installment payment directly to the manufactured home retailer that you purchase the home from. There is no third-party bank or mortgage lender, but the same factors are used to consider your application:
- Credit score
- Debt-to-income ratio
- Other factors
Fannie Mae Modular Home Loans
Fannie Mae has a program that has a lot more requirements and rules to consider. For starters, single-wide mobile homes are not eligible and homes must be at least 12 feet wide. They must also be a minimum of 600 square feet. There must be a permanent concrete foundation and it must be titled with the land, which you must own. Mortgage insurance needs to be held and homes will only qualify if they are manufactured by participating brands with an MH Advantage seal of approval.
Freddie Mac Home Loans
Like Fannie Mae, Freddie Mac has a few different extra requirements. You have to own the land and it must be taxed as “real property”, for starters. This program will allow single-wide homes, but only when they are in a planned development. Homes must be HUD-certified and permanently installed, and properties built before 1976 do not qualify. Freddie Mac will not fund investment properties and requires a 5% down payment that comes from your personal funds. There are 7/1 and 10/1 adjustable-rate mortgages available in this program, as well.
FHA Title I Home Loans
For these loans, you can only have a single-family dwelling that you are using as a primary residence. It must also be considered real property and classified as real estate. It can only be transferred from the manufacturer to the permanent site, and then it must be permanently installed. The HUD seal must also be affixed to the building and there are maximum loan amounts and terms to consider. Those with a credit score below 500 will need a 10% down payment while those with a score over 500 will need to put down 5%.
USDA Manufactured Home Loans
The USDA isn’t just for farms. As long as a manufactured home is in a rural area, it may qualify for this type of financing. The home has to be less than a year old and more than 400 square feet. It also has to sit on a permanent foundation and be taxed as real property. The site must be owned or financed (not rented) and the home can only be moved from the manufacturer to the lot. These loans do offer up to 100% financing for some applicants.
VA Modular Home Loans
For veterans and their eligible family members, VA loans can finance up to 95% of the sale price. Many of the same requirements apply as those for FHA and other loans, such as the home being located on real property that you own or finance. There are different programs available, but the basic offerings from the VA include:
- Single-Family Home and Lot: 20 years, 32 days
- Double-Wide Home: 23 years, 32 days
- Double-Wide Home and Lot: 25 years, 32 days
- Lot Purchase Only: 15 years, 32 days
How to Choose the Best Financing
The financing options can be a bit confusing for manufactured homes, but it’s not something that you have to stress about. If you take the time to sit down and talk to an experienced financial professional, you’ll learn everything that you need to know. Make sure that you work with people who understand the nuances and unique nature of manufactured home financing so that you get the right information and best financing solutions.
You can also visit the Manufactured Housing Institute for a list of lenders and manufacturers, or the HUD website, which also lists FHA-approved lenders. You will find different rates and terms from one lender to another, and based on your financial details, as you would with any loan. However, the terms discussed here are the ones that you need to be aware of so that you have an easier time financing your new home.
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