Can I Finance a Manufactured Home?

Manufactured homes offer a more affordable path to homeownership than traditional site-built houses. Manufactured homes can be financed, though the process and available loan products differ from those for conventional real estate. This distinction arises primarily from how the home is legally classified—either as real property or personal property—which impacts the types of loans available.

Understanding Loan Types for Manufactured Homes

Financing a manufactured home involves understanding two main categories of loans: those that treat the home as real property and those that treat it as personal property. This classification determines the specific loan programs a buyer can pursue. The type of loan depends heavily on whether the manufactured home is permanently affixed to land the borrower owns or if it is located on leased land.

Real property loans, often structured as mortgages, are available when the manufactured home is permanently attached to land owned by the borrower. These loans include government-backed options like those from the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA), as well as conventional mortgages. Conventional financing, supported by entities like Fannie Mae and Freddie Mac, requires the home to be installed on a permanent foundation and titled as real estate. Conventional loans typically require a minimum credit score of 620 and a down payment of at least 3% to 5%, with mortgage insurance often necessary if the down payment is less than 20%.

FHA loans, specifically Title II, can finance both the manufactured home and the land together, provided the home is permanently affixed to the land and meets FHA and HUD standards. These loans are known for lower down payment requirements, often as low as 3.5% for borrowers with a credit score of 580 or higher, though a 10% down payment may be required for scores between 500 and 579. FHA Title II loans require the home to be built after June 15, 1976, with a visible HUD certification label. An upfront and annual mortgage insurance premium are typically required.

VA loans are a benefit for eligible veterans, active-duty service members, and surviving spouses, often featuring no down payment and competitive interest rates. For manufactured homes, a VA loan typically requires the home to be permanently affixed to a foundation on land owned by the borrower and classified as real property. The home must be built after June 15, 1976, and meet HUD code standards. While the VA does not set a minimum credit score, most lenders prefer a score of at least 620.

USDA loans, designed for eligible rural areas, can also finance new manufactured homes with zero down payment for qualified buyers. These loans require the home to be permanently installed on a foundation, be a double-wide or larger, meeting Federal Manufacturing Standards. The property must be located in a USDA-eligible area and meet minimum size requirements. Borrowers generally need a credit score of 640 or higher, and their household income must not exceed 115% of the area’s median income.

In contrast, personal property loans, commonly known as chattel loans, are used when the manufactured home is not permanently attached to land or when the land is leased. These loans treat the home as personal property, similar to a vehicle. Chattel loans are secured by the manufactured home itself, rather than by real estate. They are a common option for homes located in land-lease communities or manufactured home parks. Chattel loans typically have shorter terms and often with higher interest rates than traditional mortgages. These loans may have lower down payment requirements, as low as 5%, and a faster approval process.

Factors Influencing Financing Approval

Securing financing for a manufactured home depends on a combination of borrower qualifications and specific criteria related to the home itself. Lenders assess these factors to determine the level of risk associated with the loan.

Credit scores are a significant factor, with conventional loans generally requiring a minimum FICO score of 620. FHA loans are more flexible, accepting scores as low as 500 with a larger down payment, or 580 for a 3.5% down payment. VA loans look for a credit score of 620 or higher, while USDA loans often require a minimum of 640. Chattel loans may have a minimum FICO score of 575.

Debt-to-income (DTI) ratio is another important metric, representing the percentage of gross monthly income allocated to debt payments. Most loan programs prefer a DTI ratio of 43% or lower to ensure the borrower can manage monthly payments. Some chattel lenders may accept DTI ratios as high as 50%. Lenders also evaluate income stability and employment history, requiring income proof. Down payment expectations vary by loan type, from 0% for some VA and USDA loans to 3% to 5% for FHA and conventional loans, and potentially higher for chattel loans.

Manufactured home qualifications are equally important, particularly concerning the home’s classification as real or personal property. For real property loans (FHA Title II, VA, USDA, conventional), the home must be permanently affixed to a foundation, with its wheels and axles removed, and often titled as real estate. This permanent foundation must meet standards, such as those set by FHA or VA, and be designed to withstand natural forces.

The home’s age is also a factor. Most real property loans require the home to have been built on or after June 15, 1976. Compliance with HUD codes is verified by a red certification label or data plate on the exterior of each section of the home. Additionally, the home needs to meet minimum square footage requirements. Appraisals are a standard requirement, assessing the home’s value and ensuring it meets structural and safety standards.

Steps in Securing Financing

The process of obtaining financing for a manufactured home involves a series of sequential steps, guiding the buyer from initial financial assessment to the final closing.

Pre-qualification or pre-approval is a crucial first step, providing an early estimate of how much a buyer might be able to borrow. Pre-qualification offers a preliminary assessment of eligibility based on financial information, while pre-approval involves a more thorough review of financial documents, giving a stronger indication of loan approval and terms.

Once a buyer is ready to proceed, the formal loan application is submitted. This requires personal and financial documents. Commonly requested items include proof of identity, Social Security number, recent pay stubs, W-2 forms or tax returns, and bank statements to verify income and assets. Proof of funds is also required if a down payment is needed.

Following the application, an appraisal and potentially an inspection of the manufactured home will be ordered. The appraisal determines the home’s current market value to ensure it aligns with the loan amount, while an inspection assesses its condition and compliance with relevant codes and standards. For homes financed as real property, this includes verifying the permanent foundation and HUD certification.

The loan then moves into the underwriting phase, where the lender reviews all submitted documents and appraisal results. Underwriters verify income, credit history, debt, and property details to confirm that the borrower and the home meet all loan program requirements.

The final step is closing, where all parties sign legal documents. This includes the promissory note and the mortgage or security agreement. At closing, the down payment and any associated closing costs, which typically range from 2% to 5% of the purchase price, are paid. Once documents are signed and funds disbursed, the purchase is complete, and the buyer takes ownership.