Can I Get a Loan for a Manufactured Home?

Manufactured homes, factory-built residences constructed to specific federal standards, offer an accessible path to homeownership. These homes, built to the U.S. Department of Housing and Urban Development (HUD) Code since June 15, 1976, arrive at their site in one or more sections on a permanent chassis. They are distinct from older “mobile homes” built before the HUD Code, which are generally ineligible for many financing options. Obtaining a loan for a manufactured home is possible, but the financing options and requirements can differ from those for traditional site-built homes.

Types of Manufactured Home Loans

Several avenues exist for financing a manufactured home, each with distinct characteristics depending on whether the loan covers the home only or both the home and the land. These options include government-backed programs and conventional financing.

Federal Housing Administration (FHA) loans offer two primary programs for manufactured homes: Title I and Title II. FHA Title I loans can finance the manufactured home itself, a lot, or both the home and lot. These loans are flexible, allowing the home to be placed on leased land, and typically have loan terms up to 20 years for a home or home and lot. FHA Title II loans, conversely, require the manufactured home to be permanently affixed to land owned by the borrower and classified as real estate. Title II loans often provide more traditional mortgage terms, including lower interest rates and longer repayment periods, and are subject to standard FHA loan limits for single-family homes. For FHA loans, the home must meet HUD certification standards and typically be at least 400 square feet.

Veterans Affairs (VA) loans provide benefits for eligible veterans, active-duty service members, and some surviving spouses looking to purchase a manufactured home. While VA loans are known for often requiring no down payment on traditional homes, a minimum down payment, often around 5%, may be required for manufactured homes. To qualify, the manufactured home must be permanently affixed to a foundation, considered real estate under state law, and meet VA and HUD requirements, including typically being at least 700 square feet.

Conventional loans, offered by private lenders and not backed by a government agency, are also available for manufactured homes. These loans often require the home to be permanently affixed to owned land and meet specific construction standards set by entities like Fannie Mae and Freddie Mac. Requirements typically include the home being at least 400 to 600 square feet and having a HUD Data Plate and Certification Label. Conventional loans generally require a minimum down payment, often starting from 3% to 5%, and may necessitate private mortgage insurance (PMI) if the down payment is less than 20%.

Chattel loans are a distinct financing option, primarily used when the manufactured home is purchased as personal property, often on leased land in a manufactured home community. Unlike mortgages, which are secured by real estate, chattel loans are secured only by the home itself. These loans typically feature higher interest rates, often ranging from 8% to 14%, and shorter repayment terms, commonly 15 to 25 years, compared to traditional mortgages. They offer flexibility for leased land and can have faster approval processes with lower down payment requirements, such as 5%. However, interest rates are higher to compensate lenders for the increased risk associated with financing movable property.

Eligibility and Application Requirements

Lenders evaluate various factors to determine eligibility and loan terms for a manufactured home loan. A borrower’s credit score is a significant factor in loan approval and influences the interest rate offered. Many lenders prefer a credit score of at least 620 for conventional manufactured home loans, although government-backed loans like FHA and VA programs may accept lower scores, sometimes as low as 580 or even 500 with a larger down payment. A higher score generally leads to more favorable loan terms and lower interest rates.

Lenders also assess income and employment stability to ensure a borrower’s ability to repay the loan. This involves verifying consistent income and a stable employment history over a period of time. The debt-to-income (DTI) ratio is another important metric, calculated by dividing total monthly debt payments by gross monthly income. Most lenders prefer a DTI ratio of 43% or lower, indicating sufficient income to cover existing debts and new loan obligations.

Down payment requirements vary by loan type, but preparing funds for this upfront cost is necessary. FHA loans may require as little as 3.5% down, while conventional loans often start at 3% to 5%, and some VA loans for manufactured homes may require a minimum of 5% down. Saving for a larger down payment can reduce the loan amount, potentially leading to lower monthly payments and reduced overall interest costs.

To streamline the application process, prospective borrowers should prepare a comprehensive set of documents, including:

• Personal identification, such as a driver’s license or Social Security card.
• Proof of income, like recent pay stubs, W-2 forms, or tax returns for self-employed individuals.
• Bank statements and other asset documentation to verify savings and financial stability.
• Information specific to the manufactured home, such as its make, model, year, Vehicle Identification Number (VIN), HUD tag number, and proof of title or ownership.
• If land is involved, documentation like the deed, land survey, and proof of permanent foundation installation.

Loan Process and Closing

The process of securing a manufactured home loan involves several stages, with specific actions by both the borrower and the lender.

The process begins with the formal submission of the loan application and all prepared documents to the chosen lender. Following submission, the application enters the underwriting phase, where the lender’s underwriting team thoroughly reviews all provided information. This review assesses the borrower’s financial risk and verifies the accuracy of the submitted details.

A crucial step in the underwriting process involves an appraisal and inspection of the manufactured home and, if applicable, the land. The appraisal determines the property’s current market value, ensuring it aligns with the loan amount, while inspections confirm the home meets loan program standards, such as being permanently affixed to a foundation and complying with HUD regulations. For VA loans, a structural engineer’s report may be required to confirm foundation compliance.

Upon satisfactory completion of underwriting and appraisal, the loan moves towards approval. The lender will issue a loan approval, often with specific conditions that must be met before closing. These conditions might include providing additional documentation, addressing property repair requirements, or fulfilling specific financial stipulations.

The final stage is the loan closing, often referred to as settlement. During closing, the borrower signs all the necessary legal documents to finalize the loan, including the promissory note, which outlines the terms of repayment, and a mortgage or deed of trust for real estate loans. For chattel loans, a security agreement is signed. Borrowers will also pay any required down payment and closing costs, which can include fees for appraisal, title services, and loan origination, typically ranging from 2% to 5% of the loan amount. A Closing Disclosure, detailing all final costs and loan terms, is provided to the borrower at least three business days prior to closing. After all documents are signed and funds disbursed, the transaction is recorded with the appropriate county office, officially transferring ownership and establishing the lien.