Can You Buy a Mobile Home With a Conventional Loan?

Purchasing a manufactured home with a conventional loan is possible, but it has unique considerations compared to financing a traditional site-built house. Securing a conventional mortgage depends significantly on how the home is legally classified and permanently attached to its land. Understanding these conditions is important for buyers.

Understanding Mobile Homes and Conventional Loans

While “mobile home” and “manufactured home” are often used interchangeably, they have distinct legal meanings affecting financing. A “manufactured home” is factory-built after June 15, 1976, adhering to U.S. Department of Housing and Urban Development (HUD) standards. Older homes are “mobile homes” and typically do not meet current financing requirements.

A core distinction in financing manufactured homes lies in their classification as personal property or real property. Many are initially titled as personal property, like a vehicle, especially on leased land or if not permanently affixed. Real property includes land and anything permanently attached, like a site-built house. Conventional loans, not government-backed, are for real estate. Thus, a manufactured home must be legally converted from personal to real property to qualify for a conventional loan.

Qualifying for a Conventional Mobile Home Loan

To secure a conventional loan for a manufactured home, both the property and borrower must meet specific criteria, ensuring the home is treated as real estate. Lenders view manufactured homes as a greater risk than site-built homes due to potential depreciation and market challenges.

Property Requirements

A primary requirement for conventional financing is that the manufactured home must be permanently affixed to a foundation. This involves concrete footings, piers, or steel anchoring systems, with the tow hitch, wheels, and axles removed. The foundation must comply with local and state building codes. Lenders require a professional engineer’s certification to verify the foundation meets standards and is resistant to movement.

The home must undergo “de-titling” or “affixation,” converting its status from a vehicle to real property. This involves surrendering the original vehicle title and filing an affidavit of affixture with local county land records. This ensures the home is recorded as part of the land deed and taxed as real property, aligning it with a traditional house for lending.

The borrower must own the land, as conventional loans do not permit leased land. The home must meet age and condition standards, built after June 15, 1976, and possess a visible HUD Data Plate and Certification Label.

Lenders may also impose size requirements, such as a minimum width of 12 feet and a minimum square footage often ranging from 400 to 600 square feet. Some lenders may not finance homes older than 20 to 25 years. Any additions or renovations must be completed and adhere to HUD standards and local building codes.

Finally, the combined property, including the manufactured home and land, will undergo an appraisal to determine its market value. This appraisal assesses the home’s condition, compliance, and value in relation to comparable properties.

Borrower Qualifications

Borrowers seeking a conventional loan must meet standard financial qualifications. This includes a credit score of at least 620, though a higher score can lead to more favorable interest rates. Lenders assess the borrower’s debt-to-income (DTI) ratio, which must be below 45% to 50%, to ensure the borrower can manage monthly payments. Stable employment and verifiable income are also important.

Down payment requirements vary. While some programs, like Fannie Mae’s MH Advantage, allow down payments as low as 3%, a typical minimum is often 5% of the purchase price. If a down payment of less than 20% is made, private mortgage insurance (PMI) will be required.

Financing Options Beyond Conventional Loans

When a conventional loan is not feasible, other financing avenues are available, each with its own requirements and benefits. These alternatives provide more flexible options, especially for homes not meeting conventional mortgage criteria.

Government-backed loans are a common alternative, offering more accessible terms. Federal Housing Administration (FHA) loans, specifically Title II, are for manufactured homes permanently affixed to owned land and meeting FHA standards. These loans feature flexible credit score requirements, with minimums as low as 500 (10% down) or 580 (3.5% down). The home must have a HUD certification label and be at least 400 square feet.

For eligible veterans, VA loans offer another option for financing manufactured homes. VA loans can provide benefits, including no down payment. The manufactured home must be permanently affixed to a foundation, classified as real property, and meet VA and HUD construction standards. Most lenders prefer multi-wide units and do not finance single-wide homes or those moved from a previous location.

When a manufactured home is not permanently affixed to owned land, such as in a leased mobile home park, a chattel loan is often the primary financing option. Chattel loans treat the manufactured home as personal property, like an automobile, rather than real estate. These loans have shorter repayment terms (10-25 years) and higher interest rates than traditional mortgages. However, chattel loans feature an easier qualification process, with credit score minimums as low as 575, faster closing times, and fewer closing costs. Some lenders may also offer in-house financing or personal loans, though these are less common or may come with higher costs.