Do FHA Loans Cover Manufactured Homes?
Understand how FHA loans apply to manufactured homes. Get insights into the specific conditions for approval and funding.
Federal Housing Administration (FHA) loans provide government-backed mortgage insurance, making homeownership more attainable. While often associated with traditional site-built homes, FHA loans can also finance manufactured homes, provided specific guidelines and criteria are met.
FHA Loan Eligibility for Manufactured Homes
FHA loans can finance manufactured homes, but eligibility depends on the home meeting federal standards. A “manufactured home” is defined as a dwelling built after June 15, 1976, in compliance with federal Department of Housing and Urban Development (HUD) standards. Homes built before this date are “mobile homes” and are not eligible for FHA financing.
Borrowers must occupy the manufactured home as their principal residence; FHA loans are not for investment properties or rental units. The home must also have a minimum living area of 400 square feet.
Two FHA loan programs exist for manufactured homes: Title I and Title II. The FHA Title I program finances the home, the lot, or both, even if the borrower leases the land. This program features shorter loan terms, up to 20 years for a home and lot combination, and has specific loan limits.
The FHA Title II program functions like a traditional mortgage, requiring the manufactured home to be permanently affixed to land owned by the borrower and classified as real property. Title II loans offer longer repayment terms, up to 30 years, and align with conventional FHA loan limits.
Manufactured Home and Property Requirements
To qualify for FHA financing, a manufactured home must have been built after June 15, 1976, and bear a HUD Certification Label. This red metal plate, found on the exterior of each section, indicates adherence to federal safety and construction standards. An interior data plate provides specifications like wind zone and roof load ratings. If the exterior label is missing, a Letter of Label Verification can be obtained from the Institute for Building Technology and Safety (IBTS) to confirm compliance.
For FHA Title II loans, the manufactured home must be permanently affixed to a foundation meeting FHA guidelines and local building codes. Foundation piers must rest on reinforced poured concrete footings below the frost line, constructed from solid materials.
A permanent, self-supporting perimeter wall or skirting, built on a concrete footing, must enclose the foundation, providing protection from vermin and water while allowing for an access opening. The home must also incorporate tie-downs anchored to the footings, and its tongue, axles, and wheels must be removed upon installation.
The land for the manufactured home must be owned by the borrower for Title II financing, as it treats the home as real property. Title I loans can accommodate leased land, but the lease needs to be long-term, three years or more, and include a provision for at least 180 days’ notice if terminated. The property must also have reliable access to FHA-approved utilities. An inspection and certification from a licensed professional engineer or registered architect, referencing HUD Publication 7584, is mandatory to confirm foundation compliance.
Borrower Qualifications and Loan Application
Securing an FHA loan for a manufactured home involves meeting specific borrower qualifications. Borrowers need a minimum FICO credit score of 580 for the 3.5% minimum down payment. A credit score between 500 and 579 requires a higher down payment of at least 10%. Individual FHA-approved lenders may require higher minimum credit scores, sometimes 620 or greater.
Lenders assess debt-to-income (DTI) ratios to determine ability to manage monthly mortgage payments. FHA guidelines recommend a housing-related DTI below 31% and a total DTI under 43%. Higher DTI ratios, up to 56.9%, may be accepted with compensating factors like excellent credit history, significant cash reserves, or stable employment. The 3.5% minimum down payment can come from personal savings, a financial gift, or approved down payment assistance programs.
The loan application process begins by identifying an FHA-approved lender. Borrowers complete a loan application, providing documentation of income, employment history, and financial assets. This includes pay stubs, tax returns, bank statements, proof of U.S. residency, and a valid Social Security number.
After application submission, the lender arranges for an FHA-approved appraiser to evaluate the home’s market value and verify compliance with FHA’s minimum property standards, including system functionality. For manufactured homes, this appraisal includes a specialized foundation inspection and certification.
The loan then proceeds to underwriting, where all information is reviewed to confirm borrower and property meet requirements. Upon successful underwriting, the loan is approved, leading to closing procedures involving signing documents and paying closing costs, typically 3% to 5% of the loan amount.
All FHA loans require mortgage insurance premiums (MIP): an upfront fee of 1.75% of the loan amount, and an annual premium paid monthly, which can continue for the loan’s duration depending on the down payment.