Do USDA Loans Cover Mobile Homes?

The U.S. Department of Agriculture (USDA) offers home loan programs to assist low-to-moderate income individuals in purchasing homes in eligible rural areas. Administered by USDA Rural Development, these loans are often attractive due to their favorable terms, including no down payment requirements.

Understanding USDA Loan Coverage for Mobile Homes

USDA loans cover certain factory-built housing, specifically manufactured homes, but not traditional mobile homes. The distinction lies in construction standards and permanence. Homes built before June 15, 1976, are mobile homes and do not qualify for USDA financing because they predate federal construction and safety standards set by the Department of Housing and Urban Development (HUD). Manufactured homes, constructed after this date, must adhere to these rigorous HUD codes, ensuring specific standards.

For a manufactured home to be eligible for a USDA loan, it must be classified as real property, permanently affixed to a foundation. This contrasts with personal property, which retains its wheels and chassis and is not eligible for USDA financing. The foundation must be permanent, meeting FHA/HUD-compliant standards. The towing hitch, wheels, and axles must be removed from the manufactured home to signify its permanent installation.

Borrowers must own the land where the manufactured home is located, as USDA loans are not available for homes placed in mobile home parks or on rented lots. The property must also be situated in a USDA-eligible rural area. The manufactured home needs to have a manufacture date within 20 years of the loan closing date, although for new homes, it must be built within 12 months of the loan closing and never previously occupied.

The home must meet general appraisal standards, confirming structural soundness. Manufactured homes must have at least 400 square feet of living space. Most single-wide manufactured homes are excluded, with eligibility limited to double-wide or larger multi-section homes, though this can vary by lender. Permanent utility connections for water and waste disposal are required, and the home must have a certificate of occupancy.

The Application and Approval Process

Securing a USDA loan for an eligible manufactured home begins with finding a USDA-approved lender. Work with lenders experienced in financing manufactured homes, as they are familiar with the specific property requirements and documentation involved. These lenders can guide applicants through the pre-qualification and application stages, which involve assessing income, credit score, and financial stability. While the USDA does not set a minimum credit score, most lenders require a score of at least 640.

Applicants will need to gather a range of documentation, including income verification and credit history. Specific to manufactured homes, additional documents are required to prove eligibility. This includes certification that the home was built to HUD code, evidenced by a HUD certification label or data plate. Proof of the home’s conversion to real property status and certification of its permanent foundation installation are also required.

An appraisal and inspection are crucial steps in the process, ensuring the manufactured home meets USDA and lender standards for value and condition. The appraisal confirms the property’s market value, while the inspection verifies its structural integrity and adherence to safety requirements. After the initial assessment by the lender, the loan application enters the underwriting phase, where the lender thoroughly reviews all documentation and verifies compliance with USDA guidelines.

The USDA loan approval process involves a two-step review: first by the lender and then by the USDA Rural Development office. This additional step can sometimes extend the overall timeline compared to other mortgage types, though the USDA review typically takes a few days to a week. Once both the lender and the USDA grant approval, the loan moves to the closing phase. During closing, all final documents are signed, funds are disbursed, and property ownership is transferred, typically within 30 to 45 days from the initial application.