Does an FHA Loan Cover Mobile Homes?

FHA loans, a government-backed mortgage option, can cover manufactured homes, but this financing comes with specific conditions. While not all manufactured homes will qualify, the Federal Housing Administration (FHA) provides avenues for homeownership in this sector. Understanding the eligibility criteria and loan structures is essential for prospective buyers.

Eligibility Requirements for Manufactured Homes

For a manufactured home to be eligible for FHA financing, it must meet several distinct property characteristics. A “manufactured home” under FHA guidelines refers to a dwelling built after June 15, 1976, adhering to the U.S. Department of Housing and Urban Development (HUD) Manufactured Home Construction and Safety Standards, and displaying a visible HUD certification label on each section. Homes constructed prior to this date, often referred to as mobile homes, generally do not qualify for FHA loans.

The manufactured home must be affixed to a permanent foundation. This foundation must be constructed of durable materials, designed to resist movement, frost heave, and wind uplift, and engineered to support the home’s structure. The home’s tongue, axles, and wheels used for transportation must be removed once it is placed on the site.

The home must be legally converted from personal property (chattel) to real property, ensuring it is taxed as real estate. The property must also be a single-family dwelling and have a minimum living area of 400 square feet. The manufactured home must be placed on land owned by the borrower or on a permanent leasehold interest that meets FHA requirements.

FHA Loan Terms for Manufactured Homes

Borrowers seeking an FHA loan for a manufactured home must satisfy general FHA financial qualifications. Credit score requirements are flexible, with some lenders accepting scores as low as 500 with a 10% down payment, though a score of 580 or higher typically qualifies for the lowest down payment of 3.5%.

Debt-to-income (DTI) ratios are evaluated to assess a borrower’s capacity to manage monthly payments. While many lenders prefer a DTI of 43% or lower, FHA guidelines can be more flexible, allowing ratios up to 50% or even 57% with compensating factors such as significant cash reserves or a large down payment.

All FHA loans, including those for manufactured homes, require mortgage insurance premiums (MIP). This includes an Upfront Mortgage Insurance Premium (UFMIP) of 1.75% of the loan amount, which can be paid at closing or financed into the loan. An annual MIP is also charged, typically ranging from 0.15% to 0.75% of the loan amount, paid in monthly installments. Loan limits for FHA manufactured home loans vary, depending on the specific program and whether the loan includes the land.

FHA Programs for Manufactured Home Financing

The FHA offers two distinct programs to finance manufactured homes, each with different scopes regarding land ownership: the Title I Manufactured Home Loan Program and the Title II Mortgage Insurance Program.

The Title I Manufactured Home Loan Program is designed for financing the manufactured home itself, often without requiring the borrower to own the land. This program can be used to purchase a new or used manufactured home, finance a site for the home, or even finance repairs or improvements. It permits placement on rented land, such as a lot in a manufactured home community, provided the initial lease term is at least three years and includes a notice period for termination. Title I loans have specific, lower loan limits compared to Title II, which vary based on what is being financed (home only, lot only, or home and lot combined). Loan terms for Title I are generally shorter, typically maxing out at 20 or 25 years, depending on the property type.

In contrast, the Title II Mortgage Insurance Program finances the manufactured home and the land as a single real estate transaction, akin to a traditional FHA mortgage for site-built homes. This program aligns with standard FHA mortgage terms and limits, which means higher loan amounts are generally available, reflecting the value of both the home and the land. The maximum loan amounts for Title II loans are subject to the FHA’s general loan limits, which are adjusted annually based on median home prices and can reach substantial figures in many counties. Title II loans typically offer longer repayment periods, often up to 30 years, providing lower monthly payments.

Applying for an FHA Manufactured Home Loan

The application process for an FHA manufactured home loan involves several procedural steps. First, find an FHA-approved lender experienced in manufactured home financing, as not all lenders offer these specific loan products.

Once a lender is chosen, the pre-approval process requires borrowers to submit financial documents to verify their income, credit history, and other relevant information. This includes providing income verification, credit reports, and details about existing debts. After pre-approval, borrowers can select a manufactured home and make an offer.

The selected home will then undergo an FHA appraisal and inspection to ensure it meets all HUD and FHA standards, including the permanent foundation requirements and overall structural integrity. An engineer’s certification for the foundation is typically required for this step. Following a successful appraisal and inspection, the loan proceeds to underwriting and final approval. The closing process then completes the transaction, transferring ownership and finalizing the loan.