Does FHA Cover Manufactured Homes?

The Federal Housing Administration (FHA) provides mortgage insurance on loans from FHA-approved lenders, helping individuals finance manufactured homes. FHA financing depends on whether the home is classified as personal property or real estate, a distinction important for understanding applicable loan types.

Types of FHA Loans for Manufactured Homes

The FHA offers two primary loan programs for manufactured homes: Title I and Title II. These programs address different financing needs based on the home’s attachment to the land, and understanding them is important for potential buyers.

FHA Title I loans finance manufactured homes, or homes with their lots, when not permanently affixed as real estate. This loan type is for personal property, similar to a chattel loan. Title I loans have specific limits and are often used for homes on leased land or land not yet converted to real property.

FHA Title II loans are for manufactured homes considered real property. The home must be permanently affixed to a foundation on a permanent lot the borrower owns. Title II loans function similarly to conventional mortgages, allowing longer terms and higher amounts. This program finances both the manufactured home and land as a single real estate transaction.

Property Requirements for FHA Financing

Manufactured homes seeking FHA financing must meet specific property criteria for safety, durability, and legal standards. The home must have been constructed on or after June 15, 1976, and comply with HUD Manufactured Home Construction and Safety Standards (MHCSS), evidenced by a HUD tag on each section.

For a Title II FHA loan, a manufactured home must be placed on a permanent foundation meeting FHA guidelines. This foundation must be engineered and inspected to withstand environmental factors like frost heave and seismic activity, ensuring stability. The home must be permanently affixed to this foundation and land, preventing easy removal, which classifies it as real property.

For Title II financing, the manufactured home and land must be legally titled as real property in the local jurisdiction. This conversion involves recording the home’s title with the land records office, similar to a traditional home. The home must also have direct access to a public or private road and be connected to essential utilities (water, sewer, electricity) that meet local codes and are fully functional.

An FHA-approved appraisal determines the market value of the manufactured home and land combined, ensuring the property value supports the loan amount. All wheels, axles, and towing hitches must be removed once the home is installed on its permanent foundation, signifying its transition to a permanent dwelling.

Borrower Eligibility for FHA Manufactured Home Loans

Securing an FHA loan for a manufactured home requires borrowers to meet specific eligibility criteria, aligning with general FHA mortgage guidelines. Lenders assess financial stability to ensure mortgage obligations can be managed. A credit score is important, with most FHA loans requiring a minimum of 580 for a 3.5% down payment. Scores between 500 and 579 may qualify but often need a larger down payment, typically 10%.

A borrower’s debt-to-income (DTI) ratio is evaluated, comparing monthly debt obligations to gross monthly income. FHA guidelines require housing expenses (front-end ratio) not exceeding 31% of gross income and total debt obligations (back-end ratio) not exceeding 43%. Lenders may offer flexibility based on compensating factors like cash reserves or a higher credit score. Borrowers must also demonstrate a stable employment history, typically two years in the same line of work or a consistent income source, to show reliable repayment capacity.

FHA loans have low down payment requirements, currently 3.5% of the home’s purchase price. This makes homeownership more accessible. Borrowers must also pay Mortgage Insurance Premiums (MIP), including an upfront premium (UFMIP) and an annual premium. The UFMIP is a one-time fee, often financed into the loan; the annual MIP is paid monthly as part of the mortgage payment.

The manufactured home financed with an FHA loan must serve as the borrower’s primary residence. Borrowers must be U.S. citizens, permanent resident aliens, or eligible non-citizens with valid Social Security numbers. These requirements ensure the borrower qualifies for FHA mortgage insurance.

Application Process for FHA Manufactured Home Loans

Applying for an FHA loan for a manufactured home begins with identifying an FHA-approved lender. It is beneficial to seek lenders with specific experience in financing manufactured homes, as they are familiar with the unique requirements and paperwork. These specialized lenders can guide borrowers through the process.

After selecting a lender, obtain pre-approval. This provides an estimate of how much can be borrowed, helping set a realistic budget and streamline the home search. This stage involves submitting initial financial documents for a preliminary review of creditworthiness and income stability.

Once pre-approved, borrowers select a manufactured home and secure a purchase agreement. The lender will then require various documents to process the loan application, including recent pay stubs, W-2 forms from the past two years, bank statements, and tax returns. Property-specific documentation, such as the home’s serial numbers and proof of HUD standards compliance, will also be collected.

An FHA-approved appraisal and inspection will assess the home’s value and condition, verifying it meets all FHA property requirements like permanent foundation and real property titling. The loan application then moves into underwriting, where the lender reviews all submitted documentation and the appraisal for a final lending decision. Upon approval, the process culminates in loan closing, with documents signed and funds disbursed, transferring ownership to the borrower.