Does FHA Cover Mobile Homes?
Explore FHA loan eligibility for manufactured homes. Understand the nuanced requirements for both the property and the borrower.
The Federal Housing Administration (FHA) offers mortgage insurance on loans made by FHA-approved lenders. These government-backed loans feature more flexible qualification standards compared to conventional mortgages. FHA loans can finance manufactured homes, which are dwellings built to federal standards.
FHA Loan Eligibility for Manufactured Homes
FHA loans, specifically through their Title I and Title II programs, can facilitate the purchase of manufactured homes. A manufactured home is a dwelling built in a factory on a permanent chassis, designed to be transported, and built to the U.S. Department of Housing and Urban Development’s (HUD) Manufactured Home Construction and Safety Standards (HUD Code). This means the home must have been built on or after June 15, 1976, when these federal standards were implemented.
Title II loans require the manufactured home to be permanently affixed to land owned by the borrower, treating the home and land as a single piece of real estate. These loans are subject to standard FHA loan limits and terms. Title I loans finance the home itself or a home and lot where the land might be leased. Title I loans typically have shorter repayment terms, such as up to 20 years for a home and lot, and lower loan limits.
Qualifying Property Standards
A manufactured home must meet specific physical and legal requirements for FHA financing. The home must be placed on a permanent foundation that adheres to FHA and HUD standards, engineered and inspected to withstand natural forces. A certification from a licensed professional may be required to confirm the foundation’s compliance.
The manufactured home must possess a HUD certification label, or HUD tag, affixed to the exterior of each transportable section, indicating compliance with the HUD Code. The home must also have a minimum living area of at least 400 square feet and be used as a single-family dwelling.
For Title II loans, the manufactured home must be on land owned in “fee simple” by the borrower, establishing it as real property. This means the home and the land are financed together. The property must also have access to essential utilities such as water, electricity, and sewer systems.
Borrower Qualification Criteria
Applicants for an FHA manufactured home loan must meet specific financial criteria. A credit score of at least 580 is required for the minimum 3.5% down payment. Borrowers with credit scores between 500 and 579 may be eligible but need a larger down payment, often around 10%. Individual lenders may set higher minimum credit score requirements.
The debt-to-income (DTI) ratio is another factor. FHA guidelines suggest a front-end DTI ratio of up to 31% and a back-end DTI ratio of up to 43%. Lenders may approve higher DTI ratios if the borrower has compensating factors. Applicants must also demonstrate stable income and consistent employment history, typically for at least two years.
The manufactured home must serve as the borrower’s primary residence. FHA loans require two types of mortgage insurance premiums (MIP): an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). The UFMIP is a one-time fee, currently 1.75% of the loan amount, which can be paid at closing or financed. The annual MIP is paid monthly and varies based on factors like the loan amount, term, and down payment.
The FHA Manufactured Home Loan Application Process
Securing an FHA manufactured home loan begins with finding an FHA-approved lender specializing in these properties. Obtaining pre-approval is a practical step, determining the maximum loan amount you qualify for. After pre-approval, the full loan application is submitted with necessary documentation such as proof of income, employment history, and credit details.
An FHA-approved appraiser will conduct an appraisal and inspection to ensure the home meets FHA property standards and verifies its value. This inspection confirms compliance with HUD standards, including the permanent foundation and HUD certification labels. The loan then enters the underwriting phase, where the lender reviews documentation for approval. The process concludes at closing, where loan documents are signed and funds disbursed.