FHA Loans for Mobile Homes
Approval for a conventional mortgage on a stick-built home has requirements that not every borrower can meet. That doesn't have to stop you from beginning the homeownership journey, however.
The Federal Housing Administration understands the need to cater to all types of buyers. This government assistance allows hardworking Americans to have a place to call their own and start building the equity that can aid them in finding an even better home in the future. Learn the details about FHA mobile home loans.
Types of Homes
Many people believe modular, manufactured, and mobile homes are the same. While manufacturers of each category construct the units in a factory and deliver them to a site, the names technically refer to different structures. The FHA has different standards for each, and you should understand the difference to pursue the correct kind of loan.
Modular Homes
A modular home often looks no different than a traditional stick-built home. These buildings measure up to the same local, state, and regional building codes as site-built homes and qualify for conventional loans. Research programs for first-time homebuyers for FHA support when borrowing for these homes.
Manufactured Homes
Manufactured homes are factory-built homes meeting the Manufactured Home Construction and Safety Standards set by the U.S. Department of Housing and Urban Development. People often refer to manufactured homes as "mobile homes," but HUD prefers "manufactured homes." Once these houses are in place, they aren't very portable.
These homes hit the sweet spot of affordability without compromising safety. The structure is more durable than a mobile trailer home. The HUD code demands higher quality materials for these buildings, which come in single, double, or triple sections.
Manufactured homes often have a pier and beam foundation, but builders can set them over a traditional foundation with a crawl space or basement on private land. These "mobile homes" are frequently in mobile home parks where the owners rent the lot space.
Older Mobile Homes and Travel Trailers
Mobile homes built before June 15, 1976, do not meet HUD standards. People rightly call these mobile homes "trailers." The structure is similar to a camper or fifth wheel, and the builders constructed these units to be transportable. Travel trailers also do not qualify for mortgage lending, even if the owners use the vehicle for full-time RV living.
Mobile Home Loan Details
Though manufactured models can be much less expensive than a site-built home, securing a loan can be difficult. Lenders view traditional homes attached to a piece of land as a safer risk, so fewer banks and mortgagees provide loans for manufactured homes.
FHA Loan Options
The FHA offers loans for borrowers who:
Own their land
Purchase a place in a mobile home park and lease a lot
The FHA doesn’t provide the loans. Instead, the department insures the loans from approved lenders. If you default on the mortgage, the lender relies on the government to cover most or all of the remaining debt.
Home and Borrower Requirements
The floor space of a manufactured home cannot be less than 400 square feet. The dwelling must meet state and local guidelines and comply with the Model Manufactured Home Installation Standards. HUD requires a red label on each home section to demonstrate the residence meets MMHI requirements.
Borrowers must demonstrate enough income to cover the monthly mortgage after paying other expenses. Down payment starts at 3.5%, and you must pay mortgage insurance on the loan at the initiation and monthly for the life of the loan. The exception is if you put down at least 10%, the premiums terminate after 11 years.
Terms and Rates
The FHA only backs loans for a manufactured home up to $69,678 and will insure a loan on a lot up to $23,226, making the total you can borrow for an FHA-backed loan $92,904. Lot financing maxes out at 15 years and is 20 years for a home only or a single-wide home with a lot. If you purchase a double or triple-wide home and lot, you can secure a loan for as long as 25 years.
Different FHA-approved financial institutions may have additional stipulations. Rates and terms vary, so shop around for the best deal.
One way to find FHA-approved lenders in your locale is using the HUD Lender List Search page. If you purchase your home through a retailer or dealer, ask for recommendations from local lenders.
Other Options
Compare your FHA loan options with other government programs. The Department of Veterans Affairs backs loans with no money down and no mortgage insurance. The financing can cover a manufactured home loan and stick-built houses for veterans, active duty members, National Guard members, Reserve members, and surviving spouses.
USDA loans are another no-money-down option that allows you to buy a new manufactured home and site in a rural area. The financing can also cover the transportation and setup costs, making this loan a desirable source of funding if you can live outside the city.
Manufactured Home Advantages
One advantage to owning a home in a park is that you build equity in the building, though you don't own the land. Even if your home decreases in value, you can recoup some of what you paid into it. While renting, all you receive back is your deposit.
Manufactured homeowners living in mobile home parks where they do not own the land still qualify as first-timers for site-built homes. This means you can access grants and government assistance to transition to a stick-built or modular home when you're ready to own real property.
Trailer homes do not meet FHA standards, even with upgrades and modifications. Your only funding source could be another form of lending, such as a personal loan. Since these dwellings don't follow the stricter HUD safety guidelines, you're better off improving your finances to the point you can purchase a newer and safer manufactured home.
Additional Guidance for FHA Loans
Your homeownership dreams don't have to die if you can't qualify for a conventional home loan. The FHA has put securing financing for a mobile home within reach for many people. If you need more information about the FHA and the home buying process, subscribe to FHA Insider for regular updates and essential news.