If you want to become a homeowner by purchasing a manufactured home, you’ll find several options. Let’s explore each one and the pros and cons that come along with them.
Conventional Loans
Most lenders won’t give you a conventional loan for a mobile or manufactured home. That’s because these structures aren’t considered real property. Rocket Mortgage offers conventional loan financing on manufactured homes that have been permanently attached to land and converted to real property. If you have a manufactured home that meets these criteria, conventional conforming loan sources Freddie Mac and Fannie Mae offer specialized loans.
Fannie Mae Mobile Home Loan Options
While not all lenders finance permanent manufactured homes, some may offer Fannie Mae’s MH Advantage® program, which allows buyers to finance manufactured homes with loan terms of 30 years and down payments as low as 3%. To qualify, your home will need to fit specific criteria. For instance, the home must be at least 12 feet wide and have a minimum of 600 square feet. It also can’t be on leased land.
Freddie Mac Mobile Home Loan Options
Freddie Mac also offers conventional loans for manufactured homes if they meet certain requirements. These requirements are similar to Fannie Mae’s – the home must be built on a permanent chassis, be considered real property and have at least 400 square feet of living space.
The Federal Housing Administration (FHA) offers home loans with fixed interest rates and fairly relaxed credit, debt-to-income ratio and down payment requirements. FHA loans are popular with first-time home buyers. The FHA also offers manufactured home loans called Title I and Title II loans.
Title I Loans
Title I loans can be used to purchase manufactured homes but not the land on which they sit. There are a few stipulations, such as:
The property must serve as your main residence.
The home must satisfy FHA guidelines before being placed on a rental site.
The home must be connected to utilities.
These loan programs tend to have short terms (typically up to 20 years) and low loan limits.
Title II Loans
Title II loans can be used to simultaneously purchase a manufactured home and the land it sits on. You can’t rent land from a mobile home park or manufactured home community. A real property loan requires that the land is yours.
Only true manufactured homes – the ones built on or after June 15, 1976 – can qualify for this type of financing. These loans also require that the manufactured home in question counts as real property and meets FHA standards for permanent foundations on manufactured homes.
If the home you’re considering meets the minimum requirements, it might be easier to qualify for an FHA loan. You’ll be able to get the loan without having to make a large down payment and may even save money on interest compared to other financing options.
VA Loans
If you want to buy a manufactured home and the land it sits on, another potential option is a VA loan, which is a government loan insured by the Department of Veterans Affairs. VA loans are only available to qualifying veterans and qualifying active-duty service members, as well as surviving spouses and members of the National Guard and U.S. Army Reserve who all meet certain eligibility requirements. With a VA loan, you won’t have to make a down payment or pay mortgage insurance, which is required of those who make a down payment of less than 20% on a conventional loan.
To secure a VA loan for a manufactured home, your home must be on a permanent foundation, meet HUD guidelines and be purchased with the land underneath it.
Chattel Loans
A borrower can use a chattel loan to purchase different kinds of personal property, including cars, boats and mobile homes. These loans typically have a shorter term and lower loan limit than a traditional mortgage, but the application process for a chattel loan tends to be easier.
Chattel loan lenders also hold the financed property as collateral for the loan, which can be risky. This means your lender could take your home to satisfy the debt you owe if you default on payments. Rocket Mortgage doesn’t offer chattel loans.
Personal Loans
If all else fails, you may be able to use a personal loan to finance a manufactured or mobile home. Personal loans don’t have the same restrictions on how your house is built, so you can likely qualify even if your house is a fully movable mobile home, not attached to a permanent foundation. Some lenders offer personal loans of up to $100,000, which may be more than enough to finance a manufactured home.
High Interest Rates But Few Limitations
If you have bad credit, a personal loan likely isn’t your best option. Personal loans tend to come with a high interest rate for borrowers with poor credit. In fact, the rate may be 20% or even higher, in some cases.
For home buyers who aren’t sure traditional financing is the right fit or who don’t meet the minimum requirements for the properties they’re interested in, a personal loan may be the most logical source of financing for a manufactured home purchase. You’ll be able to use the money to buy any manufactured home you’re interested in, without having to worry about loan restrictions.
Prepare to meet these requirements to qualify for a chattel mortgage: Credit score: You'll need an excellent credit score (around 680 or higher) to qualify for this type of loan.
How long can I finance a mobile home? The length of mobile home financing depends on the lender. However, you can expect to find loans of anywhere from five to 30 years, depending on the loan type.
The oldest manufactured home that can be financed is usually one built after June 15, 1976. Homes built after this date adhere to the HUD Manufactured Home Construction and Safety Standards, making them eligible for financing.
You'll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.
Note: You can get an FHA manufactured home loan with a credit score as low as 580 and a 3.5% down payment. You may be approved with a credit score as low as 500, but the tradeoff is that you must have a 10% down payment.
Many lenders will not approve a conventional loan for a mobile home because they are not considered “real property.” However, homes that are attached to a permanent foundation could qualify.
Mobile homes placed in mobile home parks typically decrease in value over time. On the other hand, land normally appreciates over time. So, if you own land and build a traditional home or, in some cases even place a mobile home on the land, the value will normally appreciate.
Permanent foundations must be con- structed of durable materials; i.e. concrete, mortared masonry, or treated wood - and be site-built. It shall have attachment points to an- chor and stabilize the manufactured home to transfer all loads, herein defined, to the under- lying soil or rock.
With the FHA Title I loan program: You can finance a new or used manufactured home, even if you don't own the land it's sitting on. You can finance a site for a manufactured home to sit on. You can finance repairs or improvements to a manufactured home you already own, as long as you own the lot it sits on.
FHA Loans. An FHA loan can be attractive because if your FICO® credit score is at least 580, you could qualify for an FHA loan with a down payment as low as 3.5% of your home's final purchase. And in good news, you can use two types of FHA loans to finance the purchase of a manufactured home: Title I and Title II loans ...
A chattel mortgage is a loan to purchase movable personal property, such as a manufactured home or construction equipment. The property, or chattel, secures the loan, and the lender holds an ownership interest.
A manufactured home can be used as collateral for a home equity loan if it meets the following criteria: The home is affixed to a foundation on the land. The home can't be in a trailer court. The person seeking the loan must also be the owner of the land.
Yes, it is possible to finance a pre-1976 mobile home, although it may be more challenging than financing a newer manufactured or modular home. Some lenders offer specialized mobile home loans, such as chattel loans or personal loans, which can be used to purchase older mobile homes.
Without an included property, banks feel there is a greater risk they will not get their money back in the event of a foreclosure. In order for banks to cover their risk, a chattel loan will have interest rates between 5.99% and 12.99%, depending on income, credit score, and other variables.
VA loans have no minimum credit score requirement to finance your manufactured home. USDA loans don't have a required minimum score, but many lenders who offer USDA loans look for a minimum score of 640.
No lender specifies a minimum CIBIL score requirement for a personal loan application. However, a score of 750 and above is preferred by lenders for loan applications. This score reflects the creditworthiness of the borrower and the chances of lenders approving the loan application with this score increases.
Clayton Homes typically requires a credit score of at least 620 for conventional financing options. If your credit score is lower, alternative financing solutions, such as FHA loans or lease-to-own arrangements, may be available.
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