Mobile home loans are loans backed by the Federal Housing Administration (FHA) for manufactured homes. There are two types of mobile home loans: regular FHA loans and personal property loans. FHA loans are fixed-rate loans with low down payments and flexible credit requirements that may be used for mobile or permanent homes. Personal property loans, also known as chattel or Title I loans, are fixed-rate loans payable over a 20-year term. VA loan and conventional loans may also be used to purchase manufactured homes, although these types of loans cater to the general public and don’t cater specifically to mobile home buyers.
A mobile or trailer home is a prefabricated structure built in a factory on a permanently attached chassis before being transported to a physical residential site. It can be used as a permanent or temporary home and can be moved by towing or trailer. By definition, mobile homes built since 1976 are known as manufactured homes and must adhere to the FHA’s building codes.
More than 22 million Americans live in the approximately 8.5 million mobile homes scattered around the country. The average sales price of a manufactured home stands at around $72,900, and manufactured homes account for around 70% of all new single-family homes worth less than $125,000. According to a study by the Manufactured Housing Institute, it can cost 10-20% less to build a manufactured home than an equivalent conventional home. With these sorts of advantages, it should come as no surprise that manufactured home production has increased for 8 straight years from 2011-2018.
Manufactured homes are not the same as modular homes, which are made of several separate prefabricated parts that are assembled on a permanent foundation to give the look of a conventional home.
FHA loans are fixed-rate loans with terms of 15-30 years insured by the U.S. Federal Housing Administration (FHA). Home buyers with a credit score of 580-619 are eligible for an FHA loan with a minimum 3.5% down payment. Buyers with a credit score of 500-579 are eligible for an FHA loan with minimum 10% down payment. Recipients of FHA loans must pay monthly private mortgage insurance (PMI) until their home equity reaches 20% of the home’s value. PMI requires an upfront payment of 1.75% of the loan amount plus a 0.45-0.85% annual premium.
Title I loans are fixed-rate loans with terms of 15-25 years that are also insured by the FHA. The borrower must sign a Placement Certificate with the Department of Housing and Urban Development (the HUD, which oversees the FHA) in which they confirm that the home has been installed and set-up to their satisfaction by seller. After moving in, the borrower can contact the HUD for assistance about any problems with construction of the home.
VA loans are another type of loan backed by the federal government – in this case the Department of Veterans Affairs. This type of loan is open to veterans of the Military, National Guard, Reserves, and surviving spouses who meet certain requirements. Qualifying veterans may use a VA loan to purchase a mobile or permanent home with zero down payment or a low down payment, and without having to pay PMI.
People who wish to finance their manufactured home and land with one loan and whose manufactured loan is built on a permanent foundation may apply for a standard FHA loan with a term of up to 30 years. To qualify for an FHA loan involving a manufactured home, the home must meet certain minimum requirements. The floor area must be at least 400 square feet. The home must have been built since 1976 and adhere to the 1976 safety code. It must be classified and subject to taxation as real estate. It must be on a permanent foundation built to FHA requirements. It cannot be located in a flood zone.
People who wish to finance a home being built on a non-permanent foundation, i.e. on leased land or on the borrower’s own land, may apply for a personal property loan. These types of loan may be used to purchase or refinance a manufactured home, developed lot, or a combination of home and lot. Personal property loans are fixed-rate loans with terms of 15-25 years. The maximum loan amount for a personal property loan is $69,678 for home only, $23,226 for lot only, and $92,904 for home and lot.
Most of the nation’s top lenders offer FHA and VA loans for use with mobile or permanent homes. Some lenders also offer conventional home loans for the purchase of a manufactured home or lot. No matter what type of mobile home loan you’d like to apply for, we recommend shopping around between the best direct lenders or using LendingTree to pre-qualify for multiple lenders in one go. LendingTree is an online marketplace that helps users connect to the best lenders for FHA loans, VA loans, conventional loans, and other types of loans in minutes. To compare pre-qualified mortgage rates, simply enter basic information about yourself and the home you’re purchasing, including location and loan amount, and LendingTree’s automated system will select the best loans from its network of lending partners.