Buying a mobile home has become a whole lot easier than before. Thanks to the dozens of financing options that make this investment possible for many aspiring homeowners. From conventional loan options to non-conventional mortgages, the options are countless and each comes with different interest and repayment terms. Some loan types offer a great deal of flexibility.
For instance, those who get approved for the USDA, FHA, and VA loan schemes can enjoy low interest, little to no down payment requirements, and most importantly a flexible repayment term. If you are also looking for financing manufactured homes, you are in the right place. Let’s explore the common manufactured home loan options that can help.
Mobile Home Financing: Is It Harder?
Customized to your individual requirements, manufactured or mobile homes are designed following the HUD standard and are single-family homes that can accommodate a couple or a small, nuclear family. They can be affixed to a permanent ground or the mobile home park which you can get on rent. Since some homebuyers invest in just the manufactured home and place it on the renting land, they do not qualify for most conventional loans.
The property that isn’t built on a site permanently or a land that you own will be considered personal property rather than real estate. This explains why most lenders hesitate to approve the loan request of aspiring home buyers interested in manufactured homes. The value of such homes tends to depreciate over time, i.e. if they fall into the personal property category. So, how easy the loan approval process is for the homebuyer depends solely on the placement of the property and whether it’s real estate or your personal property.
You might be offered chattel loans that often come with a whopping interest rate. But just because most lenders are unwilling to finance your mobile home doesn’t mean you don’t have many choices. Many programs, such as FHA, are designed for mobile home buyers. Its Title I loan is for those buying just the manufactured home without the lot. Of course, it comes with interest, but it’s often minimal and the repayment term is mostly over 20 years, making it affordable for a majority of manufactured home buyers.
Getting Approved for the Right Manufactured Home Loan
Assessing your mobile home finance options and evaluating different factors when choosing a home loan is crucial before you finalize the deal. You can choose from government-backed mortgages. Each comes with unique approval criteria. Some require you to have a manufactured home with a certain square footage of space, while others require you to have a specific foundation. Some loans are available for only those who buy the land where the home will be secured. Let’s explore the different types of home loans available for manufactured homes.
FHA Title I and Title II
Backed by the Federal Housing Administration, Title I and Title II home loans for manufactured homes are ideal for those who want flexible interest and repayment terms. The title I loan is for those who want to purchase the home, the home with the piece of land where it sits, or both. The only condition for getting approval for this loan is that this property should be your primary residence.
You can also buy the land on lease, but the contract must clearly mention the lease term of up to 3 years and a termination notice of around 6 months. The maximum borrowing limit for the Title I home loan is set forth at $92,904. FHA also offers a Title II program, which offers better interest rates and many other perks. The biggest requirement is your manufactured home must be permanently secured to the ground to qualify for an FHA Title II loan.
VA Loans
Those serving in the military, active members, or a veteran might qualify for VA loans for manufactured homes. If you have a family member who’s active in the US military, you can also apply for VA loans. Like FHA loans, to qualify for the US Department of Veteran Affairs, you must meet certain space-related requirements. For instance, the interiors of a single-wide mobile home must be at least 400 square feet, and the same for a double-wide home is 700 square feet. In addition, it must be affixed to a permanent foundation and meet the local zoning needs.
USDA Loans
Manufactured homes built after Jan 1, 2006, and installed on a plot in the rural area might qualify for the USDA loans. The best part about this loan program is that you don’t need to pay any down payment. That said, not everyone qualifies for USDA mobile home programs. Even if you have found a place in a rural area for your manufactured home, you might not qualify for this government-backed loan program if your income exceeds the threshold. Other requirements include a permanent foundation for your home, a design that meets the local zoning requirements, and the home must be in good condition.
Credit Score Requirements for Manufactured Homes
Some government-backed loan programs do not require an excellent credit score, but you must have a decent credit history to ensure quick and hassle-free approval. Your credit score also affects other factors. For instance.
FHA loan programs require a credit score of at least 500. If you do not meet this, you will have to pay 10% of the home’s value in the down payment. If your score exceeds 500, you can secure the loan with a 5% downpayment.
To qualify for the USDA loans, your credit score must be at least 640. Then again, many lenders do not consider your credit history for this loan, but some might do.
VA loans do not involve a credit score. It’s important to understand your requirements and make a choice that fits your goals, budget, and requirements. If you do not qualify for any of these loans, you can go for the conventional options, like Fannie Mae and Freddie Mac.