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Complete Guide to FHA Manufactured Home Loans

Complete Guide to FHA Manufactured Home Loans
Rita Williams
Home.com Contributor

In the market for a manufactured home? They can be attractive solutions when you’re house-hunting, since they can be more affordable than a site-built home and many new models are modern and spacious.

Even more appealing — the Federal Housing Administration (FHA) allows homebuyers to use federally-backed, low down payment FHA loans to purchase them.

FHA manufactured home loans have the same borrower criteria as those for “stick built” homes, in terms of credit score, down payment, and debt-to-income ratio (DTI).

But there are different property requirements when you’re buying a manufactured home. Not to stress, though. We’ve created a guide to everything you need to know about FHA manufactured home loans.

Can you get an FHA loan on a manufactured home?

Yes, you can. FHA loans can be used to buy:

  • A new or used manufactured home
  • The manufactured home and the land where the home will sit
  • A land site on which to place the manufactured home

Keep in mind, though, that not all lenders issue loans on manufactured homes equally. Some require that the home be placed on a permanent foundation, that the owner owns the land on which it sits, and other requirements.

If you’re thinking of buying a manufactured home, let your lender know that’s the kind of property you’re looking at and ask about their specific requirements.

If that lender can’t issue the loan, keep trying until you find a lender that can.

What to know about manufactured homes

When you hear the term “manufactured home,” you might think of traditional single-wide or double-wide trailers. You can purchase those using an FHA loan, but the definition of a manufactured home is actually broader than that — and so are your homebuying options.

The U.S. Department of Housing and Urban Development (HUD), which oversees the FHA, defines a manufactured home as a “transportable structure, comprised of one or more modules, each built on a permanent chassis, with or without a permanent foundation, designed for occupancy as a principal residence by a single family.”

Over the years, manufactured homes have evolved in size, features offered, and overall appearance. Many don’t look that different from regular homes. They have vaulted ceilings, wrap-around porches, and other features you might associate with an upscale site-built home.

Many manufactured homes are put together in multiple sections, allowing for larger, more spacious layouts than you’d see in single-wide or double-wide models.

On average, manufactured homes cost less than in-site homes. Purchasing a manufactured home may therefore provide an alternative for homebuyers purchasing in extremely competitive markets or where home values are higher than they can comfortably afford.

Note, however, that manufactured homes aren’t synonymous with cheap. Some of the larger, newer models can cost as much as a site-built home. But even if that’s the case, they provide a way to purchase a newly constructed home with less headache than fighting it out with other buyers for a site-built house in a bidding war.

Manufactured vs mobile home: Is there a difference?

HUD itself notes that manufactured homes are often referred to as mobile homes.  The terms are often used interchangeably, but manufactured home is the more modern term.

Plus, to get an FHA loan for a mobile home, you must find one that satisfies HUD’s definition of manufactured housing. That means that it meets the agency’s Manufactured Home Construction and Safety Standards (MHCSS) and has a red certification label verifying its HUD-compliant status.

Types of FHA manufactured home loans

There are several types of FHA manufactured home loan programs.

  • Manufactured home loan – for buying a new or used manufactured home and/or the lot it will be on
  • Manufactured home lot loan – a loan to buy a lot for a manufactured home. It can be in a subdivision or in a planned unit development
  • Manufactured home purchase loan – to buy a manufactured home only, without a lot

Title I vs Title II FHA manufactured home loans

FHA manufactured home loans fall under two categories, Title I and Title II.

Title I loans can be used to purchase a manufactured home, a lot, or both a home and a lot. The repayment term of a Title I loan can be up to 20 years for a home or a home and a lot. If you get one for a lot only, the maximum term is 15 years.

There are also loan limits for Title I loans:

  • $92,904 – for a manufactured home and lot
  • $69,678 for a home only
  • $23,226 for a lot

Title II loans apply to all single-family home residences that meet FHA guidelines, including manufactured homes. These can offer financing terms up to 40 years and they are subject to the standard FHA loan limits.

The FHA’s loan limits are pegged to 115% of the median home price in a given area, and they’re usually set by county. In 2021, Title II loan limits range from $356,362 to $822,375 for a single-family home, and there is no minimum required loan amount.

You can look up the limit for your area using the HUD search tool.

FHA manufactured home loan requirements

A manufactured home must be built to HUD’s MHCSS requirements to qualify for FHA financing. Not all manufactured homes meet these standards, and those produced before 1976 will not pass MHCSS muster because of changes in HUD’s building requirements.

Qualifying properties must meet the following criteria:

  • The lot must be appraised by an FHA-approved appraiser
  • The property must meet FHA requirements for safety and livability
  • If it’s in a manufactured home park, both the park and lease agreement must meet FHA guidelines
  • The foundation system’s construction and installation must meet all relevant state and local requirements
  • The site must meet established local standards for site suitability
  • The site must have adequate water supply and sewage disposal facilities

Assuming that the home and site meet FHA criteria, you’ll also need to meet the borrower requirements:

  • Minimum down payment: 3.5% 
  • Credit score: 580 for a 3.5% down payment. If your score is between 500 and 579, the down payment requirement rises to 10%. It’s possible to get a loan without a credit score, too, but your lender will closely review your history of monthly payments (rent, utilities, etc.)
  • Debt-to-income ratio (DTI): 50%+
  • Income requirements: There are no minimum income requirements, but your lender will need to verify that you have enough monthly income to make your monthly mortgage payment and cover all other debt payments. Income can include wages from your job, profit and loss statements and tax returns if you’re self-employed, Social Security benefits, disability benefits, child support, and alimony

Is it cheaper to buy a manufactured home?

It can be cheaper to buy a manufactured home than a site-built one, but you need to take all the costs into account to make sure it’s affordable for you.

Loan amount

FHA Title I loans max out at just under $93,000, so that’s likely lower than a loan you’d take out on a single-family home in most areas of the country. But if you have your eye on a newly manufactured, 1,800-square foot home complete with appliances, you’ll likely have a hard time getting a Title I loan.

It’s not unrealistic to find a manufactured home that costs the same as some site-built homes, if you opt for some of the largest and most customized models. In that case, you’d need a Title II FHA loan, and you could end up spending up to $200,000 or more to finance the home and the land.

Related reading: FHA Loan Requirements 2021 | Rates & Eligibility

FHA mortgage insurance

FHA borrowers are required to pay an upfront mortgage insurance fee of 1.75% of the loan amount, as well as an annual mortgage insurance premium (MIP). MIP rates depend on your down payment and how much you’re borrowing.

Homeowners who buy a manufactured loan with a 3.5% down FHA loan would likely pay a 0.85% MIP rate, though the specifics depend on your loan terms.

MIP rates for a 30-year FHA loan

Loan amountDown paymentMIP per yearHow long you’ll pay
$625,000 or lessLess than 5%0.85%Life of the loan
$625,000 or less5% – 9.99%0.80%Life of the loan
$625,000 or less10% or more0.80%11 years
Greater than $625,000Less than 5%1.05%Life of the loan
Greater than $625,0005% – 9.99%1%Life of the loan
Greater than $625,00010% or more1%11 years

Bolded row is the most common scenario for FHA buyers

MIP rates for a 15-year FHA loan

Loan amountDown paymentMIP per yearHow long you’ll pay
$625,000 or lessLess than 10%0.70%Life of the loan
$625,000 or less10% or more0.45%11 years
Greater than $625,000Less than 10%0.95%Life of the loan
Greater than $625,000Between 10% and 22%0.70%11 years
Greater than $625,00022% or more0.45%11 years

MIP lasts for the life of the loan if you put down less than 10% down payment. If you put down more than 10%, MIP falls off after 11 years.

Learn more: FHA Loan Mortgage Insurance: How Much Will You Pay?

Interest rates

Some lenders may charge a higher interest rate for manufactured homes than for site-built homes. There are two reasons this can be.

One is that lenders sometimes charge higher interest on loans below $100,000. That’s because these loans require just as much documentation and processing as larger loans, but they earn less money on them. By charging a higher interest rate, they’re compensated for the risk of offering a low down payment loan and for the processing that went into the loan.

Another reason that a lender might charge a higher interest rate is the resale value of the home. Modern manufactured homes in particular can be very attractive, especially if they’re put on a permanent foundation. But they may not hold their value as well as site-built homes, and the latter may simply be more attractive to most homebuyers. That represents more risk to the lender, since they could have a more difficult time selling the property in the event of foreclosure.

Of course, interest rates depend a great deal on your credit score and history, your down payment, and your DTI. If you have excellent credit, solid savings, and low debts, you could qualify for a competitive interest rate on a manufactured home loan.

Besides that, FHA mortgage rates tend to be competitive due to their government backing.

Foundation and land for the home

You may decide — or local laws may require you — to put the home on a foundation. Those costs can escalate quickly, depending on the type of foundation you choose.

According to one manufactured home company, slab or pier and beam foundations are among the most affordable. But if you decide to create a basement foundation to add some living space to the home, you could pay substantially more. Depending on the square footage of your manufactured home, you could pay tens of thousands of dollars to put down a foundation.

Then there’s the land itself. If you buy the land, will it need to be cleared and readied for a foundation to be built? Consider the labor and materials costs if so.

There are always costs and trade-offs, and it’s important to see the full picture before you make a decision.

You can sidestep some of those expenses by purchasing an existing home that’s already on a foundation. But if you’re buying directly from the factory and need to arrange for a foundation and land clearing, make sure to work those into your budget.

You may also be able to rent land in a manufactured home community or mobile home park, though you’ll want to look carefully at the terms and costs of that as well. Make sure it’s affordable, because you may find you’re better off purchasing land yourself after all.

The best course of action is to talk with a mortgage lender. Get preapproved to find out how much a lender will loan you. Talk with the lender about the pros and cons of an FHA manufactured home loan and the all-in costs of the loan.

Although the sticker price of a manufactured home may be lower than that of a site-built home, the all-in costs could bring them neck-and-neck. The site-built house could even end up being more of a deal.

In short, a manufactured home may well be the right choice for you — but no mortgage loan is going to be a “bargain.” There are always costs and trade-offs, and it’s important to see the full picture before you make a decision.

Is a manufactured home a good choice?

A manufactured home can be a good choice. It really comes down to your goals and priorities.

If you’re worried about the home’s value, research shows that a well-maintained mobile home on a foundation can appreciate at a similar rate as site-built houses. Additionally, manufactured homes must be built to strict HUD codes to ensure quality, so buyers can get a safe, well-built home by going this route.

And if your local real estate market is very competitive, buying a manufactured home can be a way to bypass the bidding wars and buy a brand-new, beautiful home with less stress.

Do I have to own the land where my manufactured home will sit?

No, the FHA does not require you to own or purchase the land where your manufactured home will sit. You can buy a manufactured home and lease the land on which it will sit.

FHA not the right fit? Here are some alternative manufactured home loans

FHA loans aren’t right for everyone. Fortunately, there are several other loan programs that allow you to purchase manufactured homes.

Conventional

A conventional mortgage is one not backed by the government, but rather regulated by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Some conventional loans allow you to put down as little as 3% on a home.

Unlike FHA loans, conventional loan programs allow you to buy a manufactured home as a second home. So if you want to buy a double-wide in a beach community as a vacation property, conventional may be the way to go.

VA

The U.S. Department of Veterans Affairs (VA) backs home loans for qualifying veterans, active-duty military, and eligible surviving spouses. VA borrowers who have full entitlement can buy a home with 0% down. Those with partial entitlement may be eligible for 0% down as well, depending how much entitlement they have available and the purchase price of their homes.

To buy a manufactured home with a VA loan, the home must be on a permanent foundation and must be listed as real estate property with the local municipality (as opposed to being classified as a vehicle or non-permanent structure). The lender may require you to prove that the vehicle title has been eliminated.

Related reading: FHA vs VA Loan: Which Mortgage Is Right for You?

USDA

The U.S. Department of Agriculture (USDA) backs loans for manufactured homes in specific areas with relatively low density (both suburban and rural). USDA loans have income limits, as they are designed to promote homeownership among low- and moderate-income borrowers. USDA loans have a 0% down payment requirement and flexible credit guidelines.

Learn more: USDA Loan Qualifications & Loan Limits 2021

Chattel loans

Chattel loans are a type of loan secured solely by the manufactured home, not the land on which it sits. Although chattel loans are the most common type of manufactured home loan, there are potential downsides, particularly higher interest rates.

FHA manufactured home loans FAQs

Do FHA loans cover manufactured homes?

Yes, FHA loans cover manufactured homes. If you meet the credit and borrower requirements, you may be able to use an FHA loan to finance the home and the land on which it will sit.

Can you get a 30-year loan on a manufactured home?

Some conventional lenders may offer 30-year terms on a manufactured home loan. FHA Title I manufactured home loans have a maximum loan term of 20 years.

What type of loan is needed for a manufactured home?

Multiple types of loans are available for manufactured homes. The FHA is one of the most advantageous due to the low 3.5% down payment, flexible credit scores, and attractive terms. But folks interested in a manufactured home can also look into VA, USDA, and conventional loans if they meet the requirements, as well as chattel loans.

Beat the bidding wars 

Manufactured homes can be more affordable than in-site homes and may provide housing options if the demand for homes in your area is fierce. If you’re in the market for a manufactured home, FHA manufactured home loans offer attractive terms and low down payment requirements.

To find out whether you qualify for an FHA loan and how much a manufactured home may actually cost you, talk with an FHA-approved lender.


Fairway is not affiliated with any government agencies. These materials are not from the VA, HUD, FHA, USDA, or RD, and were not approved by a government agency.

Further Reading

Read More

FHA Loan Requirements 2021 | Rates & Eligibility

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FHA Loan Limits 2021: FHA Loans up to $2.3M

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FHA Loan Rates Today: Are They Going Up?