An estimated 20 million Americans live in mobile homes, and not all of them fit the overplayed stereotype of being poor. According to the most recent U.S. Census, there were 8.5 million mobile homes scattered throughout the country. Around 57% of these homes were occupied by at least one person in full employment, and an additional 23% were occupied by retirees.
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 being towed or placed on a trailer.
Mobile homes built since 1976 are known as manufactured homes and are legally required to meet the Federal Housing Administration’s building codes. Manufactured homes built in accordance with FHA standards are mortgageable through FHA loans, VA loans, and occasionally through conventional loans.
Manufactured homes are typically much cheaper than other homes, accounting for around 70% of all new single-family homes worth under $125,000. As of December 2017, the average sales price of a manufactured home stood at $72,900.
Manufactured homes should not be confused with modular homes, which consist of several prefabricated parts that are assembled on a permanent foundation to give the look of a traditional home.
The Federal Housing Administration insures 2 types of loans for manufactured homes: regular FHA loans, and personal property loans (also known as a chattel loan or Title I loan).
People who wish to finance their manufactured home and land with one loan and whose manufactured loan is built on a permanent foundation are eligible for an FHA loan. These loans carry lower interest rates than personal property loans and are payable over a maximum term of 30 years.
A manufactured home must meet the following requirements for the owner to qualify for an FHA loan:
- Floor area must be 400 square feet or more.
- It must have been constructed after June 15, 1976 and must meet 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.
Personal property loans are fixed-rate loans negotiated between the borrower and the lender and are usually payable over a 20-year term. They may be used to purchase or refinance a manufactured home, a developed lot, or a home and lot together. They are the preferred option if the home being financed is not on a permanent foundation, as in the land is being leased or the home is located on land already owned by the borrower.
The maximum loan amounts for Title 1 loans are:
- Manufactured home: $69,678
- Manufactured home lot: $23,226
- Home and lot: $92,904
The maximum loan terms are:
- Manufactured home or a single-section home and lot: 20 years
- Manufactured home lot: 15 years
- Multi-section manufactured home and lot: 25 years
An FHA loan is a fixed-rate loan insured by the U.S. Federal Housing Administration (FHA). As mentioned in the previous section, manufactured homes can be used in an FHA loan provided the home is affixed to a permanent foundation and that other eligibility requirements are met. In return for being approved for of an FHA loan, the borrower must purchase private mortgage insurance (PMI), protecting the lender in the case of default or foreclosure. 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.
A Title I loan is also insured by the FHA and is designed for borrowers whose home isn’t affixed to a permanent foundation. Manufactured homes are usually purchased through retailers that sell the homes. These retailers are usually able to provide names of local lenders that specialize in Title I loans. The Department of Housing and Urban Development (which oversees the FHA) provides 2 types of consumer protection for Title I loans. The borrower must sign a HUD Placement Certificate agreeing the home has been installed and set-up to their satisfaction by the retailer before the lender can give the loan proceeds to the retailer. After moving in, the borrower can call HUD at (800) 927-2891 for assistance about any problems with construction of the home.
Another type of loan that can be used to purchase a manufactured home is a VA loan. This is a type of mortgage loan backed by the federal government’s Department of Veteran Affairs (the VA) and open to veterans of the U.S. Military, National Guard and Reserves who meet certain requirements, as well as surviving spouses of service people who died in the line of duty. The VA guarantees up to a quarter of the loan, enabling qualified lenders to forgo a down payment or mortgage insurance. The end result is that it is much easier for eligible home buyers to get approved for VA home loans than for conventional loans.
A very small number of lenders also offer conventional mortgage loans for manufactured homes. The best way of finding out if a lender in your area can offer you a mortgage loan is to shop around.
To find a conventional mortgage loan for the purchase of a manufactured home or lot, we recommending using LendingTree – an online marketplace that connects users to the lowest rates in seconds.
Only a handful of lenders offer conventional loans for manufactured homes, but most of the nation’s top lenders offer government-backed loans which can also be used to purchase a manufactured or mobile home. The following lenders all offer FHA and VA loans:
- J.G. Wentworth, an online lender that specializes in servicing government-backed loans for residents of all 50 states.
- CrossCountry Mortgage, which offers standard FHA loans and 2 types of FHA 203(k) home loans that enable home purchase plus improvements or repairs.
- Quicken Loans, one of the nation’s largest lenders, known for approving applicants quickly and with minimal documentation.
- Rocket Mortgage, Quicken Loans’ online and mobile lending service.