Mobile home financing: How to buy older manufactured homes
Mobile home financing options
When you’re financing a mobile home, issues can come up that don’t usually affect traditionally built homes:
- Few real estate lenders will finance mobile homes built before 1976
- To qualify for a mortgage, manufactured housing must be taxed as real estate and placed on a proper foundation
- Mobile home values tend to depreciate like vehicles, not increase like traditional housing
- You may be able to finance a mobile home with a personal loan, or a chattel loan instead of a mortgage if you already own the land
The upside: You might be able to finance a mobile home whether it’s residential real estate or personal property. There are companies that do both.
>Related: Low-Income Mortgage Loans: Low Down Payment, Easy To Qualify
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Financing manufactured housing as real estate
If your manufactured house is classified as real property, you may be able to finance it with a mortgage. Typically, a mobile home has to be built after 1976 to qualify for a mortgage, as we’ll explain below.
In this case your loan would work almost exactly the same as financing for traditional “stick-built” houses.
Most likely, you’d get a Fannie Mae, Freddie Mac, or government-backed mortgage. The VA, FHA and USDA all have manufactured home programs, but each loan option has different rules.
You may need slightly higher down payments, a slightly better credit history, and/or to pay higher fees. But these programs can still provide the most affordable financing for manufactured houses.
Rules for manufactured home loan programs
To buy a manufactured home with a traditional mortgage of any type, the home must be:
- At least 400 square feet
- Placed permanently on the property
- Built to HUD’s post-1976 specifications
Also, the entire property (home and land) must be taxed as real estate and not as personal property such as a vehicle.
Along with those general rules, each loan type also has its own eligibility requirements:
Conventional loans for mobile home financing
Conventional loans are not insured by a federal agency so borrowers with stronger credit profiles tend to get the most competitive rates.
- Purpose: Primary residence or second home
- Down payment: 5% (3% for Fannie Mae’s MH Advantage program)
- Minimum credit score: 620
- Maximum loan term: Up to 30 years
- Other rules: Home must be at least 12 feet wide; to finance a mobile home as an investment property you’ll need a higher down payment
FHA loans for mobile home financing
FHA loans feature insurance from the Federal Housing Administration, allowing borrowers with lower credit scores to buy single-family homes.
- Purpose: Primary residence only
- Down payment: 3.5% minimum
- Minimum credit score: 580 (570-579 possible with 10% down)
- Maximum loan term: Up to 25 years
- Other rules: Loans require upfront and ongoing mortgage insurance, and the FHA’s maximum loan amount is $93,000 which may not be enough for a double-wide home with land
VA loans for mobile home financing
Insured by the Department of Veterans Affairs, VA loans help active duty military members and veterans buy single-family homes.
- Purpose: Primary residence only
- Down payment: 5% minimum
- Minimum credit score: Varies by lender; typically 580 to 620
- Maximum loan term: Up to 25 years for double-wide; up to 20 years for single-wide
- Other rules: Upfront VA funding fee required; VA rules also require an affidavit saying mobile home will remain affixed to property
USDA loans for mobile home financing
The U.S. Department of Agriculture has home financing options for borrowers in rural and some suburban areas. You’d need to fall within the USDA’s income limits to qualify.
- Purpose: Primary residence in a rural area
- Down payment: 0%
- Minimum credit score: 640 (can vary by lender)
- Maximum loan term: 30 years
- Other rules: USDA sets maximum income limits for borrowers. Also, USDA loans favor newer homes. The program won’t finance a home built before 2006
>Related: Low-Income Mortgage Loans: Low Down Payment, Easy To Qualify
Buying a movable (mobile) home
Homes you could hitch up and move to a different mobile home community don’t qualify as real estate, so you couldn’t finance one with a home mortgage.
Instead, to finance a home without a permanent foundation, you’d need a personal property loan.
Mobile home loans for personal property — homes that are not classified as real estate — are available if you can put 5 percent down and if the home is reasonably new.
These loans resemble auto loans: Interest rates are higher than mortgage rates because loans for movable property are riskier for lenders.
The FHA backs loans for mobile home vehicles through its Title I loan program. You negotiate your rate with private lenders offering this type of loan. Note that these loans are offered by relatively few lenders and they prefer newer homes.
Using personal loans for mobile home financing
You could also get a personal loan to finance your mobile home purchase. Because a personal loan is based on you, not the property, the lender won’t need to appraise the property.
You might consider this option if your mobile home is too old or is missing its tags from the U.S. Department of Housing and Urban Development (HUD).
To get a personal loan, you likely need decent credit, and rates will be higher than a mortgage. But the lender won’t care how you spend the money.
Since a personal loan isn’t connected to the property, you could buy a mobile home even if it doesn’t conform to traditional mortgage standards for size and age.
For example, borrowers could get financing even if the home is less than 400 square feet and built before 1796.
Maximum personal loan amounts vary by lender. Some reach as high as $100,000. If you can’t get financing to buy your home, try a personal loan.
What’s with the 1976 cutoff?
Manufactured homes must have “HUD tags” to meet most mortgage lending guidelines.
These tags, or more properly, ‘certifications,’ state that the manufacturer complies with safety standards created by the U.S. Department of Housing and Urban Development, or HUD.
A HUD tag shows the home meets safety and livability standards, so it’s a good thing to have.
What do HUD tags have to do with 1976?
This rule became law on June 15, 1976. HUD notes that while it is the only agency with this requirement, most lenders also follow its guidelines.
Prior to the 1976 rule, manufactured housing was prone to safety problems like electrical and wiring issues that caused home fires.
Should I buy a pre-1976 mobile home?
Fireengineering.com states that “In mobile homes built before 1976, heating and cooking equipment are in close proximity to sleeping areas. This poses dangers to occupants and firefighters.
“The closer the source of the fire is to the sleeping area, the shorter the time the searching firefighter has to effect a rescue. Site-built homes have numerous areas in which to place utilities, and they usually don’t close the only escape route for occupants, as happens many times in mobile homes.”
According to the National Fire Protection Agency, “NFPA’s national fire data indicate that manufactured homes built to HUD standards (post-1976 construction) have a much lower risk of death if a fire occurs compared to pre-standard manufactured homes. “
So the government created minimum safety requirements to protect buyers.
Why are manufactured home loans hard to get?
Mobile homes are, obviously, mobile. So it is possible for a borrower to take a huge residential loan on very favorable terms and then haul the home out of state or even out of the country.
The same is true for cars, and that’s one reason car loans usually come with shorter terms (five years, say, instead of 30) and higher interest rates. It’s also why there is an entire industry built around recovering runaway autos.
If you got a mortgage on a mobile home, chances are you wouldn’t stop making monthly payments and disappear from your mobile home park, taking the home with you. But lenders know it is possible.
So lenders differentiate between manufactured homes as real estate and mobile homes that are truly movable.
Modular home vs. mobile home loans
Typically, it’s easier to get a traditional mortgage on a modular home compared to getting a mobile home loan.
A modular home is built in a factory but delivered in pieces and assembled on site. It’s placed on a permanent foundation and often includes a porch or a carport.
Manufactured home loans vs. mobile home loans
A manufactured home is a mobile home built after 1976 that has HUD tags to show its compliance with modern codes.
It is possible to get a traditional home mortgage, such as an FHA loan or a VA loan, on a manufactured home.
But keep in mind manufactured houses tend to depreciate, or lose value, as they age. This also makes lenders less likely to approve loans with competitive interest rates for these homes.
However, in areas where more people own mobile homes, it’s probably easier to find better financing. The darker areas in the map above indicate areas with a higher percentage of manufactured or mobile units.
Manufactured home financing for a used mobile home
For some repeat and first-time homebuyers, shopping for an existing mobile home is easier than shopping at a retailer for a new manufactured housing.
For one thing, the land and the manufactured home are already paired, and the property may already be on record as a real estate property.
If you already own the land but need to buy a used manufactured home, you may be able to get a chattel loan which is a mortgage for personal property.
In any case, make sure the used mobile home was built after June of 1976 and follows the HUD Code.
If you’re interested in a USDA loan, it’s best to shop for newer homes.
When is a mobile home a house, and when is it a car?
Homeowners may not always care whether their manufactured home qualifies as real estate or falls into the category of a vehicle. But lenders care if you’re trying to finance a home.
To be a house and not a car, your manufactured home must pass a few tests, HUD says:
- The site must have permanent water and sewer hookup
- Facilities are approved by the local municipal authority, if available at the site
- An all-weather roadway must serve the site
- The entire property must be taxed as real estate
- The towing hitch or running gear must have been removed
- No part of the finished grade level under the home is below the 100-year flood level
- Structural integrity must have been maintained during transportation and sufficient anchoring
- Support and stability must be evident
These are not all the criteria. Here’s a link to the whole set of guidelines. Alternatively, have a licensed appraiser assess and value the property.
If you pay annual taxes to your state Department of Motor Vehicles, you definitely have a vehicle. However, you can convert a manufactured home to real property by following the guidelines listed in the link above.
FAQs about manufactured home financing
Lenders and loan programs have specific rules about financing a manufactured home. If the home meets HUD and local codes and is permanently located on a parcel of land, it could be possible to get financing through a mortgage lender. If the home doesn’t meet all the requirements, you may need a personal loan, a chattel loan, or a special FHA Title I loan.
It’s best to have a credit score of at least 580 before applying for manufactured home financing. Borrowers with credit scores of 620 or higher have more loan options. Personal loans may require higher scores since they’re not secured or insured.
Yes, it is possible to finance a modular home over 30 years if the home meets the lender and loan program’s requirements.
Traditional mortgages require closing costs which could range from about 2-5 percent of your loan amount. A personal loan typically charges an upfront origination fee. This fee could range from 1-6 percent of the loan size.
Ready to buy or refinance a manufactured home?
Homeownership comes in many forms. While a manufactured home likely won’t appreciate as an investment, owning one has benefits over renting.
Buying or refinancing a manufactured home can be tough. But look around for mortgage options like FHA, and non-mortgage solutions like personal loans.
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