Manufactured Home Loans: What You Need To Know

If you’re searching for a more affordable alternative to a single-family house, a manufactured home might be a smart financial choice. The challenge? You’ll need to find and qualify for a manufactured home loan. That may be difficult depending on a few factors, including the property’s age and whether it’s permanently attached to the land underneath it.

What Is A Manufactured Home?

The main difference between a manufactured home and a traditional single-family home is how they are built. Traditional homes are typically built on the land on which they sit, while manufactured homes are built off-site in a factory.

These homes are then delivered to the plot of land on which they will sit. Some manufactured homes will be permanently affixed to this land, while others are movable.

One of the benefits of a manufactured home is that they’re less expensive than traditional single-family homes. The National Association of REALTORS^® (NAR) reported that the median sales price of existing homes stood at $363,000 in February of this year. Compare that to the price of manufactured homes: The U.S. Census Bureau says that the average sales price of a new manufactured homes in the United States was $128,300 in October of 2022.

Manufactured Homes Vs. Mobile Homes

You might think of manufactured homes and mobile homes as the same kind of housing. But there is a difference.

The U.S. Department of Housing and Urban Development (HUD) regulates manufactured and mobile homes. HUD considers a mobile home to be a residence built in a factory before June 15, 1976. That date is an important one: The makers of mobile homes were not required to follow any construction or safety standards enacted by HUD before this date.

But after this date? The makers of factory-built homes have had to follow HUD’s regulations. That’s why HUD considers any factory-built home constructed after June 15, 1976, to be a manufactured home, not a mobile home.

This definition matters when you’re ready to finance the purchase of one of these homes. Lenders don’t give out traditional mortgage loans for mobile homes. You can, though, qualify for a mortgage loan if you want to finance the purchase of a manufactured home built after June 15, 1976.

There’s one more mortgage rule you should know: In most cases, to qualify for a conventional mortgage (one not insured by a government agency), your manufactured home will need to be permanently affixed to the land under it.

How Do Manufactured Home Loans Work?

You can choose from several different types of mortgages and loans to finance the purchase of a manufactured home. These loans might differ slightly from traditional mortgages in that they often come with shorter terms and require larger down payments.

You’ll still have to send copies of documents such as your last two paycheck stubs, last 2 months of bank account statements, last 2 years of tax returns and last 2 years of W-2 forms to your lenders. They can use this information to verify that your income is high enough to cover your monthly loan payments.

Lenders will also check your credit score. It varies, but lenders will typically want you to have a FICO^® credit score of 580 or higher.

Types Of Financing For Manufactured Homes

You can turn to everything from a conventional or FHA loan to a chattel loan to finance the purchase of a manufactured home. Each of these loans come with their pluses and minuses. 

Conventional Loans

A conventional loan is any mortgage not insured by a government body. Conventional loans are instead originated by private lenders without being insured by any government agencies. Loans insured by the Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) – FHA and VA loans, respectively – are examples of government-insured loans.

Both Fannie Mae and Freddie Mac invest in manufactured homes. But before doing so, both government-sponsored entities will make sure that a manufactured home meets certain requirements. When you apply for a conventional loan, your lender might also make sure that your home meets the same guidelines.

Fannie Mae requires that a manufactured home be at least 400 square feet and at least 12 feet wide. Manufactured homes must be installed on a permanent foundation and titled as real estate, not personal property.

Your conventional loan can meet Fannie Mae guidelines with a down payment as low as 3% of the manufactured home’s purchase price. Lenders can offer both fixed-rate and adjustable-rate mortgages and still meet Fannie Mae’s manufactured home financing guidelines. You need a 620 qualifying credit score as well. Your loan’s term can be as high as 30 years.

To meet Freddie Mac’s requirements, your manufactured home must be a one-unit dwelling that is permanently affixed to a permanent foundation. It, too, must be considered real and not personal property. In most cases you’re required to own the land on which your manufactured home sits. There might be exceptions, though, if your manufactured home is in a planned unit development or in a condominium project.

Lenders can offer fixed-rate mortgages and some adjustable-rate loans and still meet Freddie Mac’s manufactured home financing requirements.

FHA Loans

An FHA loan can be attractive because if your FICO^® credit score is at least 580, you could qualify for an FHA loan with a down payment as low as 3.5% of your home’s final purchase.

And in good news, you can use two types of FHA loans to finance the purchase of a manufactured home: Title I and Title II loans. 

Title I FHA Loans

With the FHA Title I program, you can apply for a loan insured by the FHA to purchase or refinance a manufactured home. You can use these loans to buy a home, lot or both at the same time.

You don’t have to own the land on which your home sits to qualify for one of these loans. You can instead lease a lot, such as a plot of land in a manufactured home community. There is a key requirement, though: Your initial lease term on the land must be at least 3 years.

The maximum loan amounts for a Title I manufactured home loan are:

The maximum loan terms are:

Title II FHA Loans

The FHA Title II loan program is like its Title I cousin in that it allows borrowers to take out FHA-insured loans to purchase a manufactured home. The difference? Title II loans can only be used for manufactured homes that are permanently attached to a piece of land. You can’t use this program to purchase a manufactured home that is mobile.

One important note here is that a foundation inspection is required on FHA loans with a certificate that the foundation meets the Permanent Foundations Guide for Manufactured Homes. If additions have been made to the home, it needs to be inspected to make sure it meets HUD standards for the load on the foundation. If you’ve had prior inspections of the foundation or conditions, you may use these documents.

The benefit of a Title II loan is that you will generally find more lenders who originate them. This means that you can shop around for a lower interest rate and better loan terms.

Your home, though, must be eight feet or more in width and 40 feet or more in length. It must also have a floor area of at least 400 square feet and be built after June 15, 1976.

Title II loan limits will vary depending on where you live. You can use this HUD search tool to find the limit in your area.

Terms are more flexible than with Title I loans. Common types of FHA Title II loans are 15-year and 30-year fixed-rate loans.

Chattel Loans

Depending on whether your manufactured home is movable or permanently in place, and whether you own the land under it, you might have to apply for chattel loans instead of a traditional mortgage.

A chattel loan is offered by private lenders and designed for people financing the purchase of movable property and vehicles. If your manufactured home is not permanently connected to the land on which it sits, you might have no option but to explore a chattel loan.

That’s because manufactured homes that are not connected to a solid foundation are considered personal property and not real estate. Mortgage loans are only used to finance the purchase of real estate, not personal property.

Different lenders will have different requirements for chattel loans, including credit score, down payment and maximum loan amount.

VA Loans

A VA loan is an attractive option for financing the purchase of most homes. That’s because you typically don’t have to make a down payment if you qualify for one of these loans. Keep in mind, you must be a veteran, active-duty member of the U.S. Military or an eligible spouse to qualify.

However, if you’re using a VA loan to buy a manufactured home, that perk doesn’t apply. You’ll instead need a down payment of at least 5% of your manufactured home’s final purchase price.

The maximum amount you can borrow for a manufactured home permanently attached to a lot is the lesser of:

The maximum loan term depends on the type of home you’re buying:

Personal Loans

You can turn to personal loans to finance a manufactured home if you can’t qualify for a mortgage. This usually happens when your manufactured home isn’t considered real property but is instead movable, which puts it into the category of personal property.

Personal loans don’t have collateral backing them up. When you take out a mortgage loan, your home is your collateral. If you stop making your monthly payments, your lender can take possession of your home through the foreclosure process. With a personal loan, there is no collateral, so there is nothing for lenders to take should you stop making your payments.

This makes personal loans riskier to lenders. It’s why they often charge higher interest rates for personal loans. That is one drawback of using a personal loan to buy a manufactured home: You might pay more over time.

Another challenge? You might struggle to qualify for a personal loan large enough to cover the costs of buying a manufactured home. You’ll typically need a stronger credit score to qualify for personal loans of $100,000 or more.

How To Get A Loan On A Manufactured Home

Ready to apply for a mortgage to buy a manufactured home? Take the following steps:

1. Review Your Finances

You’ll first have to determine how much of a loan you can afford. This requires a budget listing your monthly expenses and your monthly income. When listing expenses, include your fixed expenses and the minimum payment for debt obligations. Use an average for costs that fluctuate each month, such as utilities, groceries and transportation costs, and include an estimate of how much you spend on discretionary purchases such as dining out and going to the movies.

The difference between your monthly expenses and income will tell you how much money you have left for a monthly mortgage payment. Don’t apply for a mortgage, though, that will consume all this extra money. It’s best to leave some wiggle room in your budget.

2. Research The Manufactured Home That’s Right For You

Next, it’s time to research the manufactured home that you want to buy. You’ll need to determine how large a home you want and how many add-ons you desire. The larger your home and the more upgrades you order – such as higher-end appliances, energy efficient windows and more powerful air-conditioning systems – the more you’ll pay.

You’ll also need to research the location of your manufactured home. Do you want to live in a manufactured home community, maybe one in which you lease the land on which your home will sit? That might be less expensive, but your mortgage loan options will be limited. You might spend more to purchase both land and a home, but this choice could leave you with the greatest number of financing options.

3. Review Your Mortgage And Loan Options

Depending on the age of your manufactured home, and whether it is permanently attached to a piece of land, you may have several options for financing its purchase. The loans available to you will depend on the strength of your credit score and the amount of debt you face each month. Lenders will also look at these factors when determining the interest rate they’ll charge you. Make sure to shop around with lenders for the best deal. And remember, not all lenders will originate mortgages for manufactured homes.

4. Apply For A Loan

To start the loan application process, you’ll first fill out an application that will ask for your basic personal and financial information. Once you submit it to your lender, you’ll also need to verify your financial information. You do this by submitting copies of such documents as your last two paycheck stubs, most recent bank account statements, last 2 years of tax returns and last 2 years of W-2 forms.

Your lender’s underwriting team will then review your application and finances to determine how much of a mortgage you can afford. Underwriters will also review your credit reports and credit score before approving you for a mortgage and assigning an interest rate to your loan.

FAQs About Manufactured Home Loans

Questions about manufactured home loans? Here are some answers.

The Bottom Line On Manufactured Home Loans

Manufactured homes can be a good option for buyers looking for a more affordable residence, but finding a mortgage for these properties can prove challenging. If you’re ready to start the process, you can apply for a mortgage with us.