Mobile homes can offer more flexibility than traditional homes at a much lower cost. However, this doesn’t mean that they’re a small expense. Mobile homes often cost between $60,000 and $100,000, which is more than many people can afford to pay out of pocket.
If you need help buying a mobile home, you’ll want to secure financing. Because mobile homes are not traditional real estate, obtaining financing for one can be a challenge. Most traditional lenders won’t give you a mortgage to buy a mobile home, but there are other options to obtain mobile home loans.
What are the differences between mobile, modular and manufactured homes?
You’ll often hear the terms mobile, modular and manufactured used when discussing similar types of homes. While they’re related, there are some important differences between these three terms.
A mobile home is built at a factory before it’s brought to a property for setup. It may or may not use metal tie-downs in place of a traditional foundation. However, this explanation can actually apply to manufactured homes as well. So, what’s the difference?
Whether or not a dwelling is considered to be a mobile home depends on when it was made. Homes built in a factory before June 15, 1976 — the date the National Manufactured Housing Construction and Safety Standards Act went into effect — are known as mobile homes.
Under the law, manufacturers were required to follow new safety standards designed to protect people who purchased mobile homes built after that date.
Like mobile homes, manufactured homes are not built on site. They’re constructed in a factory and then brought to the home site. The homes can be set up at their permanent location on blocks, metal piers or a permanent foundation. Unlike mobile homes, manufactured homes are not intended to be moved once they’re set up.
According to the Housing Act of 1980, factory-built homes constructed on or after June 15, 1976, are considered manufactured homes. The construction of these homes is highly regulated by HUD under the Manufactured Home Construction and Safety Standards (HUD Code).
Additionally, these types of homes must meet local building standards for the communities where they will be located.
Companies that construct these homes must get their designs approved by a Design Approval Primary Inspection Agency, approved by HUD, whose job it is to make sure that the plans are safe for consumers and comply with the law.
Like mobile and manufactured homes, modular homes are built in a factory and shipped to the land where they will be set up. What sets them apart is that modular homes are more similar to traditional homes. They often include crawlspaces and basements and use a traditional foundation.
Modular homes can also be delivered in two or more pieces that are then put together in the desired arrangement. This feature is where they get their modular name. A local contractor will typically manage the process of joining these multiple pieces together to complete the construction of the home.
Finally, modular homes must be constructed to the same state, local or regional building codes as site-built homes.
Ways to obtain mobile home financing
Once you figure out the features of the mobile home that you want to buy and where you’re going to put it, it’s time to figure out how to finance it. There are a few options to consider if you need to borrow money to buy your mobile home.
For example, it’s possible to get a loan from the same sources as traditional mortgages, including FHA loans, VA loans and specialized manufactured home loans through Fannie Mae and Freddie Mac. These options tend to give you longer repayment terms. But depending on your situation, you may instead opt for a nontraditional path with a shorter term, which can include chattel loans and personal loans.
The Department of Housing and Urban Development (HUD) offers loan programs for mobile homes through the Federal Housing Administration loan program, including Title I and Title II loans.
Title I loans
A Title I manufactured home loan can be used to finance the purchase of a new or used manufactured home or to alter, repair or improve one. The down payment with this program can go as low as 5 percent.
Lenders can offer Title I mobile home loans even if the buyer doesn’t own or isn’t planning to purchase the land on which the manufactured home will stand. If the borrower doesn’t own (or isn’t buying) the land, they must provide a signed lease for a mobile home plot with an initial term of at least three years.
The loan program has other requirements relating to the terms of the loan.
Maximum loan amount:
- Manufactured home only: $69,678.
- Manufactured home lot: $23,226.
- Manufactured home and lot: $92,904.
- Home improvement loan: $25,000.
Maximum loan term:
- Manufactured home or manufactured home and lot: 20 years plus 32 days.
- Manufactured home lot: 15 years plus 32 days.
- Multiunit manufactured home and lot: 25 years plus 32 days.
Title II loans
This loan program insures loans that borrowers can use to finance a qualifying manufactured home, along with land, as long as it meets the requirements.
For example, you can only use a Title II loan if you plan to live in the manufactured home as your primary residence — real estate investors need not apply. Other requirements include:
- The home must have a floor area of 400 square feet or greater.
- The home must have been constructed after June 15, 1976.
- The loan must cover the home and the land on which it stands.
- The home must be classified as real estate, but not necessarily for state tax purposes.
- The home must be built and remain on a permanent chassis.
Down payments on a Title II loan can go as low as 3.5 percent, and terms can go as long as 30 years.
Some lenders offer Fannie Mae mortgages to borrowers who wish to finance a manufactured home through the MH Advantage program. To qualify, you will need to satisfy a number of eligibility criteria, including installing the home with a driveway and a sidewalk that connects the driveway, carport or detached garage.
In order to qualify for this program, the home must also meet certain construction, architectural design and energy efficiency standards similar to site-built homes.
The loans come with 30-year financing, and you may be able to secure them with a down payment as low as 3 percent. As an added benefit, interest rates on MH Advantage mortgages tend to be lower than those of most traditional loans for manufactured homes.
Borrowers who prefer conventional financing may also be able to obtain it for a manufactured home through the Freddie Mac Home Possible mortgage program.
Qualified borrowers may be able to choose between fixed-rate mortgages (15, 20 and 30 years) and 7/1 or 10/1 adjustable-rate mortgages. You may be able to secure a loan with as little as 3 percent down, and, in some cases, you can use gift or grant money to help cover your down payment.
If you belong to the military community, you may qualify for a loan insured by the Department of Veterans Affairs. You can get a loan through this program to buy a manufactured or modular home and put it on land you already own, buy both the home and the land at the same time or refinance a home you plan to transport to land that you own.
As with traditional VA mortgage loans, lenders can offer up to 100 percent financing on manufactured home loans through the program. You’ll need what’s called an affidavit of affixture, which proves that the property is attached to land that you own and meets certain local and VA requirements.
Loan terms can range from:
- 15 years plus 32 days for land purchased for a manufactured home you already own.
- 20 years plus 32 days for a loan on a manufactured home or on a single-unit manufactured home and lot.
- 23 years plus 32 days for a double-wide manufactured home.
- 25 years plus 32 days for a loan on a double-wide manufactured home and land.
A chattel loan is a special type of personal property loan that can be used to purchase a mobile home. These loans are designed for financing expensive vehicles like planes, boats, mobile homes or farm equipment, where the property guarantees the loan.
Even if you don’t own the land on which your home will be located, you might be able to secure financing with a chattel loan. As a result, they are a popular loan option for buyers who plan to rent a lot in a manufactured home community.
Some lenders offer chattel loans for manufactured home purchases that are insured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the Rural Housing Services (RHS) through the U.S. Department of Agriculture. But while you may be able to find lenders that offer both chattel loans and traditional mortgages, the two types of loans differ in a few ways.
For starters, chattel loans typically have higher interest rates — 0.5 to 5 percentage points higher on average than traditional mortgage rates.
Chattel loans have shorter terms than traditional mortgages, which can translate to higher monthly payments but could also help you to pay off your debt sooner. On the plus side, the closing process is usually faster and less restrictive with chattel loans than the closing process you would experience with a traditional mortgage.
Mobile homes are far cheaper than traditional homes, so you may be able to finance your purchase through a personal loan rather than a specialized loan.
Personal loans are flexible loans that you can use for almost any purpose. However, personal loan interest rates tend to be higher than those of other types of loans, such as mortgages or auto loans. The trade-off is that you don’t have to provide any collateral — which means you won’t lose your home if you default — and the application process tends to be shorter and involves less paperwork.
Another important advantage of personal loans over mortgages is that they’re typically cheap or free to set up, says Steve Sexton, CEO of Sexton Advisory Group. “There’s no costly title, escrow, or appraisal fees. And the lender has zero interest in or control over your home because the loan is not secured.”
Personal loan lenders usually offer maximum loans of $25,000 to $50,000, though some lenders will let you borrow $100,000 or more. If you see a lender offering a personal loan large enough for you to finance a mobile home, it might be a good way to borrow the money that you need.
Steps to obtain mobile home financing
If you’re wondering how to buy a mobile home and get the best financing, there are a few steps you should follow first.
1. Check your credit reports
Whenever you apply for any type of financing, a lender will consider your credit as part of your loan application. Clean credit histories and solid credit scores make it easier to secure loans and receive better rates and terms from lenders.
If you find mistakes when you check your credit reports, you can dispute them with the appropriate credit bureau — Experian, TransUnion or Equifax.
Why is this important: The better credit score you have, the lower your interest rate will likely be. This can save you thousands of dollars over the course of the loan.
2. Decide whether you’re buying land in addition to the mobile home
When you’re seeking a loan to finance a mobile home, the stability of the asset being financed is important, says Sexton. If you own the land and your mobile home has had the axle and wheels removed, which makes it less likely for the borrower to pick up and move, more lending institutions are open to financing the asset.
Why is this important: If you plan to rent a plot for your home, you’ll be eligible for fewer loans than if you plan to purchase the land the home will be placed on.
3. Figure out the specifics of the home that you want to purchase
The type of home you’re looking for will affect the loans you may be eligible to receive. For example, if you want to buy a double-wide manufactured home that costs $100,000 or more, you won’t be eligible for an FHA loan. In addition, older mobile homes may not qualify for financing at all.
Why is this important: All lenders have specific lending criteria based on the type and value of your home.
4. Start looking for financing options
Choose the type of loan (FHA, conventional, chattel, personal) that you’ll use and compare different lenders’ offerings.
Rates and fees can vary widely between lenders, so take the time to shop around. Try to find a loan that has low fees and low interest rates so you can spend as little as possible over the life of the loan.
Why is this important: Doing your research and shopping around can save you thousands of dollars over the life of the loan, as well as help you secure more favorable loan terms. In addition, searching for financing options early will help ensure that there is a loan available to help you make the purchase.
5. Submit your loan application
You’ll want to ensure that your application is as complete and transparent as possible. In addition, many lenders require a down payment, so be prepared to make a payment when you complete your application.
Why is this important: Having all of your application materials on hand and completing the entire application will improve your odds of qualifying and keep the process running smoothly.
Current interest rates
As with any loan, your loan’s interest rate will vary with a number of factors. Your credit score, your down payment size, the type of home and whether you’re buying land in addition to the mobile home will affect the amount that you pay.
To qualify for low manufactured home loan rates, you’ll want to make sure that your credit score is at least 700. You’ll need at least a 750 or higher to qualify for the best rates available.
|Type of loan||Typical rates||Typical minimum credit score||Typical terms|
|FHA||2.69%||500||Up to 30 years|
|Fannie Mae||Varies||620||Up to 30 years|
|Freddie Mac||Varies||620||Up to 30 years|
|Chattel||7.75%–10.5%||575||Up to 20 years|
|Personal||2.49%–36%||600||Up to 12 years|
Factors to consider when buying a mobile home
If you’re thinking about buying a mobile or manufactured home, you’ll want to consider a few factors to make sure that you select the option that is best for you, including location, size and whether to buy a new or used mobile home.
Just like traditional homes, mobile homes and manufactured homes are all about location. Before you think about anything else, you’ll want to figure out where you’re going to install your mobile home. The location you choose will have a big impact on the rest of the process.
“Purchasing a mobile home and finding the right location is just like buying a home,” says Sexton. “A good neighborhood is important.”
One option is to install the home on a piece of land that you already own. You may also opt to buy the land where your mobile home will be located. Just make sure that zoning regulations allow for the installation of mobile homes on the lot that you own or wish to purchase. Also, you should confirm that the lot is suitable for mobile homes and that the local utilities are equipped to connect a mobile home.
Another option you can consider is renting a plot of land in a mobile home community. This requires less money upfront but adds a monthly lot rent bill to your housing costs. Check with the manager of the community for restrictions on home features and size and to find available plots.
Mobile homes and manufactured homes come in a variety of sizes, so you’ll need to decide in advance how large you want your mobile home to be. Larger homes are more expensive and require larger lots. As a result, you’ll most likely need to borrow more if you want a larger home.
Mobile homes are usually classified by their width. You may see the terms single-wide and double-wide used. Single-wide homes are slightly under 15 feet wide, and double-wide homes are double that width. Both are usually about 70 feet long.
“Many towns don’t allow single wide mobile homes in their towns or city limits,” says Sexton. “Make sure you research the rules that might apply to your situation.”
New or used
Unlike traditional real estate, mobile and manufactured homes tend to lose value over time. That means you can get a discount if you buy a used mobile home. The trade-off is that used mobile homes will often have signs of age unless they’ve been maintained very well.
You’ll also want to do some upfront research about the site where you plan to place the mobile home. Some locations won’t allow the placement of homes that were produced before a specific date, which limits your options.
With an older mobile home purchase, you will likely also need to employ someone with knowledge and inspection skills to ensure that you buy a good home.
The bottom line
Mobile and manufactured homes can be a much more affordable option than a traditional home. But if you plan to purchase one, do your research to find out what financing options are available and understand the requirements to be eligible for the financing. You’ll also want to make sure that the home is not too old to qualify for a loan or mortgage and that you have a suitable location for the home.
FAQ about mobile home financing
What credit score is needed to finance a mobile home?
The higher your credit score, the easier it will be to qualify for a mobile home loan with competitive interest rates.
“FHA will finance with a 500 to 589 credit score and 10 percent down,” says Sexton. “Credit scores with 580 or above will only be required to have a deposit of 3.5 percent. The minimum credit score with Freddie Mac or Fannie Mae is 620. Various Chattel loan providers will require a credit score of as little as 575 credit score or as high as a 660.”
How long can I finance a mobile home?
The length of financing for your mobile home depends on the lender you use. However, you can expect to find loans of anywhere from five to 30 years, depending on the type of loan you choose.
Is it hard to finance a mobile home?
Because mobile homes depreciate in value over time, it can be more difficult to find a lender that offers manufactured home financing than if you were buying a traditional home. That said, there are still plenty of options available. Just be sure to do your due diligence to find the right one for you based on your creditworthiness, your financial situation and your needs and preferences.