How to finance a mobile or manufactured home

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Mobile homes can offer more flexibility than traditional homes at a much lower cost. However, this doesn’t mean they’re a small expense. According to the U.S. Census Bureau, the average cost of a mobile home is $88,200, which is more than many people can afford to pay out of pocket.

If you’re in the market for a mobile home, you may be in search of financing. While most traditional lenders won’t give you a mortgage to buy one, there are other options available.

What are the differences between mobile, modular and manufactured homes?

You’ll often hear the terms mobile, manufactured and modular when discussing these similar types of homes. While they are related, there are some important differences between these homes.

Mobile home

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.

Whether a house is considered to be a mobile home depends on when it was made. Homes built in a factory before June 15, 1976, are known as mobile homes. This is when the U.S. Department of Housing and Urban Development (HUD) enacted the National Manufactured Housing Construction and Safety Standards Act.

After that date, new safety standards went into effect, which led to a new designation for these types of homes.

Manufactured home

Like mobile homes, manufactured homes are built in a factory. They 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 manufactured homes must get their designs approved by a HUD-approved Design Approval Primary Inspection Agency, which makes sure the plans are safe for consumers and comply with the law.

Modular homes

Like mobile and manufactured homes, modular homes are built in a factory and shipped to the land where they will be set up. However, 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 modules that are then put together on site in the desired arrangement. This feature is where they get their modular name. A local contractor typically manages the process of joining these multiple pieces together to complete the construction of the home.

Modular homes must be constructed to the same state, local or regional building codes as site-built homes.

Takeaway: Before you start shopping, understand the difference between a mobile, modular and manufactured home. While a mobile home may make sense for your friend, for example, you may be better off with a modular or manufactured home.

Ways to obtain mobile home financing

Once you decide on your mobile home’s features and where you’re going to put it, it’s time to figure out how to pay for it. There are a few options to consider when financing a mobile home.

For example, it’s possible to get a loan from the same sources as traditional mortgages, such as FHA and VA loans, as well as specialized manufactured home loans through Fannie Mae and Freddie Mac.

These mobile home financing options tend to give you longer repayment terms. Depending on your situation, you may opt for a nontraditional path with a shorter term. This could include chattel or personal loans.

FHA loans

HUD offers mobile home loans through the Federal Housing Administration loan program. This includes 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.

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. These homes will typically be placed in a manufactured home community or mobile home park. 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

Maximum loan term:

  • Manufactured home: 20 years
  • Single-wide manufactured home and lot: 20 years
  • Manufactured home lot: 15 years
  • Multi-unit manufactured home and lot: 25 years

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 for the home include:

  • Have a minimum floor area of 400 square feet or greater.
  • Be constructed after June 15, 1976.
  • Must be classified as real estate but not necessarily for state tax purposes.
  • Must be built and remain on a permanent chassis.
  • The loan must cover the home and the land on which it stands.

Title II loans cannot be used for manufactured homes on leased land in manufactured home communities or mobile home parks. Down payments on a Title II loan can go as low as 3.5 percent and terms can last as long as 30 years.

Fannie Mae

Some lenders offer Fannie Mae mortgages to borrowers who wish to finance a manufactured home through the MH Advantage program. To qualify, you 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.

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.

Freddie Mac

You may be able to obtain conventional financing 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, use gifted or grant money to help cover your down payment.

VA loans

If you belong to the military community, you may qualify for a loan insured by the Department of Veterans Affairs. You can get a VA loan to buy a manufactured or modular home and put it on land you already own, buy both the home and land at the same time or refinance a home you plan to transport to land you own.

Lenders can offer up to 100 percent financing on manufactured home loans. You’ll need an affidavit of affixture, which proves the property is attached to land you own and meets certain local and VA requirements.

Loan terms can range from:

  • Lot for a manufactured home you already own: 15 years plus 32 days
  • Single-wide manufactured home: 20 years plus 32 days
  • Single-wide manufactured home and lot: 20 years plus 32 days
  • Double-wide manufactured home: 23 years plus 32 days
  • Double-wide manufactured home and lot: 25 years plus 32 days

Chattel loans

A chattel loan is a special type of personal property loan you can use to purchase a mobile home. These mobile home 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 Service (RHS) through the U.S. Department of Agriculture. While you may be able to find lenders that offer both chattel loans and traditional mortgages, these two loan types 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 pay your debt off 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.

Personal loans

Mobile homes are far cheaper than traditional homes, so you may be able to finance your purchase through a personal loan.

Because personal loans are flexible loans you can use for almost any purpose, they can serve as mobile home loans. 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 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 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 financing a mobile home, it might be a good way to borrow the money that you need.

Takeaway: There are multiple ways you can cover the cost of a mobile or manufactured home. When you compare mobile home financing options, consider the type of home you want to buy, how much money you need to borrow, when you plan to pay back your loan, and what type of interest rate you prefer.

5 steps for getting 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 it’s important: The better your credit score, 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 financing a mobile home, the stability of the asset being financed is important, Sexton says. If you own the land and your mobile home has had the axle and wheels removed, it’s less likely that you’ll pick up and move. This may make more lending institutions open to financing a mobile home.

Why it’s 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 it’s 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 or personal) you’ll use and compare different lenders’ offerings.

Mobile home interest rates as well as manufactured home loan 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 interest rates so you can spend as little as possible over the life of the loan.

Why it’s 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 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 it’s important: Being able to submit a complete application will improve your odds of qualifying and keep the process running smoothly.

Takeaway: Make sure you’re well-prepared to finance a mobile or manufactured home. By doing so, you’re more likely to secure the best rate and most favorable terms while expediting the process.

Current interest rates

As with any loan, mobile home interest rates and manufactured home loan rates will vary based on a number of factors. Your credit score, down payment amount and type of home and whether you’re buying the land will affect the amount you pay.

To qualify for low mobile home interest rates, make sure your credit score is at least 700. You’ll need a score of 750 or higher to qualify for the best rates available.

Type of loan Typical rates Typical minimum credit score Typical terms
FHA 3.89% 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 3%–36% 600 Up to 12 years

Factors to consider when buying a mobile home

Now that you know how to buy a mobile home or manufactured home, you’ll want to consider a few factors to make sure you select the option that is best for you, including location, size and whether to buy a new or used property.

Location

Just like traditional homes, mobile homes and manufactured homes are all about location. Before you think about anything else, 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,” Sexton says. “A good neighborhood is important.”

One option is to install the home on a piece of land you already own. You may also opt to buy the land where your mobile home will be located. Just make sure zoning regulations allow for the installation of mobile homes on the lot you own or wish to purchase. Also, 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 rent bill for the lot to your housing costs. Check with the manager of the community for restrictions on home features and size and to find available plots.

Size

Mobile homes and manufactured homes come in a variety of sizes, so you’ll need to decide in advance what size home you want. Larger homes are more expensive and require larger lots. As a result, you may 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 or single unit and double-wide or double unit 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 town or city limits,” Sexton says. “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 up-front 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.

Takeaway: Remember, not all mobile or manufactured homes are created equal. Take the time to explore all your options so you can make the best decision for your lifestyle and budget.

The bottom line

Mobile and manufactured homes can be much more affordable options than a traditional site-built home. But if you plan to purchase one, do your research to find out what financing options are available and understand the eligibility requirements. You’ll also want to make sure the home is not too old to qualify for a loan or mortgage and that you have a suitable location for it.

Frequently asked questions

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,” Sexton says. “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 mobile home financing depends on the lender. However, you can expect to find loans of anywhere from five to 30 years, depending on the loan type.

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. But 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, financial situation, needs and preferences.

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Written by
TJ Porter
Contributing writer
TJ Porter is a contributing writer for Bankrate. TJ writes about a range of subjects, from budgeting tips to bank account reviews.
Edited by
Loans Editor