Despite the modest cost of a manufactured home, it can be harder to qualify for a mortgage for one of these houses. Manufactured homes, also commonly referred to as mobile homes, are built off-site and affixed to a permanent chassis. Fewer lenders are in the business of providing loans for manufactured homes. As a result, would-be homeowners simply don’t have as many financing options.
Fortunately, those interested in a manufactured home have some options if they don’t meet conventional mortgage standards. One is a Federal Housing Administration (FHA) loan, which can be used to cover the home itself, a suitable lot to build it on, or both.
- A Federal Housing Administration (FHA) loan is an option for those seeking to buy a manufactured home who cannot qualify for a conventional mortgage.
- The government insures an FHA mortgage to protect the lender in case of default.
- FHA loans require homeowners to pay an up-front and annual premium on top of the typical loan amount.
How an FHA Manufactured Home Loan Works
The FHA has two loan programs for manufactured homes: one for borrowers who own the land that the home is on, and another for homes located in a mobile home park.
With an FHA mortgage, the government insures a loan provided by an approved private lender. If you default on your payments, the lender has the assurance that Uncle Sam will reimburse it for all or part of its losses. The good news is that FHA-approved mortgage providers are willing to take on borrowers who have a slightly higher risk profile.
Homeowners fund the mortgage insurance and pay both an up-front premium and an annual premium to the FHA on top of the loan amount. That can potentially make these loans a bit more expensive than other loans. But if a government-insured loan is your only way of moving into a new home, then the extra cost may be worth it.
An FHA mortgage must be used to finance a primary residence.
FHA Mobile Home Loan Requirements
Not every mobile home will meet the standards for an FHA loan. The house must have been built after June 15, 1976. Even if you modify an older structure to meet current regulations, you won’t be able to get a loan through the program.
Moreover, the residence must adhere to Model Manufactured Home Installation (MMHI) standards and comply with local and state guidelines. A red label on the exterior of each transportable section indicates that it meets MMHI requirements. The manufactured home must be classified as real estate, meaning that it has a permanent foundation.
The government also maintains standards relating to borrower eligibility. First, you must have sufficient money to make the down payment. You also need to prove that you have enough funds left over after other expenses to handle the monthly mortgage.
FHA Loan Terms and Rates
As with other FHA mortgages, there are caps on the loan amount for manufactured homes. As of the end of 2021, the most you can borrow is $92,904 for the home and lot together (the maximum is $69,678 for the home only and $23,226 for the lot). The maximum loan duration is 20 years for a mobile home or a single-section home and a lot. However, it falls to 15 years when financing just a lot. On the other hand, mortgages that cover a multi-section manufactured home and lot can last up to 25 years.
Because the FHA doesn’t actually lend you money for a mortgage—it only guarantees the loan—you get a loan from an FHA-approved lender, such as a bank or another financial institution. You’ll need to shop around to make sure that you get the best loan terms and rate. To find an approved lender, use the search tool on the U.S. Department of Housing and Urban Development (HUD) website. In general, as with any loan, the lower your credit score and down payment, the higher the interest rate you’ll pay.
If you have questions about the FHA program, HUD operates a voice-assisted hotline that can refer you to local counseling organizations. These housing agencies can help you better understand your options. The 24-hour HUD clearinghouse can be reached at (800) 569-4287, or you can search online for a HUD housing counseling agency.
Understanding Your Options
Keep in mind that the FHA is not your only option for U.S. government-insured loans. You also may be eligible for a Department of Veterans Affairs (VA) loan or one from the Department of Agriculture’s Rural Housing Service (RHS). In some cases, these may be better paths for those looking to buy a manufactured home, so it’s worth doing your research.
FHA loans are good choices for many people, but be aware that you don’t have to get a government-backed loan to avoid discrimination. Also, don’t let outdated stereotypes about mobile home owners discourage you from pursuing a cost-effective path to homeownership. Most mobile homes are sold through local retailers and dealers, which are typically good sources of referrals for both conventional and FHA mortgage providers.
Mortgage lending discrimination is illegal. If you think that you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps that you can take. One such step is to file a report with the Consumer Financial Protection Bureau or HUD.
Pros and Cons of FHA Loans
The FHA loan program was created to support low- and moderate-income homebuyers, particularly those who have limited cash saved for a down payment. It is easier to qualify for an FHA loan than for a conventional loan. With lower down payments and credit standards compared to many conventional loans, an FHA mortgage can be an attractive choice for mobile home buyers.
FHA loans are federally insured, meaning that lenders are protected if a borrower defaults on their mortgage. As a consequence, these lenders can offer more favorable terms, including lower interest rates, to borrowers who might not otherwise qualify for a home loan.
There are a few disadvantages to keep in mind when getting an FHA loan. There are limits on how much you can borrow. And remember that FHA mortgages will require mortgage insurance, both up front and annually, and often for the entirety of the loan term.
What is a manufactured home?
The U.S. Department of Housing and Urban Development (HUD) defines a manufactured home, also known as a mobile home, as one that is built to HUD code and displays a red certification label on the exterior. Manufactured homes are built in a plant and transported and placed on a permanent foundation.
What is a Federal Housing Administration (FHA) manufactured home mortgage?
A Federal Housing Administration (FHA) loan can be used to finance a manufactured home, a lot to build it on, or both. These loans are available for borrowers who own the land that the mobile home is on and for homes located in a mobile home park.
How much can I borrow to buy a mobile home?
For a manufactured home and lot, you can borrow up to $92,904. You can borrow up to $69,678 for just the home.
The Bottom Line
FHA loans do cover manufactured homes, the lot to build them on, or both. There are limits to how much you can borrow and there is the requirement to pay mortgage insurance. What's more the home itself must meet FHA standards to qualify for a loan. But one of the two FHA loan programs can be a good option for borrowers in a market where loans for these homes may not be as easy to find as loans for conventional homes.