Mobile or manufactured homes can provide an affordable and flexible housing option for those looking to own a home. However, financing such homes can be a challenge. Fortunately, several options are available for mobile home loans, which can help buyers secure financing and achieve their dream of homeownership. In this article, we'll explore the various financing options available for mobile and manufactured homes, their benefits and drawbacks, and some tips for choosing the right one for your specific needs and budget.

When Comparing Mobile, Modular, and Manufactured Homes, What Distinguishes Them from Each Other?

When discussing types of homes, you may hear the terms mobile, modular, and manufactured used interchangeably. Although they are related, they have significant differences that are important to understand.

Mobile Homes

Manufacturing of mobile homes takes place in factories, which deliver them fully assembled to a property site. They may or may not use metal tie-downs instead of a traditional foundation. It's worth noting that this description can also be relevant to manufactured homes. The distinction between a mobile home and a manufactured home depends on the date of construction. Houses constructed in a factory before June 15, 1976, are known as mobile homes.

Following the enactment of the National Manufactured Housing Construction and Safety Standards Act by the U.S. Department of Housing and Urban Development or HUD , new safety standards created a new classification for such homes. There is usually no crawl space or basements in mobile homes because they are built on metal frames. They are available in standard sizes such as single-wide (500 to 1,000 square feet) or double-wide (1,000 to 2,200 square feet). Their average cost ranges from $10,000 to $50,000. Suppose a person is searching for an affordable pre-built home. In that case, mobile homes may be a suitable option compared to newly manufactured homes.

Manufactured Homes

Manufactured homes are also built in a factory and then delivered to the property, entirely constructed. They can be made on a permanent foundation using blocks, metal piers, or other suitable methods. Unlike mobile homes, they cannot be moved once installed. Based on the Housing Act 1980, factory-built homes built after June 15, 1976, are considered manufactured homes. The construction of these homes is subjected to strict regulations by HUD under the Manufactured Home Construction and Safety Standards (HUD Code). Therefore, they must comply with specific safety and quality standards before being placed in the market. Before being placed in a community, mobile and manufactured homes must meet the local building standards and codes before being placed in a community.

Companies constructing manufactured homes must get their designs approved by a HUD-approved Design Approval Primary Inspection Agency, ensuring that consumers are safe and the plans comply with the law. It is standard for manufactured homes to be built on a metal frame rather than having a crawl space or basement. They are available in standard sizes such as single-wide (500 to 1,000 square feet) or double-wide (1,000 to 2,200 square feet). Their average cost is approximately $87,600. A suitable option for those looking for a new home that requires little to no on-site setup or construction is a manufactured home.

Modular Homes

The construction process of modular homes takes place in a factory. Then the individual modules are transported to the building site, where they are put together. However, they are more similar to traditional homes than mobile or manufactured homes. Modular homes are typically built with a conventional foundation and can include crawlspaces and basements. Modular homes are also constructed in separate modules, which are transported to the site and assembled into the desired configuration. It is the source of their name, modular.

Usually, the process of joining these modules and completing the home's construction is handled by a local contractor. For modular homes to meet the same safety, quality, and durability requirements as site-built homes, state, local, or regional building codes must be followed. They are available in typical sizes of approximately 900 to 2,000 square feet and have an average cost of $270,000. Modular homes offer a viable option for those who want a traditional-style home that can be customized according to their preferences, all while keeping the cost lower than that of a site-built home.

Five steps for getting mobile home financing

For the mobile home buying process to be more accessible, there are five crucial steps you need to take if you're planning on buying one and searching for financing options that are best for your needs.

Step 1: Check Your Credit Reports

Check your credit reports with Experian, TransUnion, and Equifax before applying for financing. Lenders will scrutinize your credit history and credit scores before approving your loan. A clean credit history and a solid credit score can help you secure loans and receive better rates and terms from lenders. Disputing errors on your credit reports is possible by contacting the appropriate credit bureau.

Why It's Important: A good credit score will help you save thousands of dollars over the loan's term, as it affects the interest rate that you're likely to receive on the loan you're applying for.

Step 2: Determine Whether You're Buying Land in Addition to the Mobile Home

When financing a mobile home, the asset's stability is essential. Financing will likely be approved if you own the land and have a permanent foundation for your mobile home. You will have fewer loan options if you rent your plot of land instead of purchasing it.

Why It's Important: Owning the land where you will put your mobile home may make it easier to secure financing.

Step 3: Assess the Specifics of the Home You Want to Purchase

The type and cost of the home you're planning to buy will determine the loans you may qualify for. You may not be eligible for an FHA loan if you want to buy a double-wide manufactured home that costs $100,000 or more. Furthermore, financing may not be available for older mobile homes.

Why It's Important: Depending on the type and value of your home, lenders have specific lending criteria.

Step 4: Search for Financing Options

Start looking for financing options after choosing the home you want to purchase. You'll need to select the loan type (FHA, conventional, chattel, or personal) you want and compare different lenders' offerings. Interest rates and fees can vary significantly between lenders, so you should shop around for a loan with low fees and interest rates.

Why It's Important: When you research and compare financing options, you can save thousands of dollars over the life of the loan and secure more favorable terms. It is also essential to start your search early to ensure that a loan will be available to assist you in purchasing.

Step 5: Submit Your Loan Application

When you're ready to apply for a loan, ensure your application is complete and transparent. If you apply for a loan, you'll likely have to pay a down payment.

Why It's Important: Submitting a complete application improves your chances of qualifying and keeps the process running smoothly.

Different Loan Options Available for Mobile and Manufactured Homes

If you want to finance a mobile or manufactured home, you have a few options. Let's explore each one, along with their pros and cons.

Conventional Loans

Most lenders only offer conventional loans if mobile homes and manufactured homes are considered real estate. Fannie Mae and Freddie Mac also offer specialized loans for qualifying properties that meet specific criteria.

Fannie Mae

With Fannie Mae's MH Advantage® program , buyers can finance manufactured homes for up to 30 years with down payments as low as 3% and terms of up to 30 years. However, your home must meet specific criteria, such as being at least 12 feet wide, having 600 square feet of living space at a minimum, and not being on leased land.

Freddie Mac

If you meet Freddie Mac's requirements, you can also apply for a conventional loan for manufactured homes. Like Fannie Mae's initiative, the dwelling must be constructed on a permanent chassis, regarded as real property, and encompass a minimum of 400 square feet of livable area.

Although not all lenders offer financing for mobile homes or manufactured homes, both Fannie Mae and Freddie Mac provide conventional loans for qualified properties as a conventional loan option.

FHA Loans

The Federal Housing Administration (FHA) provides fixed-interest rate home loans with lower credit, debt-to-income ratio, and down payment requirements, making them popular with first-time home buyers. FHA also offers manufactured home loans known as Title I and II.

Title I loans are designed to buy manufactured homes but cannot be used to purchase the land they stand on. However, these loans have some stipulations, such as the property being your primary residence, meeting the FHA guidelines before placing mobile homes on a rental site and having access to utilities. Title I loans tend to have shorter terms and lower loan limits.

A manufactured home and its land can be purchased with a Title II loan, but not in mobile home parks or leased land. Only manufactured homes built after 1976 that meet specific requirements qualify for this type of financing, which also requires the house to count as real property.

VA Loans

Veterans and qualifying active duty service members can also get a VA loan  to invest in a manufactured home, including the land it sits on. VA loans offer several benefits, including the requirement of no money down and avoiding paying mortgage insurance. However, the home must be on a permanent foundation, meet HUD guidelines, and be purchased with the land underneath it. Mobile or manufactured homes not on permanent foundations don't qualify.

Chattel Loans

It is possible to use a chattel loan to purchase various types of property, such as mobile homes, manufactured homes, or modular homes. However, these loans have shorter terms, lower loan limits, and hold the financed property as collateral, making them a risky option if you default on payments.

Personal Loans

If you can't find financing elsewhere, you can finance a manufactured or mobile home using a personal loan. There are generally no restrictions on how your home looks for personal loans, so you may still qualify even if your mobile home lacks a permanent foundation. However, having bad credit is costly since personal loan interest rates seem higher for people with poor credit.

Personal loans can be the easiest way to buy a manufactured home for home buyers who need to be convinced traditional financing is the right fit or for those interested in properties that don't meet the minimum requirements. With the money, you can purchase any manufactured home without worrying about loan restrictions.

FAQs About Mobile Home Loans

Do all lenders issue mobile home loans?

The availability of mobile home loans will depend on the type of mobile home you're purchasing. Suppose you're buying a mobile home that will not be attached to a permanent foundation. In that case, you'll need to find a lender specializing in chattel loans or mortgages for mobile homes that can be moved. It's best to speak with your home loan expert to discuss your options and find the right lender.

When I apply for a mobile home loan, what interest rate should I expect?

Interest rates for a mobile home loan will depend on the type of mobile home you're buying. Suppose you're purchasing a mobile home that's on a permanent foundation. In that case, you can expect interest rates similar to those of a conventional mortgage for a standard home. However, you may have to pay a higher interest rate to move your manufactured home. You will receive a different interest rate depending on your credit score and financial situation.

Can you get financing for a single-wide home?

Generally, yes, but every lender has different requirements. Some lenders may have minimum square footage requirements that the home must meet to qualify for financing. Be sure to inform your lender of the type of home you're interested in and explore your loan options.

What is the repayment period for my loan?

The repayment term of your loan will depend on the lender and the type of mobile home you're financing. If you're purchasing a mobile home on a permanent foundation, loans typically have terms ranging from 15 to 30 years. However, if you're using a chattel or personal loan, you'll usually have a shorter repayment period.

Do mobile homes have a more challenging time getting financing than traditional homes?

Financing a mobile home can be more challenging than financing a traditional home. However, with good financial standing and a lender experienced in manufactured and mobile home loans, you are more likely to succeed. Do your research and understand the loan requirements and options available to you.

The Bottom Line

Securing financing for a mobile or manufactured home can be challenging, particularly if you intend to use a mortgage. Many lenders do not classify mobile or manufactured homes as real property. Therefore, you must meet numerous requirements and stipulations to qualify for a mortgage.

Stay calm if you cannot meet these requirements, as there are plenty of other financing options, including personal and chattel loans. Consider researching all your financing options before purchasing a mobile or manufactured home to determine the most suitable one for your needs.