This type of financing can put mobile home ownership within reach for many
Marguerita is a Certified Financial Planner (CFP®), Chartered Retirement Planning Counselor (CRPC®), Retirement Income Certified Professional (RICP®), and a Chartered Socially Responsible Investing Counselor (CSRIC). She has been working in the financial planning industry for over 20 years and spends her days helping her clients gain clarity, confidence, and control over their financial lives.
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.
- An 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 upfront 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. https://rksloans.com/installment-loans-ks/ 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 upfront 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, the extra cost may be worth it.
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 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 about $92,904 for the home and lot together (the maximum for the home only is $69,678 and the lot $23,226). 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.