Manufactured and Mobile Home Loans Explained

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Updated on Tuesday, May 5, 2020

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Buying a mobile home is a more affordable alternative to a traditional site-built home, but mobile home loans can be confusing.

How you finance a mobile home (or manufactured home, as they’re more commonly called today) depends on whether you plan to own the land the home sits on.

Are you buying a manufactured, mobile or modular home?

The terms manufactured, modular and mobile home are often used interchangeably, but there are differences. All of them refer to a home built in a factory or controlled environment and moved to a location of your choice. Unless you’re buying a mobile home that was built before 1976, chances are that you’re actually buying a manufactured or modular home.

Manufactured homes must meet certain standards set by the U.S. Department of Housing and Urban Development (HUD) in 1976. Today, you have considerably more options for manufactured home loans than for mobile home loans.

The table below provides an overview of the construction differences, and manufactured and mobile home financing options for each type of structure.

Type of home

How it’s built

Foundation requirement

Financing options

Manufactured homeBuilt in a factory after June 15, 1976

Moved in sections

Affixed to a permanent chassis
Typically attached to a permanent foundationConventional loans
FHA loans
VA loans
USDA loans
Retail installment contracts
Mobile homeBuilt in a factory before June 15, 1976Not typically attached to a permanent foundationPersonal loans
Chattel loans
Modular homeBuilt in a controlled (factory-like) environment

Same building code standards as site-built homes
Usually attached to a permanent concrete foundationConventional loans
FHA loans
VA loans
USDA loans
Construction-to-permanent loans
Retail installment contracts

Types of manufactured home loans

Whether you need mobile home financing for bad credit or a loan with a low down payment, you have options. Most manufactured home loan programs require you to attach the home to land you own with a permanent foundation, however, some allow financing on rented or leased land.

Conventional manufactured home loan programs

Lenders now offer more manufactured home loan options because the lower cost of factory-made homes gain popularity amid a shortage of affordable housing. Fannie Mae and Freddie Mac created the following programs to help conventional lenders meet the growing demand for manufactured home loans.

Fannie Mae MH Advantage®. Borrowers can choose from a 30-year fixed and 7/1 or 10/1 adjustable-rate mortgages (ARMs) with a down payment as low as 3%.

Freddie Mac manufactured home loans. Similar to the Fannie Mae MH Advantage loan, you’ll have 7/1, 10/1 and 30-year fixed-rate options to choose from, but you’ll need at least a 5% down payment.

FHA manufactured home loans with owned land

Loans insured by the Federal Housing Administration (FHA) can be used to purchase a manufactured home affixed to a permanent foundation on land you own. The home must be at least 400 square feet and be a single-family property.

FHA Title 1 loans for manufactured homes on leased land

You may be able to qualify for a loan insured by the FHA’s Title 1 program if you want to buy a manufactured home and place it on leased land. You’ll need at least a 500 credit score for a 5% down payment. A credit score below 500 will require at least a 10% down payment.

USDA manufactured home loans

If you’re purchasing a home in a rural area, you may be able to buy a new manufactured home with land using a loan backed by the U.S. Department of Agriculture (USDA). In most cases, no down payment is required, but there are income restrictions.

VA manufactured home loans

The U.S. Department of Veterans Affairs (VA) guarantees manufactured home loans made to active-duty military service members, reservists, veterans and eligible spouses. You’ll need at least a 5% down payment to buy a manufactured home, and you’ll have to choose from a 15- to 25-year payoff term, depending on the land and home package you choose.

Chattel loan

You don’t need to own the land your home sits on to get a chattel loan. The word “chattel” refers to personal property you can move, and a chattel loan works much like a car loan. Many banks specialize in mobile home loans that are chattel mortgages.

Retail installment contract

Manufactured home retailers offer installment contracts that allow you to pay the retailer directly, rather than applying with a mortgage lender or a bank. Down payment and closing cost requirements vary depending on the retailer.

Construction-to-permanent loan

Some lenders may offer an option for a short-term construction loan that converts to a permanent loan after the home is assembled and attached to land. The USDA’s no-down-payment construction loan is one example of this type of mortgage.

Minimum requirements for a manufactured home loan

The minimum mortgage requirements for mobile and manufactured home loans vary from program to program. The table below breaks down the most important qualifying guidelines for each type of manufactured home loan.

 Conventional loanRegular FHA loanFHA Title 1 loanUSDA loanVA loanChattel loanRetail installment contract
Minimum credit score620500-579 with 10% down

580 and up with 3.5% down
500 with 5% down

<500 10% down
640No minimum500 with 5% down

< 500
10% down
Varies by retailer
Down payment3% Fannie Mae

5% Freddie Mac
3.5%-10%5%-10%0%0%5%-10%Varies by retailer
Do you need to own land?YesYesNoYesYesNoNo
Permanent foundationYesYesNoYesYesNoNo
Minimum size600 sq. ft.400 sq. ft.400 sq. ft.400 sq. ft.*None400 sq. ft.Depends on retailer
Can home be moved?YesNoYesNot after it’s affixedNot after it’s affixedYesYes
*The manufactured home must be less than a year old to be eligible for USDA financing

Manufactured home loans on owned vs. rented land

Pros of manufactured home loans on owned land

  • You’ll pay lower interest rates. Standard mortgage programs typically offer lower rates than chattel loans if the property is attached to land you own.
  • You can choose longer repayment terms. You’ll have up to 30 years to repay your loan in most cases.
  • You won’t make a separate payment for land rent or lease. Your monthly payment includes the cost of the home and land.
  • You’ll have more title rights as a real estate owner if you default. Manufactured home lenders must follow state foreclosure laws, with strict timelines that allow you to bring payments current and save your home. Personal property repossession laws may allow a creditor to take your home without a court process, similar to when a repossession agent takes back a car.
  • You own both the home and land it sits on. Owning a manufactured home and land means you won’t have to worry about rent increases. Land values typically increase with time, helping you build equity.

Cons of manufactured home loans on owned land

  • You may be required to choose a shorter term. Some loan programs require you to pay off a manufactured home loan faster. For example, if you want to buy land for a manufactured home you already own, the VA requires that you pay it off in 15 years and 32 days.
  • You’ll pay a higher property tax bill. Over time, property taxes usually rise, adding to your monthly payment. However, you may be able to write off the expense if you itemize your deductions.
  • You’ll borrow more. When you buy a manufactured home plus land, you’ll need more money than if you just bought the home. That means a higher payment and closing costs.

How to find manufactured home mortgage lenders

Not all mortgage lenders offer programs for manufactured homes, and manufactured home mortgage rates may vary widely between companies. Ask the mortgage broker or loan officers you speak with about any restrictions on the manufactured home loans they offer.

Here are options to help you find manufactured home financing companies:

  • Use the HUD lender list search page to find FHA-approved lenders in your area.
  • Use the Manufactured Housing Institute’s search tool for a list of lenders.
  • Check out Fannie Mae’s list of manufactured home lenders.

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