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Mortgage

Manufactured and Mobile Home Loans Explained

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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.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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Mortgage

How to Recover From Missed Mortgage Payments

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understanding good faith estimate vs loan estimate
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Can you bounce back from a missed mortgage payment or two? The answer is yes, but there’s work involved. After all, your payment history has the greatest impact in determining your credit score.

Falling behind on your mortgage payments can affect your credit and finances, and you could lose your home to foreclosure. It’s critical to be proactive and not wait until it’s too late to get help.

How missed mortgage payments affect your credit

In most cases, mortgage lenders give you a 15-day grace period before charging a fee — often around 5% of the principal and interest portion of your monthly payment — for late payments. But your credit history typically isn’t impacted until you’re at least 30 days behind on a mortgage payment. At this point, your mortgage servicer may report your late mortgage payment to the three major credit reporting bureaus: Equifax, Experian and TransUnion.

Your credit score could drop by 60 to 110 points after a late mortgage payment, depending on where your score started, according to FICO research. Being 90 days late on your loan could lower your score by another 20 points or more.

It can take up to three years to fully recover from a credit score drop after being a month behind on your mortgage, FICO’s research found. Once you’re three months behind on your mortgage, that time can increase to seven years.

Recovering from missed mortgage payments

Falling behind on your mortgage can be a frustrating and scary experience, particularly if you’re facing the threat of foreclosure. Here are some options to help you get back on track after missed mortgage payments:

  • Repayment plan. Your loan servicer agrees to let you spread out your late mortgage payments over the next several months to bring your loan current. When your upcoming payments are due, you’d also pay a portion of the past-due amount until you catch up.
  • Forbearance. Your servicer temporarily reduces or suspends your monthly mortgage payments for a set amount of time. Once the mortgage forbearance period ends, you’ll repay what’s owed by one of three ways: in a lump sum, a repayment plan or by modifying your loan.
  • Modification. A loan modification changes your loan’s original terms by extending your repayment term, lowering your mortgage interest rate or switching you from an adjustable-rate to a fixed-rate mortgage. The goal is to reduce your monthly payment to a more affordable amount.

Be proactive about getting back on track and reaching out to your lender for help instead of waiting until you get late payment notices. If you think you’ll be behind soon or are already a few days behind, make contact now and review your options.

Extra help for homeowners affected by COVID-19

If you’re behind on mortgage payments because of a financial hardship due to the coronavirus pandemic, you may qualify for a mortgage relief program through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Homeowners who have federally backed mortgages, and conventional loans owned by Fannie Mae or Freddie Mac, can request mortgage forbearance for up to 180 days. They can also request an extension for up to an additional 180 days.

Federally backed mortgages include loans insured by the:

  • Federal Housing Administration (FHA)
  • U.S. Department of Agriculture (USDA)
  • U.S. Department of Veterans Affairs (VA)

Reach out to your mortgage servicer to request forbearance. Even if your loan isn’t backed by a federal government entity, Fannie Mae or Freddie Mac, your servicer may offer payment relief options. You can find your servicer’s contact information on your most recent mortgage statement.

How many mortgage payments can you miss before foreclosure?

Your lender can begin the foreclosure process as soon as you’re two months behind on your mortgage, though it typically won’t start until you’re at least 120 days late, according to the Consumer Financial Protection Bureau. Still, it’s best to check your local foreclosure laws since they vary by state.

Here’s a timeline of how missed mortgage payments can lead to foreclosure.

30 days late

Your lender or servicer reports a late mortgage payment to the credit bureaus once you’re 30 days behind. Your servicer will also directly contact you no later than 36 days after you’re behind to discuss getting current.

45 days late

You’ll receive a notice of default that gives you a deadline — which must be at least 30 days after the notice date — to pay the past-due amount. If you miss that deadline, your servicer can demand that you repay your outstanding mortgage balance, plus interest, in full.

Your mortgage servicer will also assign a team member to work with you on foreclosure prevention options. This information will be communicated to you in writing.

60 days late

Once you’re 60 days late, expect more mortgage late fees, as you’ve missed two payments. Your servicer will send you another notice by the 36th day after the second missed payment. This same process applies for every month you’re behind.

90 days late

At 90 days late, your servicer may send you a letter telling you to bring your mortgage current within 30 days, or face foreclosure. You’ll likely be charged a third late fee.

120 days late

The foreclosure process typically begins after the 120th day you’re behind. If you live in a state with judicial foreclosures, your loan servicer’s attorney will file a foreclosure lawsuit with your county court to resell the home and recoup the money you owe. The process may speed up in nonjudicial foreclosure states, because your lender doesn’t have to sue to repossess your home.

You’re notified in writing about the sale and given a move-out deadline. There’s still a chance you can keep your home if you pay the amount owed, along with any applicable legal fees, before the foreclosure sale date.

Can you get late mortgage payment forgiveness?

If you’ve otherwise had a good payment history but now have one missed mortgage payment, you could try writing a goodwill adjustment letter to request that your servicer erase the late payment information from your credit reports.

Your letter should include:

  • Your name
  • Your account number
  • Your contact information
  • A callout of your good payment history prior to missing a payment
  • An explanation of what led to the late mortgage payment
  • The steps you’re taking to prevent late payments in the future

End the letter by requesting that your servicer remove the late payment from your credit reports, and thank your servicer for their consideration. Print, sign and mail your letter to your servicer’s address.

The letter is simply a request; your servicer isn’t required to grant late mortgage payment forgiveness. If your servicer agrees to remove the late payment info from your credit reports, your credit scores may eventually increase — so long as you continue to make on-time payments.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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Mortgage

What Is the Minimum Credit Score for a Home Loan?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you’re hoping to become a homeowner, your credit score may hold the keys to realizing that dream. Knowing the minimum credit score needed for a home loan gives you a baseline to help decide if it’s time to apply for a mortgage, or take some steps to boost your credit first.

It’s possible to get a mortgage with a score as low as 500 if you can come up with a 10% down payment. Keep reading to learn the minimum credit score requirements for the most common loan programs.

What are the minimum credit scores for home loans?

Your credit score plays a big role in determining whether you qualify for a mortgage and what your interest rate offers will be. A higher credit score means you’ll likely get a lower rate and a lower monthly mortgage payment.

There are four main types of mortgages: conventional loans, and government-backed loans insured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA). Conventional loans, which are the most common loan type with guidelines set by Fannie Mae and Freddie Mac, have a credit score minimum of 620. Although some loan programs don’t specify a minimum credit score needed to qualify, the approved lenders who offer them may set their own minimum requirements.

The table below features the minimum credit scores for these home loans, along with minimum down payment amounts and for whom each of the loans is best.

Loan type

Minimum credit score

Minimum down payment

Who it’s best for

Conventional6203%Borrowers with good credit
FHA500-579 with 10% down payment
580 with 3.5% down payment
10% with a score of 500-579
3.5% with a minimum score of 580
Borrowers who have bad credit and are purchasing a home at or below their area FHA loan limits
VANo credit minimum, but 620 recommendedNo down payment requiredActive-duty service members, veterans and eligible spouses with VA entitlement
USDA640No down payment requiredBorrowers in USDA-eligible rural areas with low- to moderate-incomes

What is a good credit score to buy a house?

Meeting the minimum score requirement for a home loan will limit your mortgage options, while higher credit scores will open the doors to more attractive rates and loan terms. A good credit score can also provide you with more choices for home loan financing.

  • 740 credit score. You’ll typically get your best interest rates for a conventional mortgage with a 740 (or higher) credit score. If you make less than a 20% down payment, you’ll pay for private mortgage insurance (PMI). PMI protects the lender in case you default on your home loan.
  • 640 credit score. Rural homebuyers need to pay attention to this benchmark for USDA financing. Exceptions may be possible with proof that the new payment is lower than what you’re paying for rent now.
  • 620 credit score. The bare minimum credit score for conventional financing comes with the largest mark-ups for interest rates and PMI.
  • 580 credit score. This is the bottom line to be considered for an FHA loan with a 3.5% down payment.
  • 500 credit score. This is the lowest credit score you can have to qualify for an FHA loan, but you must put 10% down to qualify.

Annual percentage rates by credit score

Your mortgage rate is a reflection of the risk lenders take when they offer you a loan. Lenders provide lower rates to borrowers who are the most likely to repay a mortgage.

Here’s a glimpse of the annual percentage rates (APRs) and monthly payments lenders may offer to borrowers at different credit score tiers on a $300,000, 30-year fixed loan. APR measures the total cost of borrowing, including the loan’s interest rate and fees.

FICO Score

APR

Monthly Payment

760-8503.011%$1,267
700-7593.233%$1,303
680-6993.410%$1,332
660-6793.624%$1,368
640-6594.054%$1,442
620-6394.6%$1,538
*Based on national average rate data from myFICO.com for a $300,000, 30-year, fixed-rate loan as of May 4, 2020.

As the credit score ranges fall, the interest rates are higher. Borrowers with a score of 760 to 850, the highest range, saw an average monthly payment of $1,267. Borrowers in the lowest credit score tier of 620 to 639 saw their monthly payment jump to $1,538. The extra $271 in monthly payments adds up to an additional $97,560 in interest charges over the life of the loan.

Steps for improving your credit score

Now that you have an idea of the extra cost of getting a minimum credit score mortgage, follow some of these tips that may help boost your score.

  • Make payments on time. It may seem obvious, but recent late payments on credit accounts hit your scores the hardest. Set your bills on autopay if possible to avoid forgetting to pay one.
  • Pay off balances monthly. Try to pay your entire balance off each month to show you can manage debt responsibly.
  • Keep your credit card balances low. If you do carry a credit card balance, charge 30% or less of the available credit limit on each account.
  • Have a mix of different credit types. Mortgage lenders want to see you can handle longer-term debt as well as credit cards. A car loan or personal loan will help demonstrate your ability to budget for installment debt payments over time.
  • Avoid applying for new accounts. A credit inquiry tells your lender you applied for credit. Even if you were applying to get your best deal on a credit card or car loan, multiple inquiries could drop your scores, and give a lender the impression you’re racking up debt.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.