Buying a Mobile or Manufactured Home
If you are looking to purchase a home at a lower cost, you might consider buying a mobile or manufactured home.
In 2020, the average cost of a manufactured home ranged from $54,300 up to $120,300. This is much less than the prices typically associated with purchasing a traditional house. There are also several financing options available to help you pay for your manufactured home.
Types of financing for mobile homes
Before you purchase a mobile home, it’s important to compare as many financing options as possible. This way, you can pick the type of loan best suited to your needs. While the term “mobile home” continues to be used, mobile homes became obsolete in 1976 due to changes in policies set by the Department of Housing and Urban Development (HUD). Manufactured home is the current, correct term to use for these types of homes.
Here are several mobile financing options to consider:
|Must Own Land||Loan Amount||Repayment Term||Minimum Credit Score|
|Personal Loan||No||$600 to $100,000|| 1 to 7 years|
(depending on lender)
|Varies depending on lender|
|FHA Title 1 Loan||No, but must have leased the land for at least 3 years if land isn’t owned||Home only: up to $69,678|
Lot only: up to $23,226Home and lot: up to $92,904
|15 to 25 years|
(depending on home and lot type)
|Fannie Mae Manufactured Housing loan||No, but home must be principal residence||Up to 97% of LTV (loan to value) ratio||Up to 30 years||620|
|Freddie Mac Mortgage||Yes||Up to 95% of LTV (loan to value) ratio||15 to 30 years||660|
|VA Loan||Yes||Depends on VA entitlement |
(full entitlement has no loan limit)
|Up to 25 years||None |
(some lenders might have higher credit restrictions because due to greater risk with manufactured homes)
|USDA Loan||Yes||Up to 100% financing||15 to 30 years||640|
|Chattel Mortgage||No||$14,000 minimum||15 to 23 years||575|
Let us take a look at each of these different options in more detail.
Best for: Smaller loan amounts
Personal loans can be used for almost any personal expense, including the purchase of a manufactured home, and are available from online lenders as well as traditional banks and credit unions.
These loans typically range from $600 to $100,000 or more, and they come with repayment terms of one to seven years, depending on the lender.
You’ll generally need good to excellent credit to qualify for a personal loan. A good credit score is usually considered to be 700 or higher. There are also several lenders that offer personal loans for bad credit, but these loans tend to come with higher interest rates compared to good credit loans.
FHA Title 1 loan
Best for: Buyers who want to finance both a manufactured home and lot
Title 1 loans are available to borrowers who want to refinance or purchase a manufactured home, a lot, or both. These loans are offered by lenders approved by the Federal Housing Administration (FHA) and are insured by the FHA.
With an FHA Title 1 loan, you can borrow up to $92,904 if you plan to finance both a manufactured home and a lot together. Loan maximums will be lower if you want to finance just a home or lot separately. Repayment terms for Title 1 loans range from 15 to 25 years, depending on the size of the home and type of lot.
Fannie Mae Manufactured Housing loan
Best for: Borrowers who want to finance a permanent residence
Fannie Mae backs two types of loans for manufactured housing: Standard Manufactured Housing (MH) for homes and MH Advantage. MH Standard applies to properties that don’t meet specific requirements while MH Advantage refers to properties that do.
With an MH loan, you can finance up to 97% of your loan-to-value (LTV) ratio. This is calculated by dividing the amount you borrow by the appraised value of the property. You will have up to 30 years to repay an MH loan.
Best for: Borrowers who want to pay for land and various fees alongside their mobile home (such as delivery, set up, and installation)
Freddie Mac also backs mortgages that can be used to purchase or refinance a manufactured home. These loans can cover up to 97% of a manufactured home’s LTV ratio and come with terms ranging from 15 to 30 years.
Unlike an FHA-insured loan, a mortgage from Freddie Mac can be used to purchase or refinance a primary or secondary residence.
Keep in mind that loan maximums and terms could differ if you use the loan to fund a secondary residence. Freddie Mac also allows borrowers to cover the purchase of land, the home, set up, and delivery all in one loan.
Best for: Veterans or their spouses
To qualify for a loan insured by the Department of Veterans Affairs (VA), you or your spouse must be an active or retired member of the U.S. military. Keep in mind that while VA loans for traditional homes come with no down payment, VA loans for manufactured homes require a 5% down payment.
Additionally, because manufactured home mortgages present a greater risk to lenders, you might be subject to stricter credit requirements.
Best for: Low-income borrowers who live in rural areas
The U.S. Department of Agriculture (USDA) offers a few mortgage programs to help low-income borrowers in rural areas purchase homes, including manufactured homes. These loans require no down payment and could be a good choice for borrowers with poor credit.
To qualify for a USDA loan, the manufactured home must be new and installed on a permanent foundation.
Best for: Borrowers who don’t own land
Unlike traditional mortgages, chattel mortgages can be used to finance a manufactured home if it’s not attached to a foundation. With this type of mortgage, the manufactured home itself is used as collateral to secure the loan.
These loans can also be used to purchase heavy equipment like tractors or farm equipment.
Keep in mind that chattel mortgages come with lower closing costs and fees than traditional mortgages, they also have higher interest rates as they’re considered a greater risk by lenders.