Buying a mobile home is a much more affordable option than a buying a traditional home. That being the case, there are more loan options to you when you buy one. Just be sure to research a bit to understand the difference between the various loans. And make sure that the mobile home is not too old to qualify for a mortgage loan and that you have a suitable location for the home. Use this calculator to estimate your monthly payment for a mobile home.
Ways to Pay for a Mobile Home
Owning a mobile home is a great option for some families. Also known as manufactured homes, mobile homes are highly versatile and more affordable than homes built on a permanent foundation. The size of mobile homes can vary from single-wide to double-wide to multi-wide homes, and can range anywhere from 700 square feet to 4,500 square feet.
Because of the varying sizes, as well as varying locations, the price of mobile homes is not standard. Just as with traditional homes, the upkeep and upgrades can make a big difference in cost. While you can expect the purchase price of a mobile home to be more affordable, chances are you still might need financing options to purchase the mobile home.
Because mobile homes are considered personal property and not real estate, you cannot secure a traditional mortgage. Your options for financing your mobile home are somewhat limited; however, the loan will likely be significantly less than a traditional mortgage.
Below are some of the more common ways to finance your mobile home and what to expect with each type of mortgage loan.
The Department of Housing and Urban Development (HUD) offers loans through the Federal Housing Administration (FHA). To be eligible, you must be able to make the minimum required down payment and show proof that you have the income to make your monthly payments and pay your monthly expenses.
Your mobile home must all meet the government’s Model Manufactured Home Installation Standards and if new, have a one-year manufacturer warranty. Your potential home must also meet all FHA guidelines including site requirements like adequate water supply and sewage disposal. The FHA offers two types of loans for potential mobile homeowners called Title I or Title II loans.
Title I Loans
Title I loans can be used for the purchase of either a new mobile home or a previously owned (used) home, or to make repairs or improvements to a mobile home. If you do not own, or do not plan to own, the land on which the house will sit, you must show a signed lease for the land for at least three years. The down payments on these loans can sometimes go as low as 5% because these types of loans are generally considered less risky.
Title II loans
Title II loans have some more specific requirements in order to qualify for the loan. For example, the loan must cover the home and the land on which it will stand. Additionally, you must show that you plan to use the home as your primary residence and it must be larger than 400 square feet. The home must also be built and remain on a permanent chassis and have been constructed after June 15, 1976.
If you meet these and other requirements, you can get a Title II FHA loan with a down payment as low as 3.5%.
Chattel loans are generally considered the easiest to get and are therefore some of the most popular mobile home loans. Chattel loans are a type of personal property loan that are often used for all kinds of large purchases like planes, boats or farm equipment.
Chattel loans are a good option for those who don’t own or plan to own the land on which their mobile home will sit. Chattel loans can have high interest rates and usually have shorter terms than traditional mortgages. The combination of these factors could mean higher monthly payments. If you prefer to pay more each month but repay the loan sooner, a chattel loan might be right for you.
Because chattel loans are personal property loans, the closing process is generally quicker and smoother than with a traditional mortgage.
Fannie Mae offers financing for mobile homes. In addition to standard financing, they also have a program called the MH Advantage Program for qualified buyers. These loans are especially helpful for those in high-cost or rural areas. Like other loan agencies, Fannie Mae has several requirements buyers must meet in order to secure a loan. Some of those include installing a home with a driveway and a sidewalk that connects the driveway or garage.
They also have requirements regarding the construction and design of the home as well as energy efficiency standards. If you can qualify for one of these loans, you can potentially secure the loan for as little as a down payment of 3%. You can learn more about Fannie Mae’s MH financing here.
Like Fannie Mae, Freddie Mac has a loan program targeted specifically at mobile homeowners called the Freddie Mac Home Possible mortgage program. These loans are great for first time buyers or for those in lower income brackets. If you meet their loan requirements, you can secure one of these more conventional loans at a fixed or adjustable rate. Down payments can run as low as 3%. To learn more about the requirements for this type of loan, visit the Freddie Mac Home Possible site.
Former military members can secure a loan for a mobile home through the Department of Veterans Affairs. VA loans are a great option for veterans and their families because they offer benefits other loans don’t such as competitive rates or certain tax reductions.
VA loans are provided by private vendors such as banks and mortgage companies with the government guaranteeing a portion of the loan. In this way, the lender can often provide a more substantial loan with better terms for the borrower.
VA home loans, like other mobile home loans, have certain special requirements you must meet in order to qualify like good credit, adequate income, and a valid Certificate of Eligibility (COE). There are several types of VA loan available to qualified buyers including Adapted Housing Grants and Native American Direct Loans.
The United States Department of Agriculture also provides loans to mobile homeowners. There are some fairly strict requirements you must meet in order to qualify for an USDA loan however, it may be a worth exploring. If you plan to finance both the home and the land on which it will sit and if the home will have a permanent foundation, you may qualify for one of these loans. You can learn more about your loan eligibility here.
Multiple Mobile Home Financing Options
Because mobile homes are considered personal property instead of real estate, financing your mobile home can feel a little trickier than getting a traditional mortgage if you don’t know where to go. Fortunately, there are several options open to buyers with good credit and a steady income.
It’s essential to understand the specific requirements each loan service requires as they differ and can be quite detailed. Most of these lenders are eager to help get you and your family in a home and will work with you to help you understand the terms of the loan. Don’t hesitate to ask questions to find the best loan for you and your family.