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How to Get an FHA Manufactured Home Loan

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Homebuyers often choose manufactured homes built in a factory as a lower-cost alternative to site-built homes. Borrowers with bumpy credit histories and little down payment savings may find getting an FHA manufactured home loan gives them a faster path to homeownership than other loan programs.

What is an FHA manufactured home loan?

FHA manufactured home loans are mortgages backed by the Federal Housing Administration (FHA) to buy homes built in a factory. Manufactured homes may still be referred to as mobile homes by some people, but any home built in a factory today has to follow standards set by the U.S. Department of Housing and Urban Development (HUD). Mobile homes built prior to June 15, 1976 before HUD standards were enacted are not eligible for government-backed loans.

You’ll get more competitive FHA manufactured home rates and terms using the Title II FHA loan program, which requires the structure to be permanently attached to land that you own. The FHA Title I loan program provides limited options for manufactured home financing whether the home is attached to land or not.

How do FHA manufactured home loans work?

The basics of FHA manufactured home loans are similar to taking out an FHA loan for a regular home. However, the manufactured home needs to meet FHA-specific property and construction requirements, in addition to meeting basic FHA minimum mortgage standards.

FHA manufactured home loan property requirements

Once you find the perfect plot of land, FHA-approved lenders will check for the following items:

  • The home site must have access to water and sewer facilities.
  • The site must have all-weather road access.
  • The home must be taxed as real estate.
  • The must be permanently attached to the land according to local building guidelines.
  • The home must have the approved HUD seal visible on the exterior.
  • The towing hitch and any running gear must be removed.
  • The living area must be at least 400 square feet.

FHA manufactured home loan construction requirements

If you’re buying a manufactured home and land, the FHA treats it like a construction-to-permanent loan. You can roll the price of the home, land and the cost of transporting and permanent attachment into the total loan amount. However, that adds some extra hoops for you to jump through, such as:

  • You must get a construction-cost itemization. The contractor must provide invoices for the home that details costs to set up the home and put in the foundation.
  • Your foundation must meet specific standards. The home must be attached to the land with a durable foundation designed by a licensed professional engineer.
  • You must prove that you own the land. You’ll need a purchase contract itemizing the sale price if you buy a new plot of land. If you’ve owned the land for more than six months, you can use the land’s value instead of the original purchase price.
  • Your home must be converted to real property and taxed as real estate. You can only get an FHA manufactured home loan if the structure is attached to land and taxed as real property. Most states have laws that detail how to convert a manufactured home from personal property into real property, but there are two basic conditions that qualify your home as real property:
    • A recorded document confirming your home is permanently attached to land (commonly called an affidavit of affixture).
    • A copy of the purchase contract or deed showing you own or intend to own the land the manufactured home sits on.

FHA manufactured home loan minimum mortgage standards

Down payment. The minimum down payment is 3.5% and the purchase of the home and installation costs can be added to the loan amount.

Credit score. The FHA accepts scores as low as 500 to 579 with a 10% down payment. Borrowers making a 3.5% down payment need at least a 580 credit score.

DTI ratio. The front-end debt-to-income (DTI) ratio, which measures what portion of your gross monthly income goes toward paying your monthly mortgage payment, is capped at 31%. The back-end DTI ratio maximum is 43%, and looks at how much of your income goes toward all of your revolving and installment debts (i.e. student loans and credit cards), including your mortgage payment. Exceptions to FHA DTI rules are possible if you have high credit scores or extra cash reserves.

Mortgage insurance. FHA manufactured home loans require two types of FHA mortgage insurance: an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). The UFMIP is equal to 1.75% of your loan amount and paid at closing in a lump sum. Borrowers can roll this fee into their loan amount. The annual MIP ranges from 0.45% to 1.05% of the loan amount and is added to your monthly payments in 12 installments each year.

Loan limits. HUD sets the lending guidelines for FHA loans, and the loan limits adjust each year based on median home-price changes. In 2021, the FHA loan limit is $356,362 for a single-family home in most counties in the U.S.

FHA Title I manufactured home loans

Eligible manufactured homeowners who have fixer-upper projects can spruce up their homes with funds from the FHA Title I loan program. There’s even money available for homes that aren’t attached to a permanent foundation.

With an FHA Title I loan, you can borrow up to:

  • $25,090 for a manufactured home that’s real property with terms running from six months to 15 years and 32 days
  • $7,500 for a manufactured home that’s personal property with terms of six months to 12 years and 32 days

Alternatives to FHA manufactured home loans

There are a variety of other manufactured home loan programs worth considering, especially if you have high credit scores or qualify for a 100% financing loan.

Conventional loans. Fannie Mae and Freddie Mac are government-sponsored enterprises that fuel the U.S. mortgage market. The agencies offer low rate financing with down payments as low as 3% for manufactured homes. Conventional private mortgage insurance (PMI) is cheaper than FHA mortgage insurance for borrowers with high credit scores.

  • Fannie Mae MH Advantage® loan. Manufactured homebuyers need only 3% down for this loan, with terms including 30 years fixed and 7/1 and 10/1 adjustable-rate mortgages (ARM).
  • Freddie Mac loans. This program requires a 5% minimum down payment, and can finance a primary or a second home.

VA loans. The U.S. Department of Veterans Affairs (VA) guarantees mortgages for eligible military borrowers to buy manufactured homes with a 5% down payment. VA loans for manufactured homes also require proof the home is attached to land you own.

USDA loans. If you’ve found a plot of land in a rural area, you may be able to install a manufactured home on it with a loan backed by the U.S. Department of Agriculture (USDA). No down payment is required, but you do need to meet USDA income limits for your area.

How to find an FHA manufactured home lender

You may need to shop around to find an FHA-approved lender that offers loans for manufactured homes. To start, search for FHA-approved lenders in your area using the HUD lender list.

When you talk to lenders, discuss whether the loan officer has experience working with FHA manufactured home loans. Consider choosing an experienced lender over the lowest loan pricing with this type of mortgage, given all the extra hoops you need to jump through to get both the manufactured home and the FHA loan approved.

 

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