Every year, millions of Americans take out loans to finance their purchase of a home. Many of these home buyers need loans specifically to finance their manufactured homes—so where do they find this kind of financing?
Plenty of financing options are available for today’s manufactured home buyer, but navigating them requires understanding the unique requirements and uses of each option. Thus, the first step to finding your ideal manufactured home financing solution is to learn about mobile home financing and discover what might be right for you.
Types of Manufactured Home Loans
Manufactured home buyers don’t always have access to the same mortgage options as stick-built home buyers. Many mortgage lenders won’t finance a manufactured home purchase unless the home meets certain specific conditions regarding its value, foundation, and location. In practice, this means that manufactured home buyers often have to look at other sources of financing.
The full range of loan options commonly available to manufactured home buyers include:
- Conventional Mortgages
- Government Loans
- Fannie Mae and Freddie Mac Insured Loans
- Chattel Loans
- Dealer Financing
For more information on these different types of manufactured home loans, read on.
Conventional Mortgages
If your manufactured home will be titled as real property and situated on a permanent HUD-approved foundation on land that you own, you may be able to get a conventional mortgage from a bank. Land-home mortgages and construction-to-permanent mortgages are the two major types of mortgages for manufactured home buyers.
A land-home mortgage is among the most popular loan products and provides financing for both land and a home in the same mortgage. If you’re ordering a new manufactured home from a builder, consider construction-to-permanent mortgages—two-phase loans that finance home construction, then become a standard mortgage once construction is complete. Either one requires a similar application and underwriting process as a mortgage on a site-built home.
Government Loan Options
To encourage lenders to write loans for manufactured home purchases, the Federal Housing Administration operates a loan insurance program for manufactured home loans. Certain loans are eligible for FHA loan insurance, meaning that the FHA will pay the lender the balance of the unpaid loan if the borrower defaults. This can make it substantially easier for low-income borrowers to get a mortgage on manufactured homes.
To get an FHA-insured loan, you’ll need to meet a certain list of FHA loan qualifications, including the requirement that the home must be intended as your primary residence. You may still be able to qualify with a credit score as low as 500, although you’ll have to post a higher down payment.
The U.S. Department of Agriculture and the Department of Veterans’ Affairs also run their own programs that can finance mobile home purchases for buyers who meet certain conditions. When in doubt about which government loan options you might qualify for, reach out to a housing counseling agency through the HUD exchange.
Fannie Mae and Freddie Mac
Government-funded lending companies like Fannie Mae and Freddie Mac offer more options for manufactured home buyers. In particular, they feature two affordable housing programs called MH Advantage® by Fannie Mae and CHOICEHome™ by Freddie Mac that help middle-income borrowers to afford manufactured homes.
Both of these programs focus on financing for manufactured homes with the characteristics of standard site-built houses, and both offer affordable rates and down payments for qualified buyers. Their differences are mainly centered on the specific requirements that homes must fulfill to qualify for the loan, which you can read about in our article on MH Advantage® vs. CHOICEHome™.
Chattel Mortgages
For mobile home buyers who will own their homes but lease the plot of land underneath them, chattel mortgages are an option. In a chattel mortgage, the mobile home you buy will be titled as personal property, rather than real property, and it functions as your collateral for the loan. Chattel mortgages can provide financing for buyers who aren’t eligible for other programs, but buyers should know that interest rates are often higher and their terms shorter.
Financing Through a Dealer
Many manufactured home dealers now offer their own financing programs through banks that they work with. These programs are designed to be accessible for manufactured home buyers, and many will finance the purchase of both land and a home. However, terms can vary widely from one dealer to the next, so these loans should be carefully evaluated on a case-by-case basis.
MHVillage’s database of mobile home dealers offers a great way to look up local manufactured home dealers that may offer financing programs. Just click your state to get started.
Securing financing for any kind of home takes a lot of patience, persistence, and attention to detail, and mobile home financing is no exception. However, with a little knowledge about mobile home financing companies on your side, the process can be smoother and get the end result you’re looking for: an affordable mortgage on a great manufactured home.
