Mobile homes are a very popular housing option — more than 20 million people live in mobile homes in the U.S. While mobile homes offer affordable and flexible living, financing a mobile home can be a challenge if you’re not familiar with what’s available.
Let’s take a closer look at mobile home financing, including the different types of mobile home loans and the qualifications you’ll need to meet.
Mobile homes and manufactured homes are both regulated by the Department of Housing and Urban Development (HUD). The only key difference between mobile homes and manufactured homes is the year the structure was built.
Mobile homes are homes built before 1976 and constructed with wheels to be transported. Manufactured homes, on the other hand, are residences built after 1976 according to federal building codes established that year. Today, both mobile and manufactured homes are considered to be a type of factory-built housing.
You have multiple options for mobile home financing, but choosing the best option will depend on your current needs and financial situation.
FHA loans are government-backed mortgages through the Federal Housing Administration. You can finance a mobile home with a down payment as low as 3.5%. These loans also offer more flexible credit requirements. A minimum FICO score of at least 580 is required to qualify for a 3.5% down payment. But if your score is below 580, you can still qualify with a 10% down payment.
Fannie Mae MH Advantage is a financing option that offers competitive rates and terms for mobile homes that meet specific construction requirements. These homes have features such as energy efficiency and architectural elements that are similar to site-built homes.
Borrowers must have a minimum credit score of 620 to qualify, but borrowers with a score of 680 or higher may get better pricing. This loan requires a down payment of at least 3%.
Freddie Mac Home Possible is a mortgage loan option for both manufactured and site-built homes. This loan is geared toward borrowers with incomes no more than 80% of their area’s median income, and allows you to put as little as 3% down. Co-borrowers who do not live in the home can also be included to strengthen an application for a borrower’s one-unit residence.
| Tip: You can check your area’s median income, and if you qualify, using Freddie Mac’s area median income tool. |
You can qualify for this loan even if you own another property. Note that first-time borrowers are required to take a home education course.
Many lenders offer personal loans for mobile homes. However, these loans typically have higher interest rates and shorter repayment terms relative to mortgages, so it’s important to research and compare rates before choosing this option instead of a mortgage.
Each lender sets its own credit score and loan requirements, and the maximum borrowing limit can also vary. But finding (and qualifying) for a personal loan over $100,000 can be difficult. This makes personal loans most appropriate for inexpensive mobile homes that might not be considered eligible properties for a FHA or VA loan.
To get the best rate, you’ll need a high credit score and low debt-to-income ratio.
Department of Veterans Affairs (VA) loans are government-backed loans for military service members and their families. With a VA loan, you could qualify to buy a manufactured home with 0% down, a low interest rate, no PMI (private mortgage insurance), and no down payment.
Various lenders offer VA loans, but while the VA doesn’t require a down payment, your lender might. Your length of service or commitment, duty status, and character of service will also help determine your eligibility for a VA loan.
Chattel loans, also known as personal property loans, are an option for mobile homes that are not permanently attached to any foundation. In other words, the loan can help you finance a manufactured home that is placed on a piece of land that you do or don’t own. Chattel loans, along with personal loans, may be your only options for a mobile or manufactured home not affixed to a permanent foundation.
These loans tend to have higher interest rates and shorter repayment terms.
If you’re interested in financing a mobile home, you’ll need to take a few steps to get the process started.
- Determine your budget and get pre-approved for a loan: Start by determining how much you want to borrow based on a realistic price of other mobile homes in your area. You can also get pre-approved by a lender to see how much you qualify to borrow. This is also a good time to determine whether you want to purchase land in addition to the home.
- Find a mobile home dealer or real estate agent: Once you’re pre-approved, it’s time to start looking for homes. Contact mobile home dealers and real estate agents in your area who specialize in mobile homes.
- Choose the home you want and apply for a loan: Once you’ve found the manufactured home you want, submit an official application and gather the necessary documentation. This includes pay stubs, bank statements, and tax returns. Be sure to carefully weigh all your loan options before starting the application.
- Complete the closing process: As the loan processes, you’ll need to complete the closing process and pay any additional fees to secure your loan. Carefully read the final loan agreement and disclosure documents before agreeing to the terms.
Your credit score plays a large role in whether you’ll be able to secure financing for a mobile home. While credit score requirements vary depending on the specific loan program, many lenders require a credit score of at least 620, with the exception of those offering FHA loans.
Keep in mind that a higher credit score will generally result in better interest rates and more favorable terms. Check your credit score before you get pre-approved and ask the lender about its minimum credit score requirements.
No, you do not need to own land for a mobile home. While you can finance the land your home will be placed on, you can also rent land and consider loan options such as a chattel loan or a personal loan to finance your home.