How to Finance a Mobile Home

What is mobile home financing?

Financing for a mobile home can come in a few different forms, but it’s essentially any type of loan that can be used for mobile or manufactured housing. In instances where consumers don't have the cash to pay for the property they want upfront, mobile home financing lets them finance a purchase and pay it off with monthly payments over time.

Mobile vs. manufactured homes

Today, the terms “mobile home” and “manufactured home” usually mean the same thing — they both refer to a prefabricated, transportable structure that’s used as a home. The main difference between the two terms depends on when the home was built. According to the U.S. Department of Housing and Urban Development (HUD), mobile homes are structures built before 1976, while manufactured homes are structures built after that year.

Different ways to finance a mobile home

You typically can’t take out a conventional mortgage to purchase a mobile or manufactured home, but there are other options available.

FHA loans

Federal Housing Administration loans can be used to purchase or refinance manufactured homes built after June 15, 1976. While the FHA doesn’t actually lend money, it guarantees the loan in case the borrower defaults. You’ll have to find a lender that offers FHA loans in order to use this type of funding. There are two main FHA programs: Title I and Title II.

Title I loans

With Title I, borrowers aren’t required to buy the lot where the manufactured home sits or is going to be installed, but borrowers must use the property as their primary residence. They can lease the lot instead, although the initial lease period must last for a minimum term of three years. Other lease requirements must also be met, such as a guaranteed notice period of at least 180 days before the lease can be terminated.

Title II loans

Title II loans can be used for single-family home residences that meet FHA guidelines, which can include some manufactured homes. Loans can last for up to 40 years and must fall within standard FHA loan limits.

» MORE: FHA loan requirements

VA loans

Eligible military members and veterans can use VA loans to purchase a manufactured home and the property it sits on. Properties eligible for VA financing must meet specific requirements. For example, the home must be affixed to a permanent foundation, and manufactured homes may also be required to have at least 700 square feet of interior space and meet local zoning requirements.

VA loans come with numerous benefits, making them an attractive option for those who qualify. For example, eligible veterans can purchase a home with no money down, and they won’t have to pay mortgage insurance.

Fannie Mae loans

Fannie Mae offers standard manufactured home financing (requiring 5% down) and affordable financing options for manufactured housing through its Manufactured Home (MH) Advantage program. This program lets borrowers purchase manufactured homes with as little as 3% down, although specific property requirements must be met. For both its Standard MH and MH Advantage mortgages, homes must be titled as real property.

Freddie Mac loans

Freddie Mac also offers home financing options that apply to manufactured properties, although certain housing requirements must be met. For example, manufactured housing must have been built on or after June 15, 1976, and the property must be on a permanent foundation. The property must also be a one-unit dwelling that is permanently connected to utilities.

Freddie Mac guidelines for manufactured housing also state that the square footage and room dimensions must be acceptable to typical purchasers in the market area.

Chattel loans

Chattel loans typically have higher interest rates than conventional mortgages but often come with shorter terms, so you might save on interest over the long run.

Chattel loans are loans for transportable personal property such as manufactured homes, vehicles or machinery. These loans treat the property you're financing as collateral, so you can lose your mobile home if you fail to keep up with payments. Also, interest rates for chattel loans can be much higher than rates on traditional mortgages. Still, chattel loans often have shorter terms, which reduces the overall amount of interest paid.

Personal loans

Borrowers can often use personal loans to finance mobile homes or manufactured homes. Personal loans typically come in amounts of up to $100,000, and they generally feature fixed interest rates, fixed monthly payments and fixed repayment plans that don’t change for the life of the loan. Personal loans are typically unsecured, so this type of financing can usually be obtained without collateral.

What to consider before financing a mobile home

When buying a mobile home, you should consider the following:

• Where you want to live
• Whether you want to own the land your property is on
• Whether you want the option to take your property with you if you move
• New versus used mobile home prices
• The long-term costs of owning a mobile home

For example, if you own the land your mobile home is on, you’ll be responsible for property taxes in addition to housing costs. Alternatively, if you rent the land your mobile property sits on, you’ll typically need to pay rental fees.

How to boost your approval chances for a mobile home mortgage

If you’re looking to purchase a mobile home, you’ll want to make sure you’ve prepared yourself and your finances to increase your odds of approval. The following tips can help:

Check your credit

Minimum credit score requirements can vary depending on the type of mobile home financing you’re after. Before you start researching financing, you should know what your credit score is. You can typically check your credit score for free through your bank.

You should also check your credit reports from all three credit bureaus — Experian, Equifax and TransUnion — which you can do for free through AnnualCreditReport.com. If you find any errors on your report that may be negatively impacting your score, you should dispute them with the credit bureaus immediately.

Research mobile home types and financing options

Compare different types of mobile homes to decide which features you want the most. Also, consider whether you want to build and customize your manufactured home from scratch or if you want to look at existing properties for sale.

Also, make sure you understand which financing options are available for the type of property you want to buy. For example, if you want to buy a mobile home that’s not permanently affixed to the ground, you may be limited to options like chattel loans or personal loans.

Shop around and compare rates

Compare mobile home financing options to make sure you get the best deal. Depending on the type of property you want to buy, consider FHA loans, home loans offered through Fannie Mae and Freddie Mac, and VA loans (if applicable). Then, submit a complete and transparent application.

» MORE: How to choose a mortgage lender

FAQ

Bottom line

A mobile home can be a smart option to consider if you’re struggling to afford a traditional property. However, you’ll need to understand the financing options that work with the type of property you want to buy. You’ll also need to make sure the mobile home isn't too old to qualify for financing, since some loans only apply to manufactured homes built after 1976.

By digging into your options and comparing available homes, you can position yourself for the best and most affordable mobile home financing for your needs.