There are many ways to finance a mobile home, with several key factors affecting your eligibility.
Due to the affordability of mobile homes they have made homeownership possible for people who otherwise might not have enough budget to purchase a stick-built house. Remember that your financing options might not be as abundant as those for standard home loans, but you can access government-backed mortgages and other credit lines.
Difference Between a Mobile Home and a Manufactured Home
Before we delve into the different financing options, it makes sense first to clarify the difference between mobile homes and manufactured homes.
Essentially, builders constructed mobile homes before June 15, 1976, while they built manufactured homes after this date, which must comply with the construction and safety standards set by Housing and Urban Development.
What should you consider when planning to buy a mobile home?
The type of mobile home you’re planning to purchase may affect your eligibility for home loans.
Another factor to consider is your mobile home size which comes in three versions: the single-wide version, which measures around 8-12 feet wide; the double-wide which measures between 24 feet and 32 feet; and the triple-wide which basically consists of three separate units.
Aside from the floor size, other factors such as complex design and layout can drive up the price of mobile homes.
Keep in mind that mobile homes classify as personal property rather than real estate property, causing them to depreciate rapidly once in use. But on the flip side, they come with a lower tax liability.
While buying a used mobile home might be a good option for homeowners on a tight budget, take note that some manufactured home communities may not allow older models, particularly those in a dilapidated condition and those manufactured before the implementation of HUD’s strict construction and safety standards in the late 70s.
In addition, you may want to know some tips for first-time mobile home buyers and what to keep in mind about mobile homes in California.
What are my options for mobile home loans?
If a mobile home qualifies as “real property” because you also own the land, you can finance it with mortgage programs. Some financing options also have rigid requirements, e.g., the size should be at least 400 sq ft, and the wheels should be removable to make the home “fixed” to a location.
Below are the two major types of mortgage programs available for mobile home buyers:
1) Traditional Mortgage Programs
Traditional mortgage programs like Fannie Mae MH Advantage Program and Freddie Mac’s Program might be good financing options for mobile home buyers. Both are known for their competitive rates, fixed-rate mortgages of up to 30 years, and low down payment options (as low as 3%), making them the preferred line of credit of most lenders.
2) Agency-Backed Mortgage Programs
They include loan programs from the Federal Housing Administration, the U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture.
The Federal Housing Administration offers loans for manufactured homes under Title I and Title II. They come with a down payment as low as 3.5% to 5% and terms as long as 30 years.
For those in military service, the Department of Veteran Affairs can provide them a line of credit in which the terms range between 15 and 25 years. This offers more flexibility compared with other financing options, as you can use it to purchase not just the mobile home itself but also the site on which the house sits.
Meanwhile, the financing options by the Department of Agriculture usually come with zero down payment, provided that the mobile home sits on a rural site and it is not more than a year old.
In the event that you’re not unable to meet the requirements, you may want to consider a chattel loan, which is a financing option that is not really geared towards real estate. In fact, this falls under the category of personal property loan that covers “movable properties.”
To reiterate, mobile homes are considered personal property and not real estate assets unless the land where it sits is taken into account.
Compared with other financing options, chattel loans have less rigid requirements, especially in terms of your credit score, although they come with one major caveat: The loan amount is smaller than most traditional mortgage programs, in contrast to their higher-than-usual interest rates and shorter terms.
Conclusion
Budget-wise, mobile homes are great alternatives to site-built houses, although the available financing options are more limited and restrictive. But with a bit of research and patience, it’s possible to find a loan program that suits your needs.
There are many ways to finance a mobile home, with several key factors affecting your eligibility.
Due to the affordability of mobile homes they have made homeownership possible for people who otherwise might not have enough budget to purchase a stick-built house. But bear in mind that your financing options may not be as numerous as standard home loans, although there are government-backed mortgages and other lines of credit that you can tap.
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