Financing a Manufacturing Home: FHA and Other Options
A manufactured home (sometimes referred to as a mobile home) can be an affordable option for homeownership. You can get an FHA loan to purchase one, for example. Because of the controlled factory environment, manufactured properties are often less expensive to build than traditional homes.
The term ‘mobile home’ may hold negative connotations for some prospective home buyers, yet this is one of the most affordable options for homeownership. Most of the negatives stem from some of the poor craftsmanship of the original mobile homes that were built over 50 years ago. Today’s mobile homes are not like those of the past, and they can’t be if you want to qualify for an FHA loan to buy one.
Understanding the Modern-Day Mobile or Manufactured Home
The federal government did not regulate original mobile homes. It wasn’t until the implementation of the Federal Manufactured Home Construction and Safety Standards in 1976 that home builders adhered to federal regulations on quality and safety.
Today, manufactured homes, as they are currently called, are built to the same, if not higher, standards of on-site stick-built homes. The primary difference is manufactured houses are made in a factory and then transported to a property in pieces for final installation.
Financing Your New Home
Because of the controlled factory environment, manufactured properties are often less expensive than building traditional homes. Unfortunately, while a manufactured house is less costly than a similar stick-built or site-built house, it still costs more than what most people have in their savings account. Consequently, it is necessary to find financing options for the home purchase, of which there are at least three.
FHA Loan for Manufactured / Mobile Homes
The Federal Housing Administration provides loans through approved lenders on a variety of property types. The FHA Title I loan program is specifically designed to purchase manufactured homes, the property for it, or the combination of the land and house.
However, the FHA does place loan limits on each purchasing option. To buy a manufactured home without the property, you can apply for up to $69,678; for the lot alone, you can apply for a maximum of $23,226; for the combination, the house and the lot, you can apply for $92,904 at most.
A borrower must also meet certain expectations. For example, they must:
- Provide the minimum down payment (specific to the lender)
- Use the house as a primary residence
- Demonstrate ability to make payments
- Secure a site or lot for the home
Chattel Loans
If you do not own the lot and the manufactured property, you will need a chattel loan, otherwise known as a personal property loan. Because a manufactured home is classified as a chattel, vehicle, or personal property, it does not fall under typical mortgage regulations, primarily without purchasing the land.
Traditional Mortgage
If you are paying both the lot and house together, you can use a traditional mortgage to purchase the property. Consequently, you might end up with two loans, one for the manufactured house and a mortgage on the property. However, after the home is installed, it might be possible to combine both loans into a single mortgage.
Are you considering the purchase of a mobile or manufactured home? Contact a UW Funding representative to discuss your financing options.