USDA Loan Restrictions
There are certain scenarios when a USDA loan cannot be used – even if the site is an approved rural area and you meet eligibility requirements as a borrower.
USDA Loans and Mobile Homes: Loan Restrictions
First and foremost, USDA loans cannot be used to finance a site without an actual home on it.
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They also aren’t eligible to pay for:
- Any unit that doesn’t meet FMHCSS requirements
- A site that is already owned by another party
- An existing, pre-owned manufactured home or repairs to one
- Furniture or other movable pieces of interior property
USDA Loan Process for Modular Homes
The USDA loan process for modular homes isn’t starkly different than that of any other loan products. But you’ll typically need a construction loan to make these work.
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In addition, the property must meet a few additional requirements, be covered by a warranty and meet other eligibility standards before the loan can be approved.
The USDA loan process includes:
- Warranty Requirements – The home’s dealer must provide proof of warranty for the home to the lender. This warranty must comply with all HUD requirements.
- Lender Requirements – The lender should have a copy of all manufacturer warranties on file. They will also require a guarantee fee and an annual fee (similar to PMI) if the loan is for 80 percent or more of the sales price.
- Certification Requirements – The dealer and buyer must sign a document certifying that the home sustained no damage during transport or assembly.
- Lien Requirements– You’ll need to ensure all contractors have been paid and that there are no liens attached to the property for work performed.
- Real Estate Tax – The home needs to be taxable as real estate under state law.
- Title and Lien – The title and lien must be recorded in local land records as including both the property and the site itself. The mortgage must have a title insurance policy, and you, as the buyer, must acknowledge that the home, though movable, needs to be secured to the site to be eligible for USDA financing.
Once all these requirements have been met, the home is constructed on its permanent foundation, and all liens are removed on the property, the loan can be approved and your funds dispersed.
Hurdles
One of the biggest hurdles in using a USDA loan on a modular or manufactured home can be finding a lender.
Not all lenders make loans for manufactured housing or offer financing for new construction.
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If you’re interested in modular or manufactured homes, make sure to look for lenders who not only offer USDA loans on these properties but who also have deep experience with them. This will ensure your loan process goes smoothly and without error.
Buying a Modular or Manufactured Home via USDA Financing
No matter the property type in question, USDA financing can offer significant cost-saving benefits – both up front and over the life of your loan.
With no down payment requirements, looser credit and income guidelines and affordable PMI rates, a USDA loan could save you thousands of dollars in the long term.
To learn more about your eligibility for USDA loans for manufactured homes or modular housing, contact a home loan specialist today.
Source: https://tholansonnha.com
Category: Finance
