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- Mobile, manufactured, and modular homes are similar, but there are key differences that will affect the financing you can use.
- Many programs require the home to have at least 400 square feet of living space.
- Depending on your situation, a personal loan may be a better choice than a home loan.
Mobile homes are a better fit for some homebuyers than traditional houses. You may have a lower budget, want a smaller space, or need to move the home later.
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Some lenders offer mobile home loans, but financing for these types of homes are different from traditional houses.
Mobile home vs. manufactured home vs. modular home
The terms “mobile home,” “manufactured home,” and “modular home” are often used interchangeably, but there are a few key differences. And the type that you choose will determine the kinds of mortgages you can select to finance the purchase of one.
All three are built in a factory and shipped to the site, whereas traditional houses are constructed directly on the property.
Mobile and manufactured homes
Mobile homes are what manufactured homes used to be called before the US Department of Housing and Urban Development’s Manufactured Home Construction and Safety Standards went into effect. All “mobile homes” built after June 15, 1976, are considered manufactured homes.
Manufactured homes are built in a factory according to HUD standards and are constructed on a permanent chassis.
Modular homes
Modular homes are also built in a factory, but they aren’t built according to the HUD Code. Modular homes must conform to state and local building codes, just like a site-built house would.
Also like site-built homes, modular homes are considered real property. Manufactured homes can be classified as either personal property or real property, depending on whether they’re permanently affixed to the ground.
Your ability to qualify for certain loans may depend on whether or not your home is classified as personal property or real property. With a modular home, you’ll likely have a wider range of mortgage options to choose from, as these homes can typically be purchased using traditional home financing, such as a conventional mortgage.
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You have several options for loans depending on your down payment, credit score, and size of the home. The best fit could also come down to whether you want a mobile, manufactured, or modular home.
1. Fannie Mae
The Fannie Mae MH Advantage Program is for manufactured homes. You’ll receive a 30-year fixed-rate mortgage, and this program offers lower interest rates on manufactured home loans than you may receive elsewhere.
You need a 3% down payment and at least a 620 credit score. The home also must meet certain criteria — for example, it must be minimum 12 feet wide and have 600 square feet of living space.
2. Freddie Mac
Freddie Mac also has loans for manufactured homes, and you can choose between a variety of fixed-rate and adjustable-rate terms. Like Fannie Mae, Freddie Mac requires the home to meet criteria. The home must be at least 12 feet wide with 400 square feet of living space.
3. FHA loans
You can get an FHA loan for either a manufactured or modular home. You’ll get an FHA loan through a traditional lender, but it’s backed by the Federal Housing Administration.
There are two types of FHA loans for manufactured and modular homes: Title I and Title II.
Title I loans are used to purchase a home but not the land it sits on. The amount you can borrow depends on which type of property you are buying, but it has relatively low borrowing limits. A Title I loan could be a good option if you’re working with a smaller budget.
Title II loans are used to buy both the home and the land underneath. The property must meet certain standards, such as having 400 square feet of living space.
Note: You can get an FHA manufactured home loan with a credit score as low as 580 and a 3.5% down payment. You may be approved with a credit score as low as 500, but the tradeoff is that you must have a 10% down payment.
4. VA loans
Loans backed by the Department of Veterans Affairs are for qualifying active military members, veterans, and their families. You can use a VA loan to buy a manufactured or modular home.
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You don’t need a down payment when you get a VA loan, and the minimum credit score required will depend on which lender you use.
5. USDA loans
You can use a loan backed by the US Department of Agriculture to buy a manufactured or modular home. The home needs to have at least 400 square feet of living space, and it must have been constructed on or after Jan. 1, 2006.
As with a VA loan, you don’t need a down payment, and the credit score you need will depend on the lender.
Note: USDA loans are for homes in rural areas, and you must have a low-to-moderate income to qualify. The maximum income level depends on where you live. You can see your county’s income limit here.
6. Chattel loans
Chattel loans are types of loans for various types of properties, including cars and boats. You can use a chattel loan to buy a mobile, manufactured, or modular home.
These loans have higher interest rates than the other types of loans on this list, plus shorter term lengths. But a chattel loan could be a good option if you want to buy a manufactured home that isn’t eligible for other types financing.
7. Personal loans
Lenders set limits on how you can use funds from a personal loan. Depending on which lender you use, you may able to put the money toward a mobile, manufactured, or modular home.
One of the best personal loans may be cheaper upfront than a home loan, because you won’t have to pay for most closing costs. Personal loans usually charge higher interest rates than home loans, though, especially if you have a poor credit score.
To choose between these mobile home loan options, think about which type of home you want to buy. Then see which programs you qualify for.
Source: https://tholansonnha.com
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