How to Buy a Mobile Home or Manufactured Home

Manufactured homes are a good option for homeowners looking for a newly built modern home that comes with an affordable price and affordable mortgage payment.

Though the term “mobile home” is still used, these single, double and triple-wide prefabricated homes are now referred to as manufactured homes and average from 1,000-3,000 square feet in size. The look of these manufactured homes has come a long way – many have a modern appearance and have some of the features of newly-built homes.

Financing a manufactured home or any other type of home is challenging, and it can be especially hard for a new homeowner. It’s no longer common for buyers to make a 20% down payment on the purchase price. Many public and private organizations help buyers who have less than 5% available for a down payment.

There are many responsibilities owning a home that new buyers should be familiar with, and they apply to manufactured homes too. Maintenance costs should be part of a monthly budget, along with “rent” for the land the manufactured home sits on, property taxes and insurance.

The biggest cost, of course, will be buying and financing a mobile or manufactured home. Financing for these homes is different than for a standard home loan, but various programs can make it easier to qualify.

The biggest difference is that loans for mobile and manufactured homes are only for the home itself, not the land it sits upon. The park or community usually owns the land and leases it to homeowners. That’s the "rent" referred to above.

Most traditional financing will require that the manufactured home be placed permanently on a site. That makes the home what is called “real property.”

How to Finance a Mobile Home or Manufactured Home

Financing a manufactured home is not always as simple as applying for a loan and being approved. Many lenders will not approve a conventional loan for a mobile home because they are not considered “real property.” However, homes that are attached to a permanent foundation could qualify.

The common factor in qualifying for any loan is credit score. The better the score, the more likely you will qualify. In general, credit scores higher than 580 will gain loan approval, though lenders will prefer the score be at close to or above 620.

Mobile Homes vs. Manufactured Homes

If you’re considering buying a manufactured, mobile, or modular home, it’s important to understand the differences between them. The catch-all “mobile home” is typically used for all three categories, but when it comes to loans and financing, they are not the same.

Pricing options vary among the three categories, as do how they’re built and installed. Safety standards required in their construction also vary. That makes it easier to get financing for some types of these homes.

» Learn More: Home Selection

Mobile Homes

Though many still refer to all homes of this style as mobile homes, by definition they are not -- and definitions matter when it comes to loans and financing. Mobile homes are defined as factory-built before June 15, 1976. That is before regulations required certain safety standards. Most lenders avoid lending for what, by definition, are mobile homes.

Manufactured Homes

Manufactured homes are factory-built after June 15, 1976, and subject to federal safety standards set in 1974. Manufactured homes can be installed permanently on blocks, metal piers or a foundation. The intention is the home is permanent, and not to be moved. They also must meet building standards in the locality where they are placed. If they are moved – and it is possible to do so – it can affect financing for a loan.

Modular Homes

Modular homes are factory-built homes assembled on-site. You’ve probably seen them when driving on the highway – they’re the homes with the flags and “wide load” signs. Modular homes must meet the same local building codes as traditional site-built homes and are usually installed on a concrete foundation. Loans are usually easier to get for modular homes because they hold their value and appreciate more than mobile or manufactured homes.

How to Qualify for Financing

Approval for any loan means meeting certain standards for qualifying. Once you’ve decided what kind of home to buy and where you want to put it, you’ll need to go through these steps to qualify for a loan.

Ensure your credit score meets standards: This is a key step in obtaining any home loan. A score below 580 will make it difficult, if not impossible, to qualify. Scores at or above 620 will help, but you shouldn’t feel comfortable until you get above 670. The three major credit bureaus – Experian, TransUnion or Equifax – allow you to check your credit report. If you feel there is a mistake, you may dispute the score. The better the score, the lower the interest rate, which can save thousands over the course of the loan.

Save for a down payment: The more money you can put down, the less you have to borrow and the lower your loan payment. While a down payment is not always required, it is a good idea to maximize the amount of down payment to lower the cost of money borrowed.

Determine whether you are buying land: The more permanent the home, the more likely a lender will be willing to help. If you own the land where the home is located and the manufactured home has wheels and axles removed, the more you are telling the lender the home is permanent. If you plan to rent a plot for the home, the fewer loans you’ll be eligible for compared to if you purchase the land where the home sits.

Identify what you want in your home: Manufactured homes have come a long way. Many include some of the better amenities found in a traditional home, and the designs have improved to maximize the use of space. The type of home you buy also affects the loan you may qualify for. Example: A double-wide manufactured home that costs more than $100,000 does not qualify for an FHA loan. Older mobile homes (by definition above) may not qualify for any loan at all.

Shop for the right lender: We’ll cover in more specifics the type of loans you may choose. Once you decide, it’s important to ask more than one lender what they offer. Manufactured home interest rates vary between lenders, so taking the time to seek the best option can save money. Try to find a loan that has low fees and interest rates. Doing this extra work can save thousands of dollars.

Submit your application: Complete the application completely and honestly. If you plan to make a down payment, be sure those funds are available when you complete the loan process. Completing the application in the best manner will improve the chances of qualifying and make sure the process proceeds without a major hitch.

Ways to Finance a Manufactured Home

Keep these factors in mind when seeking financing:

• Where will you put the home? – The loan will likely be for the home only, so you’ll need to either buy the land for it through another loan or rent some land through a mobile home community. Renting land could mean you will not be eligible for some loans.
• Bigger homes may not be eligible for some loans – Buying a double-wide home that costs $100,000 or more isn’t allowed in an FHA loan. Maximum loan amounts vary by the type of home bought.
• Compare lenders – Not only should you compare the type of loan but see how fees and interest rates vary among lenders.

Here are six broad financing options:

Bank or Credit Union

If you own the land under your manufactured home, you are in luck. Banks, credit unions and other lenders usually require you to own the land in order to get a mortgage. The homes must be legally and permanently installed on the land to qualify.

Once you own the land, financing a manufactured home is fairly similar to financing a traditional home. You’ll need a credit score in the mid-600s, a down payment of 10%-to-20% (as low as 3.5% with an FHA loan), and income that is roughly one-third the mortgage.

If you don’t think you have the minimum credit score required, you can start by researching how to improve your credit score. The fastest way is to get moving on credit card debt.

Online credit counseling from InCharge Debt Solutions can help. InCharge is a nonprofit credit counseling agency that provides a free snapshot of your credit report. It can help you come up with a repayment plan for credit card debt, such as a debt management program.

In addition to improving your credit score, owning the land you want to put a manufactured home on can make being approved for a loan easier. According to manufacturedhousing.org, 49% of new manufactured homes are placed on private property.

If you don’t plan on purchasing land for your manufactured home, you can still finance the purchase with a bank or credit union lender, or possibly through help from the federal government.

These programs are designed to help consumers get mortgages on manufactured homes, which account for 9% of new single family homes in the U.S. housing market.

Department of Agriculture Programs

Housing assistance programs began in the New Deal era (1930s) when the government wanted to provide better homes for the rural population. The programs were administered by the USDA because the programs were geared toward on-farm housing.

The best thing about a USDA loan (also known as a Rural Development loan) is that there is no down payment required. When you wonder how to buy a mobile home with no money down, think USDA. You are also allowed to finance 100% of the home’s appraised value.

The house must meet geographical requirements, but that doesn’t mean you have to live 20 miles from your nearest neighbor. About 97% of the U.S. land mass is USDA loan eligible, an area encompassing 109 million people.

Interest rates have risen since the COVID pandemic eased, which is a negative. But with the USDA, rates fluctuate but are usually less than conventional loans. The downside to a USDA loan is a Guarantee Fee of 1% is added to the total loan amount, and an annual fee of .35% gets added to your monthly payment.

There is no minimum credit score for USDA loans, however, you need a score of 640 or higher to qualify to use the USDA's automated underwriting system. Borrowers with lower credit scores can still qualify for USDA loans using manual underwriting.

Unlike traditional mortgages, you can be disqualified for making too much money. The maximum limit is 115% of the median income for the county or area you want to live in.

Check with your bank or credit union to see if they can help you with a USDA loan application for a manufactured loan.

Here’s a quick look at the features of a USDA Manufactured Home Loan:

• No down payment required
• Can finance 100% of appraised value
• Must meet geographic requirement: rural location
• Can’t make 115% or more of county’s median income
• Fees: 1% fee added to the total loan, and .35% to monthly payment

Federal Housing Administration Programs

If you exceed the USDA’s income limit, you should consider an FHA loan as they have no wage maximums. The FHA doesn’t actually give you money for a home loan. It insures the loan, which entices lenders to finance mortgages since they are backed by the government.

It’s up to the homebuyer to find an FHA-approved lender and negotiate terms.

There are two types of FHA loans:

1. FHA Title II loans: A down payment as low as 3.5% is needed. Loan terms can be as long as 30 years. Title II loans are real estate loans, meaning you’ll have to purchase the land and home together. The home must be permanently installed on an approved foundation system.
2. FHA Title I loans: These loans are for personal property, so you don’t have to own the land that the home sits on. If the land is leased, the initial lease must be at least three years. Down payments can be as low as 5%. That amount can vary by lender, depending on your credit score. Repayment terms are shorter than Title II loans.

The maximum limits on Title I loans are:

• If you’re buying the home and the land, the maximum mortgage is $92,904.
• If you’re buying a home without the land, the maximum is $69,687.
• If you already own the home and are buying just the land, the maximum is $23,226.

All FHA loans are assumable. That means if you decide to sell your home, the buyer can just take over the payments. That’s a great feature if interest rates have risen since you got the mortgage.

Like a USDA loan, the biggest downside is mortgage insurance. The upfront premium is 1.75% and the monthly fee is .85%, which is divided equally into 12 installments per year.

As for credit, the score requirement varies from lender to lender, but the minimum score that will qualify for an FHA loan is 580.

Scores between 580 and 669 are considered fair. Anything below that is considered poor. But if you are in that range, don’t give up the dream.

When it comes to financing a mobile home or modular home financing or even manufactured home loans, there are programs designed to help financially strapped consumers with bad credit.

Nonprofits like InCharge Housing Counseling have credit counselors who work to improve your credit and find out if you qualify for down payment assistance.

The bottom line is that if you want to own a home, a manufactured one might be the way to go. To get an FHA loan, find a bank, credit union or mortgage lender who works with FHA-loans.

A quick look at the features of an FHA Manufactured Home Loan:

• Term is typically 20 years
• Minimum down payment is 3.5%
• Maximum loan for home plus land: $92,904
• Credit score must be above 580
• Future buyer can assume your mortgage at your interest rate
• Fees: 1.75% of purchase price, monthly fee of .85%

VA Loans

Veterans Administration (VA) loans are another way to buy a manufactured home. To qualify you must be a service member or veteran.

These loans are for manufactured homes that will be attached to a permanent foundation on land that’s owned by the borrower. If you’re buying the home and land together it must be your primary residence.

Other VA loan restrictions include:

• Review of potential borrowers’ employment history, credit history, assets and income.
• Maximum loan terms.
• 1% funding fee.
• Maximum loan amount is 95% of the purchased value.

Chattel Loans

A chattel loan is used to buy moveable personal property, which is often placed on land the borrower doesn’t own. Often a chattel loan is used for items like planes, boats, mobile or manufactured homes and farm equipment.

Chattel loans for manufactured homes are often smaller than standard home loans because you’re not buying the land. This can make financing easier for some because they’re borrowing less money.

However, the repayment periods are shorter — 15 or 20 years — which could lead to higher monthly payments. But you’ll own the home a lot quicker than with a 30-year mortgage on a standard home.

Another downside is that interest rates can be higher on chattel loans. A study by the Consumer Financial Protection Bureau found that the annual percentage rate, or APR, was 1.5% higher on chattel loans than standard mortgages. Loan processing fees, however, were 40-50% lower.

Fannie Mae & Freddie Mac

Some lenders offer Fannie Mae or Freddie Mac loans. Fannie Mae loans are 30 years, with a down payment as low as 3% and require a credit score of 620 or higher. Those with a score higher than 680 may get a better interest rate.

Freddie Mac is a more conventional loan with a fixed-rate mortgage and repayment in 15, 20 or 30 years, or on a 7/1 or 10/1 adjustable-rate mortgage. A minimum 5% down payment is required.

Fannie Mae loans are obtained through the MH Advantage Program, which offers loans at lower rates than traditional manufactured homes loans. Qualifications include installing a home with a driveway. The home must meet certain construction, design, and efficiency standards.

Freddie Mac loans come through the Freddie Mac Home Possible mortgage program. In some cases, grant money can be used for the down payment.

Should I Buy a Mobile Home?

Clearly the biggest attraction is the cost – as the 22 million Americans who live in mobile homes can attest. The average sale price of a new manufactured home is $88,000, while the average sale price of a new home in 2023 was $513,400, according to Federal Reserve of St. Louis.

The costs for new manufactured homes vary greatly depending on whether it’s a single wide ($88,000) or multi-section ($155,800).

Compared to traditional homes, they are decidedly less expensive. But contrary to that reputation, mobile homes are not “cheap.” The state of the manufactured home art has come a long way.

To see what financing terms you may  get to buy a manufactured home, the first thing you should do is review your credit report. The better your credit score is, the more likely you are to qualify for better loan terms.

You can get a free copy of your annual credit report at AnnualCreditReport.com from each of the three major reporting bureaus (Equifax, TransUnion, and Experian). Or call 1-877-322-8228.

Mobile Home Insurance

Every home must be insured, including manufactured homes. This expense must be included as the long-term cost of owning a mobile home.

This policy protects you if your home is damaged and requires repairs. Policies typically cover the dwelling and your belongings; you can choose to add liability, which covers you if someone is injured at your home.

Standard policies, however, likely will not cover major catastrophic events like hurricanes, earthquakes, tornadoes, or floods. To add these items or obtain a policy that covers them, talk to a licensed and reputable insurance agent.

Get Help Financing Your Home

If you need additional help or have questions about your personal credit and finances, you may want to discuss your financial situation with a credit counselor.

For additional housing counseling, nonprofits such as InCharge Debt Solutions can provide more information.

InCharge is a nonprofit organization that offers confidential and professional credit counseling, debt management services, bankruptcy education and housing counseling. Its goal is to help consumers achieve a healthy financial position as they pursue their dreams.

A counselor from InCharge is required by law to provide the best financial advice possible for your individual situation. Its solutions for debt, for example, could lead to setting up a debt management program for you that will relieve the burden of debt.

Debt management can be a big help especially to those dealing with credit card debt, which can be an impediment to qualifying for a manufactured home loan.

Counseling sessions are free, and are done on the phone or online.