What is a manufactured home?
Manufactured home. Modular home. Mobile home. They’re all different, but they’re all home. There’s a good chance if you want to buy one, you’ll need financing. That’s where we come in. They’re alternatives to traditional homes, and not all lenders have loans for them. Let’s learn more about mobile home loans and financing options.
Manufactured, modular, mobile. What’s the difference?
We’re so glad you asked. Knowing the differences will help you understand your home financing options.
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Manufactured home
A manufactured home is a factory-built home, on a permanent metal frame (called a chassis), moved in one or more sections to a home site. To qualify as a manufactured home, it has to have been built on or after June 15, 1976, to meet the requirements of the Department of Housing and Urban Development Manufactured Home Construction and Safety Standards (HUD Code). To get a conventional or government loan on a manufactured home, it must be attached to a permanent foundation and hooked up to utilities and a sewage system.
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Modular home
This is the closest thing to a site-built home, and qualifies for traditional financing. Like a 3D puzzle, the pieces of the home are manufactured, taken to the building site, and completed by a builder or contractor. You can either buy it from the builder once it’s complete or nearly complete, or contract to have one built for you. It has to meet the same building codes as a site-built home.
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Mobile home
Unlike a manufactured home, a mobile home can be moved. It’s not eligible for a home loan because it’s considered personal property, not real property like a site-built home. It may be on wheels and not attached to a permanent foundation, and it may be smaller than the minimum square footage required for some manufactured home loans. The good news is that we have mobile home loans, also called chattel loans, which means you can finance a mobile home. We’ll explain more later.
Manufactured home property requirements
To be eligible for a traditional mortgage, a manufactured home has to qualify as real property, equivalent to a site-built home. We’ve already mentioned some requirements, for example being attached to a permanent foundation. Anything that makes it mobile has to be removed, such as wheels, a towing hitch, and axles. Other considerations include making sure your title is properly recorded, and it’s no longer registered with your state motor vehicle department.
Manufactured home and mobile home financing options
Let’s review the possibilities, from conventional and government mortgages to chattel and personal loans.
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Both Fannie Mae and Freddie Mac (the two biggest purchasers of conventional loans finance manufactured home mortgages that meet their guidelines. The basics apply: the home must meet the HUD Code and be attached to a permanent foundation. Beyond that, there are slight differences.
- Fannie Mae manufactured home financing: Fannie Mae financing is available for manufactured homes at least 12 feet wide with a minimum of 400 square feet of gross living area. The home must be a one-unit dwelling, and cannot include an accessory dwelling unit (ADU). You must own the land as fee simple, unless the home is in a co-op, condo project, or planned unit development (PUD). Leased land is not eligible.
- Freddie Mac manufactured home financing: Freddie Mac will finance a manufactured home that is at least 12 feet wide with a minimum of 600 square feet of living space. There’s an exception if you’re going to use it as an ADU, in which case the home may be 400 square feet. You must own the land, unless the home is in a condo project, PUD. Leased land may be eligible with permission from Freddie Mac.
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If you qualify for a VA loan, you can use it to purchase or refinance a manufactured home. All the benefits and requirements of a VA loan apply, including 0% down payment and the ability to re-use your benefit. The home must be attached to a permanent foundation on land you own, or you can purchase the home and land with one loan. The manufactured home must have a floor area of no less than 400 square feet for a single-wide or 700 square feet for a double-wide.
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FHA loans are available for manufactured home purchases and refinances. The manufactured home must have a floor area of no less than 400 square feet. They are often the choice of first-time homebuyers because of their low down payment requirement (3.5%) and more forgiving credit requirements. Couple that with an affordable manufactured home, and it’s an attractive option. There are several loans within the program. You can finance a manufactured home or a home and land to place it on. In addition, FHA offers a shorter-term loan if you want to place your home on a leased lot in a manufactured home community or mobile home park.
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Chattel means personal property. Chattel is generally defined as something moveable, unlike real estate, so this is a loan you can use for a mobile home purchase. (It can also be used for a manufactured home, but a traditional mortgage may be a better choice. We can explain the options.) You can finance the home only, and place it in a mobile home community or on leased land, or you can place the home on land you own free and clear and use the land as a down payment for the new financing. Because it’s secured by the home, or the home and land, a chattel loan has a more attractive interest rate than an unsecured loan. You can also use a chattel loan if you’re planning on making the mobile home a vacation or second home, too.
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If qualifying for a traditional mortgage or chattel loan is an issue, you may want to consider a personal loan. Be aware that the interest rate is likely to be much higher, and the loan term will be significantly shorter. Banks and credit unions are typical sources of personal loans.
Are manufactured homes a good investment?
As a mortgage company, we’re not in the business of giving investment advice. That said, we believe strongly in the importance of homeownership. Owning a home is a gamechanger: strengthening communities, creating stability, and building family wealth over time. That’s our kind of investment.
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