The Federal Housing Administration (FHA) has been helping people access loans for buying their homes since 1934. Initially founded as a way to stimulate the housing market and increase the number of homeowners, the FHA now offers excellent lending conditions to those who want to buy their first home, such as a low down payment and flexible terms. If you always wanted to buy your own manufactured home in San Diego, California but thought you couldn't meet all lending requirements, an FHA loan may be just what you need.
What are FHA Loans and How Do They Work?
An FHA loan is a mortgage typically targeted toward low- to moderate-income buyers, as it requires a significantly lower down payment and credit score compared to most conventional loans. Despite the name, FHA loans aren't directly issued by the FHA. An approved lender, like Cascade Financial Services, issues the loan, with the FHA backing it. Therefore, FHA Manufactured Home Loans in San Diego, CA are mortgages insured by the FHA for buying factory-built homes. You can also refinance an existing loan for a manufactured home via the FHA loan program.
Some of the minimum mortgage standards for FHA loans are:
- Down payment: You can borrow up to 96.5% of a home's value with an FHA loan, meaning that the minimum down payment is only 3.5%.
- Credit score: The minimum credit score for an FHA loan with a 3.5% down payment is 620.
- Mortgage insurance: There are two types of mortgage insurance required for FHA manufactured homes: an upfront mortgage premium (UFMIP) and an annual mortgage insurance premium (MIP). The former amounts to 1.75% of the total loan, while the latter is an annual payment that ranges from 0.45% to 1.05% of your total loan amounts and is added to your monthly payments.
- Debt-to-income ratio: FHA loans tend to be the most flexible with debt-to-income ratios. You may qualify with a DTI over 50% if you have extra cash reserves or a high credit score.
- Loan limits: The FHA's limits for issuing loans are adjusted each year based on the average home prices. The limit for 2022 for a single-family home, including manufactured homes in San Diego, is $879,750.
What are the Special FHA Provisions for Manufactured Homes?
In addition to FHA's lending conditions for construction loans, those for manufactured homes have some extra requirements:
- The loan can include the home's purchase price, all improvements you choose to make on the property, and the price or payoff for the land.
- You can meet the 3.5% down payment requirement with land equity, which can also be gifted.
- It's a one-time close loan, meaning that you can combine financing for the land, construction, and permanent mortgage into a single mortgage loan.
There are also special requirements for the manufactured home itself:
- The home must have been built based on a federal HUD building code and after June 15th, 1976.
- The home's minimum size must be 400 square feet.
- Each of the home's sections must have a HUD certification label affixed to it.
- The home must be your primary residence.
- The home must be permanently attached to a foundation that complies with FHA standards.
- If the appraiser notices additions or structural changes to the original manufacturer home, an inspection by a relevant state or local jurisdiction administrative agency or licensed structural engineer is required for the appraisal.
Also, when you're buying both the manufactured home and the land below it, there are extra requirements:
- The contractor has to provide invoices that show all costs to set up the home and build the foundation, as they're permanently attached to the total loan amount.
- The foundation must be designed by a licensed professional engineer and meet specific construction standards.
- You must provide proof that you own the land the manufactured home is on. If you've recently bought it, the amount that the loan will cover is the one on the purchase deed. If you've owned the land for more than six months, the amount that the loan will cover is the land's market value.
- Your manufactured home is converted from personal property to real property and taxed as real estate. You can qualify your home as real property by providing a document that confirms your home is permanently attached to the land and a copy of the land's purchase contract or a deed showing that you intend to buy it.
If you live in San Diego and you're looking for a loan at competitive rates to finance or refinance your manufactured home, Cascade can help you become a homeowner. With a more than the two-decade-long history of helping their clients become homeowners, we offer our clients personalized services to make sure they get the best loan conditions they qualify for. Contact Cascade Financial Services today and talk to one of our loan service professionals!
Contact us at (877) 869-7082 to learn more about our FHA modular and manufactured home loan programs, or get started right away by filling out our online prequalification.