What is an FHA Manufactured Home Loan?
FHA Manufactured Home loans represent a popular option for home buyers who currently have the ability to repay a mortgage, but may have had some credit challenges in the past. FHA loan products also carry lower down payment requirements. These products are a great vehicle to help individuals who have a not-so-perfect financial history achieve the dream of homeownership.
The benefits of an FHA manufactured home loan are similar to that of a regular FHA home loan:
- A relatively low down payment.
- Interest rates and down payment requirements that are less sensitive to credit score than conventional loans.
- Higher debt-to-income ratios are allowed.
- In some cases, lower mortgage insurance rates for low credit score applicants.
How Do You Qualify for an FHA Manufactured Home Loan?
To qualify for a FHA modular or manufactured home loan, you must make a small down payment or have some equity in the property. Cascade’s FHA modular and manufactured home purchase loans require as little as 3.5% down or land equity in lieu of this amount. FHA refinance loans have a maximum Loan To Value of 97.75%.*
As with any loan, you must prove you have enough income to afford the payments. The debt-to-income ratio required for approval can vary based on a number of factors including past credit history, how much of the total income is dedicated to housing, residual income calculations, and other factors. As part of the loan application process, a representative at Cascade can help you understand debt-to-income ratios and work with you to determine the appropriate loan amount for your unique circumstances. If you would like to learn more about the benefits of manufactured homes check out our blog.
Cascade will verify that your financial situation meets the following criteria:
- No foreclosures in the last 3 years.
- Verifiable source of down payment.
- Verifiable source of sufficient income.
- Additional criteria will apply.
*For example, a $200,000 loan with a 30-year term, a 96.5% loan to value ratio, and a rate of 3.25% (3.967% APR) is repayable in 360 monthly payments of $1,012.08, which includes $167.41 in FHA Mortgage Insurance. This FHA monthly payment does not include the cost of property insurance or property taxes, which will increase the monthly payment.
What Are FHA Manufactured Home Loan Guidelines?
Manufactured homes are built in a factory setting, delivered to the home site and, to be eligible for an FHA loan, permanently attached to the property. Also, the FHA categorizes a manufactured home as a structure that is at least 8 feet in length and 40 feet in length.
Not every home will fulfill the standards required by the FHA for this type of loan. The home must have been built after June 15, 1976, because that's the date that the U.S. Housing and Development (HUD) implemented new standards for manufactured homes. Before this date, homes were called mobile homes and do not qualify for loans backed by the government because these homes were made before HUD standards were implemented. Now, the manufactured home must follow rules implemented by the Federal Manufactured Construction and Safety Standards.
Even if the home you'd like to finance is older and you're looking to modify it to meet current regulations, you will not be able to get a loan through this program. The home must also adhere to Model Manufactured Home Installation (MMHI) standards as well as follow certain local and state guidelines. To determine if your home meets the MMHI standards, look for a red label on the exterior of each transportable section. Also, the home must have at least 400 square feet of floor space and hold classification as real estate. This means that it needs to have a permanent foundation.
When reviewing an application for an FHA loan, Cascade will typically need to determine that the home has the following characteristics:
- Is the borrower’s primary residence.
- Is being taxed as real estate.
- Has access to sewer and water facilities.
- Has access to at least one all-weather road.
- Is permanently attached to a foundation that meets FHA standards.
- Meets the Model Manufactured Home Installation Standards.
- Is on a lot that is designated or approved.
What are FHA Manufactured Home Construction Loan Requirements?
If you're looking to purchase land and attach a manufactured home, the FHA considers this type of loan a construction-to-permanent loan. What this means is that you can combine the price of the land, home, permanent attachment, and transportation into the total amount of the loan. If you opt to do that, you must complete the following:
- You must obtain an itemization of the construction cost. Your contractor needs to provide invoices about the manufactured home that show the costs associated with securing the home to the foundation.
- You must prove you own the land. You need a contract that itemizes the price if you purchase a new plot. For purchases that occurred more than six months ago, the land's value will suffice.
- Your foundation must fulfill specific standards. The manufactured home needs to be attached to land that has a durable foundation designed by a licensed engineer.
- Your home must be taxed as real estate. FHA only approves manufactured home loans for structures attached to the land. Many states have their own laws that specify how you can transfer a manufactured home from personal to real property. You will need an affidavit of affixture stating that the home is attached permanently to the land and a copy of the deed or purchase contract stating that you currently own or will own the land.
FHA vs. Conventional loans
Conventional loans typically require higher credit scores, fewer challenges in your credit history, and a lower debt-to-income ratio. Conventional loans do not require mortgage insurance at 80% LTV or below and do not require an Upfront Mortgage Insurance Premium.
What Else Should You Know About FHA Manufactured Home Loans?
If you're interested in securing an FHA manufactured home loan, reach out to the professionals at Cascade. Manufactured home lending requires specific expertise and experience. Since we opened our doors in 1999, we have tailored our own loan products to meet the needs of manufactured home clients. Our loan specialists have years of experience and training in all of our loan products, including FHA manufactured home loan options. They can answer any questions you might have about the entire process. We understand every case is different, and throughout our history of offering FHA modular and manufactured home loans, we have worked with all sorts of borrowers.
If you’re purchasing an existing manufactured home that is not currently affixed to a foundation, Cascade may be able to structure a loan that allows you to upgrade your foundation to FHA standards.
Interested in an FHA Manufactured Home Loan? Contact Us to See If You Qualify Today
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.