Manufactured homes are a popular option for families of all types. Of the 129 manufactured home plants in the United States, 22 are in Texas. Texas has more manufactured homes than any other state in the country, with 108,282 as of April 2020. This is more than 2.5 times the next-highest number, which is 38,792 manufactured homes in the state of Florida.
If you're interested in financing a manufactured home, a VA home loan may be the perfect option for you. Learn more about how this unique home financing program works.
What is a VA Loan?
The U.S. Department of Veteran Affairs provides partial backing for certain mortgages provided by private lenders. It's important to note that the VA does not fund these loans itself. Rather, it offers a guarantee to the lender, who is then willing to provide special terms to borrowers who are using the program. If these borrowers’ default on the loan, the VA will reimburse the lender for some of the loss, which makes the lender more willing to provide benefits that wouldn't otherwise be available.
VA loans provide favorable terms that aren't typically available with other loans. This includes:
- A $0 down payment with some lenders.
- No requirements for monthly private mortgage insurance.
- Interest rates are usually 0.5 to 1% lower than conventional interest rates.
- More relaxed credit requirements that may allow you to qualify for a VA loan even if you have a foreclosure or bankruptcy in your credit history.
- Limited fees and closing costs.
- No penalties for prepayment.
Who is Eligible for a VA Home Loan?
To qualify for a VA home loan, you must obtain a Certificate of Eligibility. Requirements for this certificate vary by type of service. If you are a veteran, you must meet the active duty minimum service requirement for the period of time in which you served. If you're currently on active duty, you must have served for at least 90 continuous days. National Guard and reserve members must have six credible years in the Selected Reserve or National Guard and one of the following:
- An honorable discharge.
- Placement on the retired list.
- Honorable service and a transfer to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve.
- Current service in the Selected Reserve.
If you served in the National Guard or Reserve between August 2, 1990, and the present, you must have 90 days of active-duty service.
If you do not qualify under the above requirements, you may be able to get a COE if you were discharged for:
- Reduction in force.
- Certain medical conditions.
- A disability that is related to your military service.
- An early out after serving at least 21 months of a two-year enlistment.
- The convenience of the government after serving at least 20 months of a two-year enlistment.
What Can I Use a VA Manufactured Home Loan For?
You can use a VA manufactured home loan in many ways. Purchasing a manufactured home and lot is only one option. You can also use this type of loan to:
- Purchase a manufactured home for a lot you already own.
- Purchase and improve the lot for a manufactured home you already own.
- Refinance an existing manufactured home loan in order to buy the lot.
- Refinance an existing VA manufactured home loan for a lower interest rate.
Do All Manufactured Homes Qualify for a VA Home Loan?
In order to qualify for a VA home loan, you must use your manufactured home as a full-time single-family dwelling. The home must also:
- Have permanent facilities for cooking, sleeping, eating, and sanitary purposes.
- Include a tag on the outside noting that the home meets HUD codes and regulations.
- Sit on a permanent foundation.
- Pass a home appraisal and inspection performed by an independent party selected by the VA.
Individual lenders may also set additional requirements for the manufactured homes that they provide financing for.
How Are Manufactured Home Loans Different From Traditional Home Loans?
While you can get a $0 down construction loan for a traditional VA home loan, this is more difficult to achieve if you're purchasing a manufactured home. The chances of long-term depreciation are higher with manufactured homes than with those that have a traditional construction. Therefore, many lenders will require some form of down payment for this loan. You will typically have to provide a down payment of at least 5% for a VA manufactured home loan.
Since these loans are slightly higher risk for the lender, you may also find that you need to have a lower debt-to-income ratio or higher credit score for a VA manufactured home loan than you do for other VA home loans. However, manufactured homes are also much cheaper than most conventional homes. The average site-built home costs $114 per square foot, while a manufactured home averages just $55 per square foot.
How Do I Get a VA Manufactured Home Loan?
Begin by applying for your COE from the U.S. Department of Veterans Affairs. You can do this online, by mail, or through an approved lender. Once you have your COE, you must supply your lender with additional personal and financial information to prequalify for your loan.
Cascade Financial Services is an experienced lender specializing in the manufactured home industry. If you're interested in financing a manufactured home in Texas, we can help you find the best loan option and most favorable terms for your individual situation. We proudly serve the Dallas area as well as all of Texas. Contact us to get started now!