6 Mobile Home Financing Options That You Can Choose in 2024

Building a house is an expensive undertaking. You need to invest your time and money to have a home that suits your needs. According to Rocket Mortgage, the average cost to build a conventional house in 2022 is around $285,956, but some homeowners shell out as much as $460,000. Due to the exorbitant cost of building a house, it shouldn’t surprise you that more homeowners are looking into alternative types of housing, like mobile homes. 

If you are interested in building a mobile home, you’ve come to the right place. This article explains the various options you can explore to finance your mobile home. 

What’s the Difference Between Mobile, Modular, and Manufactured Homes?

Before we go any further, let’s get something out of the way. Most people confuse the terms mobile, modular, and manufactured homes. These terms are often interchanged, although they have different meanings. So, how are they different?

Mobile 

A mobile home is a type of prefabricated house. It is built in a factory and has a permanently-attached chassis. Once the home is complete, it is transported or delivered to the site. The original term mobile home refers to factory-built homes before 1976. After 1976, mobile houses started being referred to as manufactured homes. Check this article for a comprehensive discussion about mobile vs. manufactured homes. 

Modular

A modular home is a type of prefab home that gets manufactured in a factory. A modular home consists of sections called modules. A house can be made from one or several modules, depending on the size of the house. Check our article to learn more about the differences between prefab homes vs. modular homes. 

Manufactured                                     

Mobile homes and manufactured homes are essentially the same, with some slight differences. For one, manufactured homes are built to conform to HUD codes, while mobile homes, just like site-built houses, are built according to local, county, or state building codes. 

What are the Financing Options for a Mobile Home

Building a mobile home might be more affordable than building a traditional house, but it has a downside. Receiving financing assistance to build a mobile home is more challenging than financing a conventional home. However, you can explore several prefab home financing options, and we will tell you more about them in this section. 

Conventional Mortgage Programs

Conventional mortgage programs don’t receive backing from government agencies like the VA. These loans typically cost less than FHA loans. However, they can be more challenging to get than FHA loans. 

Fannie Mae

Fannie Mae has a program called Manufactured Housing or MH Advantage program. This program aims to help homeowners finance manufactured houses that have features you can find in site-built houses. You can use this program as long as the title includes the mobile or manufactured home and the land it is on. 

The MH Advantage program gives homeowners access to fixed-rate mortgages. These mortgages have terms of up to 30 years. There are also 7/6 and 10/6 adjustable-rate mortgage loans or ARMs. A 7/6 ARM loan means you have a fixed interest rate for the first seven years, with the interest rate adjusting every six months for the remaining 23 years. A 10/6 ARM loan means you have a fixed interest rate for the first 10 years and interest rate adjustments every six months for the remaining 23 years. 

This program is available to a wide range of borrowers. You are eligible for an MH Advantage if you have a credit score of at least 620. If you have a credit score of at least 680, you increase your chances of getting better pricing. 

Freddie Mac

Freddie Mac has a manufactured home mortgage for low and moderate-income borrowers. This type of mortgage is ideal for borrowers who want conventional financing terms applied to their manufactured homes. Like Fannie Mae’s MH Advantage, Freddie Mac offers fixed-rate, 7/6 and 10/6 ARMs. 

To qualify for a Freddie Mac manufactured home mortgage, you must finance a 1-unit primary residence or a second home. Investment properties are not included, so you cannot finance a mobile home meant as a rental property or Airbnb. 

Agency-Backed Mortgage Programs

As its name implies, an agency-backed mortgage program is issued and guaranteed by the US government or one of its agencies. 

Federal Housing Administration (FHA) Loans

This is a type of loan backed by the Federal Housing Administration. This means that while the borrower deals with an FHA-authorized lender, the loan itself is insured by the FHA. Since this type of loan is backed by the FHA, the lender is insulated from loss if the borrower defaults on the mortgage. 

An FHA loan allows for a down payment of as low as 3.5%. Terms of up to 30 years are available. You can also use an FHA loan in barndominium financing or pole barn home financing.  

If you are interested in getting an FHA loan, you must decide between the FHA Title I loan program and the FHA Title II loan program. The FHA Title I loan program allows you to apply for a mortgage even if the manufactured home is not attached to the land. The FHA Title II loan program requires that the manufactured home is permanently attached to land that you own. 

USDA Loan

As part of the United States Department of Agriculture’s (USDA) efforts to boost housing supply in rural areas, you can avail of the USDA Rural Development’s Single Family Housing Guaranteed Loan Program. Under this program, the USDA will guarantee 100% of the appraised value of both the land and the manufactured home. You can also use a USDA Loan to finance a barndominium. 

VA Loan

If you are a service member, a veteran, or an eligible surviving spouse, you can use a VA loan to finance a mobile or manufactured home. You can use this loan to convert 100% of your home value to cash. What makes this option even more attractive is that mostly, no down payment is required for a VA Loan.      

Chattel Mortgage Loan

A chattel mortgage loan is a type of loan for a manufactured home. You can also use it for other movable properties, like vehicles or machinery. In this type of loan, the movable property, or chattel, acts as the collateral for the loan. This means that if you default on your loan, the lender can repossess your manufactured home and sell it to pay off the loan. 

Aside from being applicable only for movable properties, what sets chattel mortgage loans apart from conventional loans is that you can use them to finance only the manufactured home and not the land where the property sits. This means that to avail of a chattel mortgage loan, you should either own, rent or buy the land. If you plan to buy land, you will need a different loan to finance it. 

Compared to conventional loans, chattel mortgage loans often have shorter repayment periods and lower maximum loanable amounts. While conventional loans can have up to 30 years repayment period, chattel mortgage loans are usually limited to between 15 and 20 years. 

Chattel mortgage loans also tend to have higher interest rates. A shorter repayment period and high interest rates usually mean higher monthly payments than conventional loans. However, chattel mortgage payments also have lower processing fees. 

How Do You Get a Loan for Your Mobile Home?

Here is a simplified guide on how to get a loan for your mobile home. 

Check Your Credit Score

The first thing that you need to do is to check your credit score. A good credit score means better rates that can help you save thousands. Having a good credit score also means higher chances of loan approval.

Decide on What to Buy

The next thing to do is decide on the type of mobile home you will buy. Are you getting a single-wide or are you aiming for a double-wide home? You also need to decide whether you are buying just a mobile home or planning to include land too. These are important questions because they can dictate the type of loan you need. 

Look for a Lender

Once you know the loan type you want, search for a lender. Approach several lenders or mortgage companies to compare rates and terms. This will give you a better idea of whether you can handle the monthly payments. 

Apply for a Loan

The final step is to apply for a loan. This involves preparing the requirements and paperwork to get the ball rolling. The requirements you need to prepare depend on the lender but be ready to submit the sales contract for your mobile home, proof of income, source of funds for a down payment, and a list of debts and liabilities. On a case-to-case basis, you might have to present proof of homeowner’s insurance and a divorce decree or court order if you are paying alimony. 

Things to Keep in Mind When You Purchase a Mobile Home

Here are some things you need to consider in buying a mobile home. These are crucial because they can affect the cost of your mobile home and the financing options you can avail of. 

Location

Check with local authorities to ensure you can build a mobile home on your property. Some counties have ordinances that prohibit mobile homes in certain locations. 

Your location can also dictate the loan you can get. For example, USDA Loans are primarily for rural areas, so your mobile home must be in a rural location if you are after this type of loan. The location also affects the value of your property, so building a mobile home in a high-value area can increase the maximum loan amount you can get. 

Size

Ensure that the mobile or manufactured home you buy has more than enough space for your needs. If you can build a bigger one immediately, then do so. This is cheaper than building a small one and deciding to go for a more spacious one after a couple of years. 

The size of your mobile home affects its price and the loan type you will need. For example, if you are buying a small mobile home and already own the land, a personal loan might cover your expenses, and there’s no need for a more sizeable loan. 

Frequently Asked Questions 

How much does a mobile home cost?

A new single-wide mobile home costs around $51,000, while the average price of a new double-wide is around $107,000. However, remember that these price estimates can go higher depending on the features and amount of customization you want for your mobile home. 

How much credit score do I need to buy a mobile home?

While it will be challenging, getting a home loan with a credit score of 500 is possible. However, aside from the difficulty of getting approval, expect high interest rates and a bigger down payment. A credit score of at least 620 is ideal for an easier loan process and better interest rates. 

What is the oldest mobile home a bank will finance?

The oldest mobile home a bank will finance is one built after 1976. Anything built before 1976 won’t qualify for a mortgage. 

Is It Hard to Finance a Mobile Home?

Yes, financing a mobile home is more challenging than financing a traditional home. However, many financing options are available to help you build your mobile home. You can go with Fannie Mae or a Freddie Mac loan that offers fixed-rate, 7/6, and 10/6 ARMs. There are also agency-backed loans, like FHA, USDA, or VA. These various loan types make building a mobile home an easier and more worthy construction project. Ensure you follow our Facebook page for other informative articles about shipping container homes, pole barns, and barndominiums.