When contemplating buying a mobile home, securing a mortgage can pose more challenges compared to a conventional house purchase. Thankfully, FHA loans offer an avenue to acquire a mobile home. If you’re prepared to proceed with your mobile home purchase, discover the essential details on finalizing your acquisition with an FHA loan.
Defining A “Mobile Home”?
In a broad context, a mobile home is essentially a movable living structure. However, when it comes to mobile homes financed through an FHA loan, the U.S. Department of Housing and Urban Development (HUD) sets specific criteria.
A “mobile home” approved by HUD is essentially a manufactured home. These homes are constructed offsite, following HUD’s Manufactured Home Construction and Safety Standards building code, not at their final location. To meet the HUD standards, the home must have been built after June 15, 1976, when the updated regulations came into force. An approved manufactured home will bear a red certification label on each transportable section.
A key requirement of the HUD code is that manufactured homes must be built on a permanent chassis.
Understanding an FHA Loan
For prospective home buyers eyeing a mobile home purchase, the FHA loan program stands as a viable choice. Such a loan, secured by the Federal Housing Administration, offers a mortgage alternative. While borrowers engage with an FHA-approved lender, the FHA provides insurance for the loan.
The FHA’s support shields the lender in case of default on the mortgage. This financial safety net encourages lenders to collaborate with borrowers who meet the loan program’s criteria but may not qualify for a traditional loan.
Securing an FHA Manufactured Home Loan for Your Mobile Home
When applying for an FHA loan for a manufactured home, you’ll need to choose between the Title II FHA loan program and the FHA Title I program.
The FHA Title I program allows for a manufactured home not to be attached to the land, while the FHA Title II program mandates the home to be permanently affixed to land you own.
Most lenders provide FHA loans for manufactured homes under Title II. Similar to those purchasing traditional homes, borrowers seeking an FHA loan for a mobile home will need to apply through an FHA-approved lender. The key distinction lies in the fact that the manufactured home must adhere to the specific building and construction standards outlined by the FHA.
Requirements for FHA Home Loan
When seeking an FHA home loan, certain criteria must be met by both the borrower and the property. Let’s delve into these essential requirements.
- Manufactured homes must comply with building codes set by HUD. These codes mandate a living area of at least 400 square feet, the removal of the towing hitch, and the display of a visible HUD-approved seal on the exterior.
- Property prerequisites necessitate that the dwelling be permanently affixed to the land, classified for taxation as real estate, and equipped with water and sewer amenities. Additionally, the resident should have unimpeded access to the premises irrespective of weather conditions. A foundation inspection is mandatory, adhering to the guidelines outlined in the Permanent Foundations Guide for Manufactured Housing. Should a qualifying inspection have already been conducted previously, it may suffice.
- Credit Score: The FHA loan program is available for borrowers with credit scores as low as 500. Borrowers with scores between 500 and 579 are required to make a 10% down payment, while those with a score of 580 or higher can opt for a 3.5% down payment. To qualify, a minimum credit score of 580 is necessary.
- Occupancy Requirement: The home must be utilized as the primary residence.
The Advantages And Disadvantages Of Using An FHA Loan On A Mobile Home
Like all loan options, FHA loans come with their own set of advantages and disadvantages. Here’s what you should be aware of.
Advantages
- More accessible down payment options: Individuals with a credit score of 580 or higher could qualify for a 3.5% down payment.
- Favorable debt-to-income ratio (DTI) limits: FHA loans permit a maximum DTI of 57%. Borrowers with a high DTI will undergo individual evaluations by lenders.
- Reduced credit score prerequisites: Those with a credit score of 500 or above are eligible for an FHA loan, offering more lenient credit score conditions compared to other loan options.
Disadvantages
- Securing a home with an FHA loan can pose challenges in making competitive offers due to the loan approval process’s slower pace.
- Mortgage insurance is a must with FHA loans, requiring borrowers to pay an initial 1.75% of the loan amount and an ongoing annual insurance premium added to monthly payments.
- FHA loan limits may include borrowing restrictions. For Title I manufactured homes, the limit is up to $92,904 for a home and lot. Title II loans adhere to standard FHA guidelines.
Key Takeaway
Prospective home buyers often find the affordability of manufactured homes quite appealing. To proceed with purchasing a manufactured home using an FHA loan, consider applying for mobile home financing through Elevation Mortgage. For personalized assistance, reach out to our Home Loan Experts by calling 719.247.6622.
Reed Letson
Reed offers two decades of expertise as a mortgage broker, focusing on veterans and first-time home buyers. With a strong grasp of real estate and mortgage markets, he empowers clients with practical insights. Reed's passion is guiding clients to build wealth through real estate investments and financing solutions.