How To Finance A Manufactured Home With A VA Loan

Financing Manufactured Homes :

The housing market is chaotic in many parts of the nation, yet manufactured homes present an affordable housing solution for many. 

VA loans make these homes particularly appealing to service members, veterans, and eligible surviving spouses because they often come without a down payment. However, can a VA loan be secured for a mobile home?

VA Loans for Mobile or Manufactured Homes

VA loans aim to make homeownership more accessible and affordable for those who have served in the Armed Forces, offering benefits like no required down payment and no need for long-term mortgage insurance. These loans are unique in allowing homeowners to convert up to 100% of their home’s value into cash.

Obtaining a VA loan for a mobile home through traditional mortgage lenders is not an option. The distinction between mobile and manufactured homes can be confusing, and you’re not alone.

Eligibility and Requirements for VA-Manufactured Home Loans

While “mobile home” and “manufactured home” are terms often used synonymously, they represent distinct categories from both historical and lending viewpoints.

By legal definition, homes produced before June 15, 1976, are classified as mobile homes. Post this date, homes must comply with rigorous safety standards defined by the Manufactured Home Construction and Safety Standards, implemented by the Department of Housing and Urban Development (HUD), qualifying them as manufactured homes.

VA loans are unavailable for mobile homes constructed on June 15, 1976, yet lenders can approve VA loans for manufactured homes built after this crucial date.

Property and Borrower Requirements for VA Loans

Individual lenders may have specific requirements. However, we can outline the VA’s basic standards for these loans.

Property Requirements for VA Loans:

• Permanent Foundation: The VA generally mandates that manufactured homes be fixed to a permanent foundation, although exceptions may be granted with VA approval.
• Property Classification: Homes must be classified as real property and titled with the land, subject to lender-approved exceptions.
• Construction Standards: A HUD tag is required to ensure the home has been inspected and meets legal construction standards for manufactured homes.
• VA Minimum Property Requirements: Manufactured homes must meet VA’s sanitation, safety, and structural standards. Homes that need more time to be ready for occupancy may need repairs.
• Space Requirements: Single-wide homes require at least 400 square feet; double-wide homes need a minimum of 700 square feet.

Borrower Requirements:

• Certificate of Eligibility: Confirms VA loan eligibility based on service time, with possible waivers for eligible surviving spouses or those receiving VA disability.
• Credit Score: The VA does not specify a minimum credit score, though lenders might have their criteria.
• Down Payment: Only typically required if there’s impacted entitlement from a previous or ongoing VA loan.
• Debt-to-Income Ratio (DTI): VA prefers a DTI ratio that does not exceed 41% of gross monthly income, with potential exceptions for residual income or other factors.
• VA Funding Fee: A fee between 1.25% and 3.3% of the loan amount is required, with exceptions for eligible surviving spouses, those receiving VA disability, or Purple Heart recipients.

Maximum VA Loan Terms:

• Loan Term: The term can extend up to 30 years, 32 days, or the appraiser’s determined remaining property life, with no difference for manufactured homes.
• Loan Amount: Factors affecting the maximum loan amount include refinancing details, ownership of the lot, and the purpose of the purchase.

For precise expectations, consult with your lender.

Loan Terms and Benefits for Manufactured Homes

Using a VA loan to finance a manufactured home offers multiple advantages:

• Minimal initial investment: No down payment is usually needed, though a funding fee applies.
• Favorable interest rates: VA loans provide competitive, often lower, rates than conventional or FHA loans, acknowledging the service of military members and veterans.
• Unlimited loan amount: VA loans do not have a maximum loan limit like traditional and FHA loans, allowing borrowing up to the home’s appraised value.

Lender Variability and Alternative Financing Options

Currently, not all lenders provide VA loans for manufactured homes due to varying requirements from mortgage investors. This necessitates an assessment from lenders on whether they can offer such loans. Nevertheless, alternative financing methods are available.

Alternative Financing Options for Mobile and Manufactured Homes:

The financing options mainly available depend on the home’s construction date. Manufactured homes built post-June 15, 1976, have broader financing avenues than older mobile homes. Consider the following options:

• Conventional Loan: Homes meeting Fannie Mae or Freddie Mac standards require a 5% down payment, a 620 credit score, and a DTI below 40%. The home must be post-June 15, 1976, affixed to a permanent foundation and titled with the land.
• Chattel Loan: Typically used for mobile homes, these personal property loans have slightly higher interest rates than traditional mortgages.
• Personal Loan: As unsecured loans, personal loans don’t require collateral, leading to higher interest rates, but often come with a swift qualification process.

FAQs on VA Loans and Manufactured Homes

Can a VA loan be used for a relocated manufactured home?

Most lenders are hesitant to finance a manufactured home that has been relocated, as this often implies the house is not on a permanent foundation, necessitating special VA approval for the loan.

Is a VA cash-out refinance possible on a manufactured home?

Yes, a VA cash-out refinance can be applied to a manufactured home, typically to refinance the current loan and finance the purchase of the land where the house is situated.

Why are mobile homes ineligible for VA financing?

Mobile homes, constructed before the HUD’s national safety standards were introduced on June 15, 1976, are deemed too high a risk for traditional mortgage financing by lenders due to their age and safety concerns. Chattel loans or unsecured personal loans are usually the alternative options for financing such homes.

Conclusion

Financing a manufactured home with a VA loan is feasible, especially when the house is secured to a permanent foundation and is titled along with the land. VA loans offer several benefits, such as typically not requiring a down payment and providing highly competitive interest rates.