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FHA loans for manufactured homes: How they work and how to qualify

Yahoo Personal Finance· Getty Images
7 min read

With the median home price exceeding $400,000, some hopeful home buyers priced out of traditional homeownership are turning to manufactured homes. According to the Manufactured Housing Institute, as of 2021, manufactured homes cost less than one-fourth of traditional single-family homes with land.

Though manufactured homes are much more affordable, you still may need some help with financing. FHA loans for manufactured homes are worth considering, especially if you have a less-than-ideal credit score and don’t have much saved up for a down payment. Here’s what you need to know about FHA loans for manufactured homes, including how they work and whether you qualify.

Read more: 12 types of homes for buyers and renters

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According to the U.S. Department of Housing and Urban Development (HUD), manufactured homes are built offsite and transported on a permanent chassis to the final address. These homes must adhere to HUD’s Manufactured Home Construction and Safety Standards building code and be built after June 15, 1976, when the updated standards were enacted. All HUD-approved manufactured homes will also have a red certification label attached to each transportable section.

Learn more: Manufactured vs. modular home — What are the differences?

FHA loans for manufactured homes are mortgages backed by the Federal Housing Administration (FHA) that you can use to buy a house built off-site and affixed to a permanent chassis. You can also use these loans to finance your land purchase if necessary.

To qualify, you have to meet FHA’s borrower eligibility criteria, and your home must also meet FHA manufactured house guidelines and stringent property requirements. We’ll touch on those later.

Learn more: Pros and cons of FHA loans

Though many people still use the terms “mobile home” and “manufactured home” interchangeably, they are not the same thing.

Mobile homes are prefabricated homes built before HUD’s Manufactured Home Construction and Safety Standards building code was created in 1976, so they’re different from manufactured homes both in terms of construction and design. There wasn’t as much oversight regarding building requirements or materials for mobile homes built before 1976, so these properties aren’t eligible for FHA financing.

In short, mobile homes refer to unregulated construction built before June 15, 1976, whereas manufactured homes are built after that date and follow specific HUD rules for design, durability, and safety.

There are two kinds of FHA loans for manufactured homes: Title I and Title II.

You can use a Title I manufactured home loan to buy or refinance your manufactured home, the land it sits on, or both.

However, you don’t have to own the land to be eligible for a Title I FHA manufactured home loan. You can just lease a lot in a manufactured home community or mobile home park. However, the HUD requires your initial lease term for the land or lot to be at least three years.

You can use the FHA Title II program to finance your manufactured home purchase, but unlike the Title I program, you must buy both the house and the land it sits on. You don’t have the option of leasing the lot.

Unfortunately, FHA loans for manufactured homes aren’t available to just anybody. Here are the eligibility requirements.

If you have a credit score of 580 or higher, you’ll only need to make a 3.5% down payment. But if your credit score is between 500 and 580, you’ll need to put at least 10% down to qualify.

Your debt-to-income ratio (DTI) is calculated by dividing all your required monthly debt payments by your gross (pre-tax) monthly income, and it helps lenders gauge your ability to repay the money you plan on borrowing. FHA lenders typically like to see a DTI of 43% or lower, though exceptions could be made if you have a high credit score or down payment.

To qualify for an FHA manufactured home loan, the property must have been built after June 15, 1976, and have a red HUD certification label — this certifies that the home was built to HUD standards. The home’s installation also must meet the Model Manufactured Home Installation Standards and, if it’s a new unit, have a one-year manufacturer’s warranty.

To qualify for an FHA manufactured home loan, you must make the manufactured home your primary residence. This means it can't be an investment property or a second home.

The HUD has different loan limits for Title I and Title II loans.

Loan limits for Title I loans vary depending on what you’re buying:

  • For both a manufactured home and land, your loan limit is $148,909 (single-section) or $237,096 (multi-section)

  • For just a manufactured home, your loan limit is $105,532 (single-section) or $193,719 (multi-section)

  • For just a lot, your loan limit is $43,377

Multi-section homes are larger than single-section manufactured homes and are typically delivered in multiple sections that are joined together later.

Title II loan limits follow the FHA mortgage limits, which vary depending on where you live. For 2024, the borrowing limit for a single-family home is $498,257 in most parts of the country. In high-cost areas, the maximum is $1,149,825. Check the FHA Mortgage Limits website to find your area's maximum FHA home price.

Dig deeper: What are the requirements for an FHA loan?

To find an FHA-approved lender in your area, use the search tool on the U.S. Department of Housing and Urban Development’s website. Note that just because a lender offers FHA loans doesn’t necessarily mean it has FHA loans specifically for manufactured homes, so you may need to shop around a bit. Once you’ve found a few options, get preapprovals or Loan Estimates from at least three lenders and compare the terms to get the best deal.

Many of your options will be lenders that specialize in manufactured home lending. However, there are some bigger-name lenders with FHA loans for manufactured housing, such as Rocket Mortgage.

Read more: Best FHA mortgage lenders

FHA loans aren’t your only option for financing a manufactured home. Check out these alternatives to see if they’re a better fit:

  • Conventional loans. Fannie Mae’s MH Advantage program is a manufactured home financing program with terms up to 30 years and down payments as low as 3%. Freddie Mac’s Home Possible? loan is also worth considering, but it’s only available to those who make 80% or less of their area’s median income.

  • USDA loans. USDA’s Single Family Housing Guaranteed Loan Program helps low-to-moderate-income home buyers finance homes across rural America, including manufactured houses. No down payment is required, but there are income limits.

  • VA loans. If you’re an eligible military borrower, the U.S. Department of Veterans Affairs (VA) loan can be a great way to finance your manufactured home. However, your home must be on a permanent foundation and adhere to HUD’s Manufactured Home Construction and Safety Standards to be eligible.

You can get rejected from an FHA loan if you don’t meet the borrower requirements or your manufactured home doesn’t follow HUD’s design, durability, and safety rules. For example, maybe your credit score is below 500, or the manufactured house doesn’t have proper insulation and safe electrical systems.

According to the HUD, the minimum FHA loan term for all manufactured homes is six months. The maximum is 25 years plus 32 days for multi-unit manufactured homes.

Mortgage rates for manufactured homes tend to be higher than with stick-built houses because lenders feel it’s riskier to give out these types of loans Here’s why: Manufactured homes tend to depreciate faster than traditional homes, which can make them more difficult to resell if you default on the loan.

This article was edited by Laura Grace Tarpley.