Can You Use an FHA Loan to Buy a Manufactured Home?
One common question we get is whether an FHA loan, with its lower down payment and more lenient credit requirements, can be used to purchase a manufactured home. The answer is: yes and no (I know, not the clear answer you wanted)
First Let’s Understand FHA Loans
Before we dive into the specifics of manufactured homes, it’s essential to understand what an FHA loan is. An FHA loan is a mortgage insured by the Federal Housing Administration, designed to help people who might not qualify for a standard mortgage. It allows for smaller down payments and lower credit scores than many conventional loans.
FHA Loans and Manufactured Homes
Now, to address the core question – yes, you can use an FHA loan to buy a manufactured home. However, there are specific requirements that you must meet, both regarding your qualifications as a borrower and the standards the manufactured home must satisfy.
Borrower Requirements for an FHA Loan
To qualify for an FHA loan, you need to:
- Have a FICO score of at least 580 for the lowest down payment option of 3.5%
- For FICO’s lower than 580 you’ll need 10% down
- Demonstrate steady employment history (think 2 years solid job history)
- Possess a debt-to-income ratio below certain limits (typically 43 percent of your gross income)
- Use the home as your primary residence (only, not for investors)
Manufactured Home Eligibility for an FHA Loan
When it comes to the home itself, the FHA has additional criteria for manufactured homes:
- The home must be built after June 15, 1976
- It must adhere to the Manufactured Home Construction and Safety Standards (HUD Code)
- The floor area must be at least 400 square feet
- The home must be permanently affixed to a foundation that meets FHA’s Permanent Foundation Guide for Manufactured Housing
- It must have a property title as real estate (not as personal property and need to own the land)
- The home must be intended for use as a primary residence
The Pros and Cons of Financing a Manufactured Home with an FHA Loan
Pros:
- Lower down payments make it more accessible
- FHA loans are assumable, meaning the loan can be transferred to a buyer
- More lenient credit score requirements (down to about a 580 FICO score)
Cons:
- Meeting the eligibility criteria for the manufactured home can sometimes be challenging
- There are limits on how much you can borrow
- FHA loans require mortgage insurance premiums, which add to the overall cost
Steps to Take When Considering an FHA Loan for a Manufactured Home
- Check Your Credit: Ensure your credit score and financial history meet FHA loan requirements
- Find an FHA-Approved Lender: Not all lenders offer FHA loans, so it’s crucial to find one that does and understands manufactured home requirements. FHArates.com is the perfect place to find an FHA Lender!
- Get Pre-approved: This will give you a clear idea of what you can afford and shows sellers you are serious about buying
- Search for a Qualified Home: Look for manufactured homes that fit the criteria set by the FHA
- Have the Home Appraised: The FHA requires an appraisal by an FHA-approved appraiser
In Conclusion
Purchasing a manufactured home with an FHA loan is a viable route for many homebuyers, especially those entering the market for the first time. While navigating through the FHA loan requirements may seem daunting initially, understanding the process can open up an affordable pathway to homeownership. Remember to consult with a good mortgage advisor to assist you through each stage.
If you’re looking at manufactured homes and wondering about your financing options, remember that an FHA loan might be just the solution you need. With proper guidance, an FHA loan can help bring your dream of owning a home to reality.
For more information on FHA loans and homeownership, subscribe to our blog or contact a mortgage expert who can provide personalized advice for your situation.
