The FHA loan offers the possibility to purchase many types of homes including single-family, condos, townhomes, and modular/mobile homes. But you have to exercise caution when you want to buy a mobile home, not every FHA lender will be willing to provide the financing.
The FHA doesn’t fund the loans that it guarantees. The bank that underwrites the loan actually does the funding. This means they get the final say in which loans they accept and which they do not. Some lenders just are not comfortable funding mobile homes, while others don’t have a problem with it.
If you are on the hunt for a modular home, you’ll also have to look far and wide for a willing FHA lender to fund your purchase.
The Requirement’s the Modular Home Must Meet
Even though the FHA doesn’t fund the loans, they have a say in which type of modular homes a lender can finance in their name. Any home you choose must meet the following requirements:
- Be built after June 15, 1976
- Be a permanent fixture on the lot (you can’t pick it up and move it)
- Adhere to the Model Manufactured Home Installation Standards
- Have a one-year manufacturer’s warranty if it’s brand new
- Be placed on a lot acceptable to the FHA (has proper water supply and sewer drainage)
Buying the Modular Home and the Land
You have options when it comes to buying the modular home and the land you will place it on. The FHA does not require you to own the land the home will be on. But you must have a proper lease if you will lease the land. In order for a lender to approve a manufactured home on leased land, though, you must have a lease that is good for at least 3 years.
You can also use your FHA financing to purchase both the home and the land, if you so choose. In fact, whether you buy just the home, just the land, or both determines the maximum loan amount you may obtain:
- If you buy just the home, you can borrow up to $69,678
- If you buy just the land, you can borrow up to $23,226
- If you buy the home and the land, you can borrow up to $92,904
You can borrow the money for up to 20 years if you buy the home or the home and the lot and place it on a single-section lot. If you buy the home and the lot and the lot is a multi-section lot, you can borrow the money for up to 25 years. If you buy just the lot, you can borrow the funds for up to 15 years.
Qualifying for the FHA Loan
Just like you would for the purchase of any other home bought with FHA financing, you must meet the following requirements:
- Minimum credit score of 580 (some borrowers require a higher score for modular homes)
- Minimum down payment of 3.5%
- Maximum debt ratio of 31% on the front-end and 43% on the back-end
Some lenders impose further or more restrictive requirements in order to ensure that you are not high risk as buying a modular home already puts the lender at risk.
In order to find the right lender, you may need to shop around. Some FHA lenders don’t offer this type of financing at all. Others may offer it, but have some more restrictions than the FHA requires. Doing your homework will help you find the lender that has the most favorable terms in helping you buy your modular home.