Besides the usual home, a manufactured home is worth a peek from homebuyers. Manufactured homes are built to HUD standards and are less expensive to buy and maintain.
Manufactured Home vs Mobile Home vs Modular Home
It’s not unusual to run into those three terms when looking up “manufactured homes” online. While they may look and sound the same, there exists a difference between these terms and the financing options that may available for them.
A manufactured home is a dwelling unit with a floor area of 320 square feet or more, with a permanent chassis to ensure the transportability of the home pursuant to the HUD Code. The HUD Manufactured Home Construction and Safety Standards (HUD Code) requires that the transportable sections of the said home that was built after 15 June 1976 must contain an HUD tag. This tag or certification label confirms that the structure meets the HUD’s standards under the Code.
A mobile home is the predecessor of today’s manufactured homes. Mobile homes are dwelling structures built before 15 June 1976, the enactment date of the HUD Code, and do not conform to construction standards specifically for the type.
A modular home is built based on the relevant local, state or regional building codes as site-built homes.
FHA Loans for Manufactured Homes
The Federal Housing Administration insures loans for the purchase of manufactured homes, their lots, or both. Each loan comes with a fixed interest rate.
The maximum loan terms and amounts, per FHA’s Manufacturing Housing Program, are as follows:
| Type of Purchase | Loan Amount | Loan Term |
| Manufactured Home Lot | $23,226 | 15 years |
| Manufactured Home Only or Single-Section Manufactured Home and Lot | $69,678 | 20 years |
| Manufactured Home and Lot | $92,904 | 25 years |
Under FHA relevant guidelines, you don’t have to own or purchase the land where the factory-built housing is erected. You can lease a lot located in a mobile home park or manufactured home community. The lease must also have an initial term of three years and provide an advance notice of termination of at least 180 days.
To be eligible for an FHA loan, you must live in the manufactured house as your principal residence and meet the underwriting requirements such as credit, debt-to-income ratio, and down payment. Regardless of how much money you put as down, you have to pay for mortgage insurance and set aside an escrow account for property tax and homeowner’s insurance.
It’s possible to buy a manufactured home using conventional financing, i.e. loans sold to Fannie Mae and Freddie Mac. However, some lenders prefer to originate loans to be insured by the FHA because of its more relaxed guidelines and less buy-back risk in the event the loans go bad.
For example, some lenders would require a borrower to own the lot or site for the manufactured home whereas the FHA can allow a borrower to just lease a lot, subject to meeting certain requirements. This and other flexibilities can be available to you.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.
