While traditional stick-built houses are financed with mortgages, can you get a mortgage on a mobile home? The answer depends on the mobile home type and its location. For lenders, the key factor is whether the home is considered real property.
This article explores the financing options available for manufactured homes, including those that qualify for traditional mortgages. We’ll also explore why some mobile homes aren’t eligible for mortgages and alternative financing solutions.
Manufactured Homes vs. Mobile Homes: Understanding the Distinction
Before diving into financing options, it’s crucial to understand the difference between manufactured homes and mobile homes. Though often used interchangeably, there’s a key distinction that impacts financing.
- Manufactured Homes: Built in factories to federal building codes, these homes are generally placed on a permanent foundation and considered real property. They are often indistinguishable from traditional site-built homes and can be appreciated over time.
- Mobile Homes: Built before June 1976, these homes don’t meet current federal building codes and typically sit on wheels. They are considered personal property and depreciate like vehicles.
Financing Options for Manufactured Homes
While traditional mortgages aren’t readily available for all manufactured homes, there are financing options to consider:
- FHA Loans: The Federal Housing Administration (FHA) offers Title I Property Improvement loans for manufactured homes meeting specific criteria. These loans can finance the purchase of a manufactured home and the land it sits on, provided the home meets FHA standards. Additionally, FHA Title II loans can finance existing manufactured homes that meet FHA requirements.
- VA Loans: Veterans Affairs (VA) loans are another option for veterans looking to finance a manufactured home. Similar to FHA loans, VA loans have specific requirements for the manufactured home and its land.
- USDA Loans: The United States Department of Agriculture (USDA) offers Rural Development loans for qualified manufactured homes in rural areas. These loans can be attractive due to lower down payment requirements and competitive interest rates.
- Conventional Mortgages: Can you get a mortgage on a manufactured home with a conventional loan? In some cases, yes. Freddie Mac and Fannie Mae, government-sponsored enterprises, offer loan programs for certain manufactured homes that meet their criteria. These homes must be permanently affixed to a foundation, meet specific size and age requirements, and be located on land owned by the borrower.
- FHA Streamline Loans: If you already own a manufactured home financed with an FHA Title I loan, you may be eligible for an FHA Streamline loan to refinance your existing mortgage with potentially lower interest rates or more favorable terms.
- Chattel Loans: Chattel loans are an option for manufactured homes not meeting the criteria for traditional mortgages. These loans are similar to car loans and are secured by the manufactured home, not the land. However, they typically have higher interest rates and shorter repayment terms than mortgages.
Why Traditional Mortgages Aren’t Always Available for Mobile Homes
There are a few reasons why traditional mortgages aren’t readily available for all mobile homes:
- Depreciation: Unlike traditional homes that appreciate over time, mobile homes typically depreciate, making them less attractive to lenders.
- Resale Value: Due to depreciation and their mobile nature, mobile homes can be harder to sell than traditional houses. This creates a risk for lenders if a borrower defaults on a mortgage.
- Land Ownership: A manufactured home must be situated on land owned by the borrower to qualify for a traditional mortgage. Mobile homes located in mobile home parks, where the resident rents the land, are typically not eligible for mortgages.
Final Thoughts
While you can get a mortgage on a mobile home depending on the specific type of home and its situation, financing options are available for those looking to purchase a manufactured home. Exploring FHA loans, VA loans, USDA loans, and even conventional mortgages for qualifying manufactured homes can offer attractive financing terms.
For mobile homes that don’t qualify for traditional mortgages, chattel loans provide an alternative, albeit with potentially higher interest rates. Ultimately, understanding the financing options available and the eligibility requirements for manufactured homes is crucial for making informed decisions when purchasing a non-traditional dwelling.
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