How to choose the right type
- Mobile, manufactured and modular homes are similar, but there are key differences that will affect the financing available.
- Many programs require the home to have at least 400 square feet of living space.
- Depending on your situation, a personal loan may be a better choice than a home loan.
- Read more stories from Personal Finance Insider.
Mobile homes are more suitable for some buyers than traditional homes. Maybe you are on a lower budget, want a smaller space, or need to move out later.
Some lenders offer mobile home loans, but financing these types of homes is different from traditional homes.
Mobile home vs prefabricated house vs modular house
The terms “mobile home,” “manufactured home,” and “modular home” are often used interchangeably, but there are a few key differences. And the type you choose will determine the types of mortgages you can choose to finance the purchase.
All three are built in a factory and shipped to the site, while the traditional houses are built directly on the property.
Mobile homes and manufactured homes are very similar in structure and appearance. The main difference between them is when they were made. Those built before June 15, 1976 are classified as mobile homes, while those built after that date are classified as manufactured homes.
Prefabricated homes are also built to safety standards set by the Department of Housing and Urban Development (HUD). This is the main difference between them and modular homes, which follow safety standards regulated by the local or state government.
7 ways to finance a manufactured home
You have several options for loans depending on your down payment, your credit rating, and the size of the home. The best fit can also depend on whether you want a mobile, prefab, or modular home.
1. Fannie Mae
the Fannie Mae MH Advantage Program is for manufactured homes. You will receive a 30 year fixed rate mortgage and this program offers interest rates on manufactured home loans lower than you might receive elsewhere.
You need a 3% down payment and a credit score of at least 620. The house must also meet certain criteria – for example, it must have a minimum width of 12 feet and a living area of 600 square feet.
2. Freddie Mac
Freddie Mac also offers manufactured home loans, and you can choose from a variety of fixed rate and variable rate terms. Like Fannie Mae, Freddie Mac demands that the house meet criteria. The house should be at least 12 feet wide and 400 square feet of living space.
3. FHA loans
You can get an FHA loan for a manufactured or modular home. You will get an FHA loan through a traditional lender, but it is backed by the Federal Housing Administration.
There are two types of FHA loans for manufactured and modular homes: Title I and Title II.
Title I loans are used to buy a house, but not the land it is on. The amount you can borrow depends on the type of property you are buying, but its borrowing limits are relatively low. A Title I loan could be a good option if you are working on a tight budget.
Title II loans are used to purchase both the house and the land below. The property must meet certain standards, such as having a living area of 400 square feet.
4. VA loans
Loans guaranteed by the Department of Veterans Affairs are intended for eligible serving members, veterans and their families. You can use a VA loan to buy a manufactured or modular home.
You don’t need a down payment when you get a VA loan, and the minimum credit score required will depend on the lender you use.
5. USDA loans
You can use a loan guaranteed by the United States Department of Agriculture to purchase a manufactured or modular home. The house must have at least 400 square feet of living space, and it must be built on or after January 1, 2006.
As with a VA loan, you don’t need a down payment and the credit rating you need will depend on the lender.
6. Movable loans
Homeowners loans are types of loans for various types of properties, including cars and boats. You can use a home loan to buy a mobile, prefab, or modular home.
These loans have higher interest rates than the other types of loans on this list, as well as shorter terms. But a home equity loan might be a good option if you don’t qualify for other types of home loans, or if you know you want a mobile home rather than a manufactured or modular home.
7. Personal loans
Lenders set limits on how you can use the funds for a personal loan. Depending on the lender you use, you may be able to invest in a mobile, prefab, or modular home.
A personal loan can be cheaper to start with than a home loan because you won’t have to pay most of the closing costs. However, personal loans generally charge higher interest rates than home loans, especially if you have a bad credit rating.
To choose between these mobile home loan formulas, think about the type of housing you want to buy. Then see which programs you qualify for.