VA Loans for Mobile Homes

The United States is experiencing one of the hottest housing markets in its history, and the robust demand coupled with very low inventory in many markets is driving home prices into record territory.

The state of the market is forcing many prospective homebuyers to pivot and consider manufactured or modular homes. Fortunately, those who qualify for the VA home loan program can use it to buy a manufactured or modular home, but there are a number of stipulations unique to these dwellings that a buyer should know first.

What Are Mobile and Manufactured Homes?

The first step is to become familiar with some terms and classifications for these structures, particularly as they relate to the VA home loan process. While “trailer” and “mobile home” are colloquial and very broad terms for describing prefabricated homes built in a factory on a chassis and later transported to a site, those terms are also pretty outdated.

According to the law, anything manufactured before June 15, 1976, is considered a mobile home. Structures built after that date must comply with the stricter guidelines of the Manufactured Home Construction and Safety Standards, rules established and enforced by the Department of Housing and Urban Development (HUD). Homes that meet these guidelines are classified as manufactured homes. A third category, modular homes, is different from mobile homes and manufactured homes in that these structures don’t have to meet HUD standards and are built to the same building codes and standards as site-built homes.

Differences Between Mobile and Manufactured Homes

The VA loan program has its own view of the structures, and considers “mobile” and “manufactured” structures as one and the same. The VA classifies a mobile or manufactured home as any home that’s built in a factory on a permanent frame or chassis. Conversely, a modular home is built in sections in an off-site factory and later transported to another location where it’s assembled on a foundation.

Are VA Loans an Option for Mobile or Manufactured Homes?

Using the VA loan program is possible for the purchase of a mobile or manufactured home, but there are certain guidelines that exist. First, remember that the VA doesn’t lend the money — it only guarantees the loan. A VA-approved lender will have its standards, and not all are willing to issue loans on manufactured or mobile homes. Second, before meeting any specific lender requirements, any property will have to conform to the VA’s standards.

VA Loan Requirements for Manufactured Homes

Before you submit an offer, take the time to understand the specific requirements that manufactured homes must meet in order to be eligible for the VA home loan program.

• Permanent foundation: The VA has a general policy that the home must be affixed to a permanent foundation, though it may be possible with approval from the VA to secure a loan on a property that is not permanently attached.
• Classification: The structure must conform with applicable building and zoning rules. It must also be classified and taxed as real property and titled with the land it sits upon. (An exception may be granted if the lender gets approval.)
• Construction: The property must have a HUD tag, a metal identification plate located outside the structure certifying that it has been inspected and meets construction standards specific to manufactured homes. There should also be a data plate inside the home, usually located inside a closet or cabinet, that lists information about the house.
• Size: Single-wide structures must have at least 400 square feet of living space, while double-wide structures must have at least 700 square feet.
• VA’s minimum property requirements: Like all loans issued by the VA home loan program, manufactured homes are subject to the VA’s standards in categories such as sanitation, safety, structural integrity, and more.

Eligibility Criteria for Manufactured Home Loans

In a highly competitive housing market like this one, manufactured homes are a great option that are typically more affordable. As with all VA loan programs, the property and structure must meet VA requirements and borrowers must meet eligibility criteria and qualifications in order to work with the VA home loan program.

• Certificate of Eligibility: Available through the VA, this document confirms that a borrower is eligible for a VA loan based on military service. (Some requirements may be waived if you’re applying as a surviving spouse or are receiving disability benefits through the VA.)
• Credit score: The VA doesn’t impose a minimum credit score, but your lender may have its own standards. In addition, since lenders consider manufactured homes a riskier investment, your credit score may carry greater weight in the approval process.
• Down payment: In most cases, the VA program does not require a down payment for a site-built home. For manufactured homes, a 5% down payment is mandatory.
• Debt-to-income ratio (DTI): A lender will analyze your DTI, the amount of your monthly income that is used toward debt payments. If the DTI is too high, it could sink your application.

How To Buy a Manufactured Home With a VA Loan

To earn approval for a VA loan on a manufactured home, it must be permanently attached to land and categorized as real property. Remember, not every lender will be willing to issue a loan on a manufactured/mobile home, despite your credit history and other financial factors. With this in mind, here are some specific ways that you can use a VA loan for the purchase of a mobile/manufactured home:

• For buying a mobile/manufactured home that will be professionally affixed to a lot that you already own.
• For buying both a manufactured home and lot at the same time when the structure is already affixed to the lot.
• For buying a manufactured home and lot at the same time when the structure is not affixed to the lot, but will be.

To start the process, search out a lender that will work with manufactured and mobile homes, then get preapproved for the loan. Once the lender studies your financial history and DTI ratio, it will issue a letter confirming how much it is willing to lend you.

Gary Foote, a Nashville-based mortgage and real estate broker with Edge Home Finance, Realty Masters and Associates, and Zach Taylor Real Estate, said his most valuable advice for veterans is to start the process early and choose the right professionals.

“As the saying goes, ‘Proper preparation prevents poor performance,’ ” Foote said. “It’s vital to work with experts who understand the nuances of VA loans and can serve you effectively.”

Foote, who specializes in working with veterans and the VA home loan program, offered these tips:

• Reach out to a loan professional early. The more time in advance, the better position you can get into.
• Interview and vet professionals. Make sure you choose professionals who align with your values, communication style, and are true experts in their field.
• Allow those professionals to coach you in the process. This includes pulling your credit report early.

VA Loan Terms on Manufactured Homes

Loan terms for the VA home loan program on manufactured homes will require shorter payoff periods than the typical 30-year fixed rate mortgage issued for traditional structures. Terms of the loan and the maximum loan amount will depend on a few factors, including the size of the structure and whether you own the lot where the home will sit. Know going in that you will not receive a 30-year mortgage and your loan terms will differ depending on the structure type and other factors.

• Single-wide manufactured homes can fetch a maximum VA loan term of 20 years, 32 days.
• Single-wide manufactured home and land can also qualify for a maximum VA loan term of 20 years, 32 days.
• Land for a home you already own can qualify for a maximum VA loan term of 15 years, 32 days.
• A double-wide manufactured home can fetch a maximum VA loan term of 23 years, 32 days.
• A double-wide manufactured home and land can qualify for a maximum VA loan term of 25 years, 32 days.

What Other Loan Options Exist for Manufactured Homes?

Again, using your VA home loan benefits to purchase a manufactured home can be more difficult than with a traditional home structure. Many lenders consider them risky investments, partly because manufactured homes depreciate in value more quickly than site-built homes. So, if you’re unable to find a lender willing to work with you through the VA home loan program, there are other options.

• Federal Housing Administration: The FHA backs two types of loans for manufactured homes. The loans can be used to finance a manufactured home, a piece of land, or both.
• Title I loans: These loans are for borrowers who want to live in a mobile home park or other communities with lots that are typically leased rather than owned. Title I loans typically offer a fixed interest rate and cover a 20-year term.
• Title II loans: These loans are for those who wish to buy a manufactured home and the land on which it will sit. This forgiving loan program features down payments as low as 3.5%, a minimum credit score of 500, and terms up to 20 years.
• Fannie Mae MH and MH Advantage loans: Borrowers with a 620 credit score or higher can qualify for these programs.
• Freddie Mac Home Possible: Borrowers with a credit score of 660 or higher can qualify for this program with as little as 3% down. Borrowers without a credit score can also qualify with a down payment of 5%.
• Chattel loans. These are commonly used for mobile home purchases. These secured loans allow the lender to repossess the home in case of default, but not the land it sits on.
• Personal loans: Interest rates and loan amount totals for these unsecured loans are determined by your credit score and financial situation. This may be a good fit for purchasing a manufactured home as the overall cost is far less, on average, than site-built homes.