- 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 option than a home loan.
- Read more stories from Personal Finance Insider.
Mobile homes are more suitable for some home buyers than traditional homes. You may have a lower budget, want a smaller space, or need to move the house later.
Some lenders offer loans to purchase mobile homes, but financing for these types of homes is different from traditional homes.
Mobile home vs. manufactured home vs. modular home
The terms “mobile home,” “factory home,” and “modular home” are often used interchangeably, but there are some key differences. And the type you choose will determine the types of mortgages you can choose to finance one purchase.
All three are built in a factory and shipped to the site, while traditional homes 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. Homes built before June 15, 1976 are classified as mobile homes, while homes built after that are classified as manufactured homes.
Manufactured homes are also built according 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 factory-made home
You have several loan options based on your down payment, credit score, and home size. The best fit can also be whether you want a mobile, factory or modular home.
1. Fannie Mae
The Fannie Mae MH Advantage Program is for manufactured homes. You’ll receive a 30-year fixed rate mortgage, and this program offers lower interest rates on manufactured home loans than you would get anywhere else.
You need 3% down payment and at least 620 credit score. The house must also meet certain criteria – for example, it must be at least 12 feet wide and contain 600 square feet of living space.
2. Freddy Mac
Freddie Mac also has loans for manufactured homes, and you can choose from a variety of fixed-rate terms and adjustable rates. Like Fannie Mae, Freddie Mac demands that the house meet the criteria. The house must be at least 12 feet wide and contain 400 square feet of living space.
3. FHA loans
You can get an FHA loan for a manufactured or modular home. You’ll get an FHA loan through a traditional lender, but this support is backed by the FHA.
There are two types of FHA loans for manufactured and modular homes: Title I and Title II.
Title 1 loans are used to purchase a home, not the land on which it is located. The amount you can borrow depends on the type of property you are buying, but it has relatively low borrowing limits. A door one loan can be a good option if you are working on a smaller budget.
Title II loans are used to purchase both the home and the land under it. The property must meet certain criteria, such as having a living space of 400 square feet.
4. VA . Credits
The loans backed by the Department of Veterans Affairs are for the rehabilitation of active military, veterans, and their families. You can use a VA loan to purchase a manufactured or modular home.
You do not need a down payment when you take out a VA loan, and the minimum credit score required will depend on the lender you use.
5. USDA Loans
You can use a USDA-backed loan to purchase a manufactured or modular home. The home must have at least 400 square feet of living space, and must have been built on or after January 1, 2006.
As with a VA loan, you do not need a down payment, and the credit score you need will depend on the lender.
6. Chattel Credits
Chattel loans are types of loans for different types of real estate, including cars and boats. You can use the chat loan to purchase a mobile, factory or modular home.
These loans have higher interest rates than the other types of loans on this list, as well as shorter lengths. But a personal loan can be a good option if you don’t qualify for other types of housing 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 the money from a personal loan can be used. Depending on the lender you use, you may be able to put the money into a mobile, manufactured or modular home.
A personal loan can be cheaper up front than a home loan, because you won’t have to pay most of the closing costs. Personal loans usually charge higher interest rates than home loans, especially if you have a poor credit score.
To choose from mobile home purchase loan options, consider the type of home you want to purchase. Then find out what programs you qualify for.