With the average price of a home exceeding $412,000, mobile homes, also known as prefabricated homes, are more cost-effective and offer more flexibility. According to the Manufacturing Housing Institute, the average sales price of a prefab home is about $127,250.
That said, financing the purchase of a mobile home or manufactured home may require more research than buying a traditional home, since most mortgage lenders don’t offer financing for these types of properties due to their low cost and depreciation in value. Still, there are some options available to you.
Mobile Home Financing Options
A traditional mortgage may not be a viable way to finance a mobile home, so you may need to look for other types of loans. Consider these options for financing your mobile home.
FHA Loans
The Department of Housing and Urban Development (HUD) offers mobile home loans through the Federal Housing Administration (FHA) loan program, which includes Title I and Title II loans.
Title I Loans
Title I prefab home loans can be used in a variety of ways, including to finance the purchase of a new or used prefab home, to refinance a prefab home purchase, to purchase a developed lot on which this type of home will be built, or to purchase a combination of both land and home. These funds can also be used to remodel, repair, and improve a prefab home.
Lenders can offer Title I mobile home loans even if the buyer does not own or plan to purchase the land on which the manufactured home will be built. These homes are typically located in manufactured home communities or mobile home parks. If the borrower does not own or will not purchase the land, they must provide a signed lease for the mobile home plot for an initial contract term of at least three years.
Loan programs have other requirements related to the terms of the loan.
Maximum loan amount:
- Prefab homes only: $105,532 for single section, $193,719 for multi-section.
- Manufactured home site: $43,377.
- Prefab home and land: $148,909 for a single section, $237,096 for multiple sections.
Maximum loan term:
- Prefabricated house: 20 years plus 32 days.
- Single-wide prefab home and land: 20 years plus 32 days.
- Prefab home site: 15 years plus 32 days.
- Multi-unit manufactured home and land: 25 years plus 32 days.
Title II Loans
This loan program guarantees loans that borrowers can use to finance a qualified manufactured home and land, so long as they meet the requirements: For example, you can only use a Title II loan if you plan to live in the manufactured home as your primary residence.
Other requirements for housing include:
- Minimum floor area is 400 square feet.
- Must be constructed after June 15, 1976.
- It is classified as real property, but not necessarily for state tax purposes.
- It is built on a permanent chassis and will remain there.
- The loan must cover the home and its lot.
Title II loans cannot be used for manufactured homes located on leased land in manufactured home communities or mobile home parks. Down payments on Title II loans can be as low as 3.5 percent, and terms can extend up to 30 years.
Fannie Mae
Some lenders offer Fannie Mae mortgages to borrowers looking to finance a manufactured home through their MH Advantage program, which offers 30-year loans with down payments as low as 3%. What’s more, interest rates on MH Advantage mortgages tend to be lower than conventional loans for manufactured homes.
To qualify, a home must meet several eligibility criteria, such as having a driveway and a walkway leading to the driveway, carport or detached garage. It must also meet certain construction, architectural design and energy efficiency standards similar to those for site-built homes.
Freddie Mac
You may be able to get conventional financing for a manufactured home through the Freddie Mac Home Possible mortgage program. You can get a loan with as little as a 3% down payment, and in some cases, you may even be able to get gift money or grant funding to help cover the down payment.
Freddie Mac also offers financing for manufactured homes through its CHOICEHome Mortgage program. To qualify, homes must meet the same requirements as site-built homes and meet certain eligibility factors.
VA Loans
If you’re a member of the military, you may be able to qualify for a loan guaranteed by the U.S. Department of Veterans Affairs (VA). You can use a VA loan to purchase a prefabricated or modular home and build it on land you already own, to purchase both the home and land at the same time, or to refinance a home that you plan to move onto land you already own.
Lenders can provide up to 100 percent financing for prefab mortgages, and they will require an affidavit of attachment certifying that the property is attached to the land you own and meets certain local and VA requirements.
The terms of the loan are as follows:
- For prefabricated house plots already owned: 15 years plus 32 days.
- Single-wide prefab home: 20 years plus 32 days.
- Single-wide prefab home and land: 20 years plus 32 days.
- Double Wide Prefab Home: 23 years and 32 days.
- Doublewide prefab home and land: 25 years plus 32 days.
Personal Property Loan
A personal property loan is a special type of personal property loan that can be used to purchase a mobile home. A mobile home loan is a loan to purchase a high-value vehicle such as an airplane, boat, mobile home, or farm equipment, with the real estate serving as collateral for the loan.
Some lenders offer personal property loans for the purchase of manufactured homes that are insured by the FHA, VA, and the Rural Housing Service (RHS) through the U.S. Department of Agriculture. Additionally, the closing process for a personal property loan is usually quicker and has fewer restrictions than a traditional mortgage.
There are also some drawbacks to personal property loans that you should be aware of. The interest rates on personal property loans are usually higher than traditional mortgages. Also, because the term of a personal property loan is shorter, your monthly payments may be higher than a traditional mortgage.
Personal Loans
Because mobile homes are much less expensive than traditional homes, you may be able to finance your purchase with a personal loan. Personal loans are flexible, so they can be used for almost any purpose, including a mobile home loan.
However, interest rates on personal loans tend to be higher than other types of loans, like mortgages or car loans. The trade-off is that you don’t have to put up collateral, so you won’t lose your home if you default on your personal loan payments. The application process also tends to be shorter and requires less documentation.
Another key advantage of a personal loan compared to a mortgage is that they’re usually cheap or free to set up, says Steve Sexton, CEO of Sexton Advisory Group: “There are no expensive title, escrow or appraisal fees. And because the loans are unsecured, the lender has no interest or control over your home.”
Personal loan lenders typically offer loans of up to $25,000 to $50,000, but some lenders will let you borrow up to $100,000 or more. If you can find a lender that offers a personal loan in a large enough amount to finance your mobile home, it could be a good way to borrow the funds you need. You’ll need good credit to qualify, and interest rates for good credit personal loans start around 7.50 percent.
Bankrate’s Viewpoint
When comparing mobile home financing options, consider the type of home you want to buy, how much you need to borrow, when you plan to repay the loan, and the type of interest rate you’re looking for.
How to finance a mobile home
If you want to know how to buy a mobile home and get the best financing, there are a few steps you should take first.
1. Check your credit report
Whenever you apply for a loan, lenders will consider your credit as part of your loan application. Having a good credit history and a solid credit score can make it easier to secure a loan with better rates and terms.
If you check your credit report and find an error, you can dispute it with the appropriate credit reporting agency, such as Experian, TransUnion, Equifax, etc. The credit reporting agency will respond within 30 days.
Why is this important: If you have a good credit score and history, you’re likely to get a lower interest rate, which could save you thousands of dollars over the life of your loan.
2. Decide whether to buy land in addition to your mobile home
When it comes to financing a mobile home, Sexton says the stability of the asset you’re financing is important: If you own the land and the axles and wheels of your mobile home are removed, you’re less likely to get it out and move it. That could lead to more lenders willing to lend to a mobile home.
Why is this important: If you plan to rent a land upon which you build your home, you will be able to get less of a loan than if you plan to purchase land upon which you build your home.
3. Figure out the details of the home you want to buy
The type of home you’re looking for will affect the loan you can get. For example, if you want to buy a double-wide manufactured home that costs more than $200,000, you won’t qualify for an FHA loan. Also, older mobile homes may not qualify for certain types of financing.
Why is this important: Every lender has specific lending criteria based on the type and value of your home.
4. Compare financing options
Choose the type of loan you want to take out and compare loans from different lenders. Mobile home and manufactured home loan rates and fees can vary widely from lender to lender, so take your time to shop around. Find a loan with low fees and interest rates to help you spend as little as possible over the life of the loan.
Why is this important: Doing your research and comparison shopping can save you thousands over the life of your loan and help you secure more favorable loan terms. Plus, researching financing options early on can help ensure you get the loan that will help you buy.
5. Submit your loan application
Make sure your application is as complete and transparent as possible, and have a down payment ready when you fill out the application, as many lenders will require one.
Why is this important: Submitting a complete application will increase your chances of qualification and make the process go more smoothly.
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Be sure to prepare thoroughly when financing your mobile home or manufactured home. This will speed up the process while increasing your chances of securing the best interest rate and most favorable terms.
Current Interest Rates
Like any loan, mobile home interest rates and manufactured home loan rates vary based on several factors. Your credit score, the size of your down payment, the type of home, and whether or not you’re buying land will affect how much you pay.
To qualify for low interest rates on mobile homes, make sure your credit score is at least 700. To qualify for the best available rates, you’ll need a score of 750 or higher. Average rates shown are accurate as of August 9, 2024.
| Types of Loans | Average Rate | Typical minimum credit score | General Terms |
|---|---|---|---|
| Federal Housing Finance Agency | 6.45% | 500 | Up to 30 years |
| Fannie Mae | Various | 620 | Up to 30 years |
| Freddie Mac | Various | 620 | Up to 30 years |
| Movable property | From 8% | 575 | Up to 20 years |
| Personal | 12.38% | 600 | Up to 84 months |
Mobile Homes, Modular Homes, Prefabricated Homes
You often hear the terms mobile, manufactured and modular used interchangeably when discussing these similar types of homes. Although they are related, there are some key differences between these homes.
A trailer home is manufactured in a factory and then transported to a site for installation. It may or may not use metal fasteners instead of a traditional foundation, but the same statements apply to prefabricated homes as well.
Like mobile homes, prefab homes are manufactured in a factory. Prefab homes can be set up in a permanent location on blocks, metal posts, or a permanent foundation. Unlike mobile homes, prefab homes are not meant to be moved after they are set up. Prefab homes are typically more expensive than mobile homes, with an average sales price of $118,000 in March 2024, according to the U.S. Census Bureau.
Like mobile homes or prefab homes, modular homes are manufactured in a factory and shipped to the property where they will be installed. But they are more like traditional homes. They often have crawl spaces or basements and use traditional foundations. Prices range from $180,000 to $360,000, according to Angi.
Bankrate’s Viewpoint
Before you buy, understand the difference between mobile homes, modular homes, and prefab homes to choose the best option for you.
Factors to consider when buying a mobile home
Now that you know how to buy a mobile home or prefab home, you should consider several factors, such as location, size, and whether you want a new or used home, to choose the best option.
position
Before you think about anything else, decide where you’re going to set up your mobile home. The location you choose will have a big impact on the rest of the process.
“Buying a mobile home and finding the right location is like buying a house,” Sexton said. “It’s important to be in a good neighborhood.”
You can choose to set up your home on land you already own, buy land to set up your mobile home on, or rent land in a mobile home community. If you choose to buy land, consider zoning regulations and any necessary utility connections.
size
Mobile homes and prefab homes come in a variety of sizes, so you’ll need to decide in advance what size home you want. Larger homes are more expensive and require a larger lot, so if you want a larger home, you may need to borrow more.
Mobile homes are typically classified by their width. Both classifications are usually around 70 feet long. Some common classifications you will come across are:
- Single Wide Dwelling or Single Unit: Less than 15 feet wide.
- Double Wide Home or Double Unit: Approximately 30 feet wide.
“Many towns don’t allow single-wide mobile homes within their town or city limits,” Sexton says. “Be sure to research the rules that apply to your situation.”
New or used
Unlike traditional real estate, mobile homes and manufactured homes tend to depreciate over time, which means you can get a discount by buying a used mobile home. The downside, however, is that used mobile homes often show signs of aging unless they’re well-maintained.
Some locations prohibit the installation of mobile homes manufactured before a certain date, which limits your options, and if you are buying an older mobile home, you may need a professional opinion to check the condition of the mobile home.
Long-term costs
One expense to consider when purchasing a mobile home or manufactured home is the cost of mobile home insurance. Like standard homeowners insurance, this type of insurance provides protection if your home is damaged or needs repairs.
Mobile home insurance often covers not only the home itself, but also your belongings if they are damaged or stolen. You can also get insurance that includes liability coverage, which protects you if someone is injured on your property and you are held responsible.
Standard mobile home insurance policies don’t typically include coverage for disasters like hurricanes, earthquakes, or floods, and you may need additional coverage. And just like with a traditional home, the cost of mobile home insurance varies depending on the level of coverage.
Conclusion
Mobile homes and prefabricated homes are much more affordable than traditional site-built homes. But if you’re planning to buy one, find out what financing options are available and understand the qualification requirements. You also need to make sure your home isn’t too old and in a good location to qualify for a loan or mortgage.
