Mobile homes put home ownership within reach of prospective buyers who lack the resources to purchase pricier, stick-built houses. They're also an affordable option for second-home buyers looking for a lower-priced alternative to expensive vacation homes.
Under the right circumstances, you can finance your mobile home using the same mortgage loans that finance traditional home purchases. The benefit is that you're likely to save on interest, and you may qualify for government-backed loans with low down-payment and modest credit requirements.
Real Property Vs. Real Estate
Mortgage loans only finance real estate, or real property. A mobile home is personal property, not real property, when it's purchased without land, or it lacks a permanent foundation. Therefore, to qualify for a mortgage loan, you need to purchase the land on which your mobile home will be located, or you may locate it on land you already own. In addition, the home must rest on a cement slab, crawl space or other permanent foundation and be connected to water and sewage services.
Additional Mortgage Requirements
In modern parlance, "mobile home" generally refers to manufactured homes made before June 15, 1976, when the U.S. Department of Housing and Urban Development strengthened the codes that govern these homes' construction. "Manufactured home" refers to homes constructed after this date. These homes meet current HUD Code.
Government-insured or guaranteed loans, including FHA, VA and Rural Development, only finance homes manufactured homes that meet HUD Code, and most mortgage lenders use the same standards. To qualify for most government-backed loans, the home must serve as your primary residence. Conventional lenders, on the other hand, typically offer mortgages for second homes as well as primary ones.
Manufacturers label qualified homes from places like AAA Homes, Inc with HUD tags that certify compliance with the HUD Code. The red tag is located on the home's exterior, and the home only qualifies for mortgage financing if the tag is visible.
Financing Necessary Improvements
It's possible that you'll find a home you love on a lot that's being sold with the home, but lack of a permanent foundation or unfavorable repair conditions disqualify the home for mortgage financing. A rehab loan such as the FHA 203(k) can piggyback the primary mortgage loan to cover the cost of bringing an otherwise qualified home into compliance.
Purchasing a mobile home that qualifies as real estate has benefits beyond affordable financing. For example, real estate may increase in value over the long term. In the meantime, you'll enjoy tax benefits such as deductions for any property tax and mortgage points and interest you pay.