VA Mobile Home Loans: Can I Buy a Manufactured Home with a VA Loan?
Posted on: January 8, 2020
Why would you want to buy a manufactured home (a.k.a. mobile home; we’ll use the terms interchangeably) rather than one built traditionally? Chances are, affordability will be a big factor.
In 2018, the Manufactured Housing Institute (MHI) reckoned the cost was less than half: an average price per square foot of $49 for a manufactured home, compared with $107 for a site-built one.Click here for today's VA loan rates.
Time was, you’d have had to make big lifestyle sacrifices to make such savings. But modern manufactured homes can be spacious, comfortable and highly energy efficient. And they are built to rigorous standards that ensure they’re safe and durable. Small wonder the MHI says roughly one in 10 new homes in America are manufactured ones.
VA mobile home loans essential for affordability
There’d probably be even more new mobile homes being built if only buyers would take more care over their financing, according to a 2018 study by the Urban Institute. Most of those buyers opt for a “chattel loan” (a chattel is just a personal possession), which is a personal loan.
But those are typically way more expensive than comparable mortgages. In fact, the study calculates that, on average, one “costs 4.4 percentage points more per year than a standard mortgage loan.” Over the lifetime of a loan, that’s going to add up to a pile of cash.
Of course, if you’re eligible for VA mobile home loans (and you probably are if you’re eligible for VA loans), you stand to get an even better deal than the average mortgage borrower. So don’t be bamboozled by salespeople into taking the park’s own (or recommended) chattel financing. They’re going to be thinking of their fat financing commissions rather than your best interests.
How do I buy a mobile home with a VA loan?
The VA doesn’t lend money. All it does is guarantee loans. So your lender will be a private company that can set any standards it likes. True, it has to observe the VA’s rules as a minimum, but it can build its own on those.
And that means not all VA-approved lenders are willing to lend on manufactured/mobile homes. In fact, many won’t. So you’re going to have to search out one that will help you. Don’t worry, there are some around. Indeed, we list a few, below.
Once you find a lender, get pre-approved for the loan. The lender will verify your income and finances and run a credit check. And it will then give you a letter confirming how much it’s willing, in principle, to lend you. That puts you in a powerful position when you’re buying a place. And it should see off even the most high-pressure park salesperson.
VA loans for manufactured homes: 3 peculiarities
Bear in mind three things:
- You’re not going to get a 30-year mortgage on a mobile home. There’s a 25-year maximum for larger units and a 20-year one for smaller ones.
- Lenders typically look for slightly better credit scores on these homes. So, if necessary, learn how to raise your credit score and invest some time and effort in doing so. It will pay you back richly.
- You’ll likely find it harder to find a lender. Many companies are unwilling to provide VA loans for manufactured houses
Having a loan that lasts less time has pros and cons. Your monthly payments will be higher because you’ll have fewer installments across which to spread the burden. However, you’ll also be borrowing for a shorter period, which means your overall cost of borrowing should be lower. After all, you’ll be paying interest for fewer years.
Chances are, you won’t need great credit to get a loan. The VA doesn’t set a formal floor on your FICO credit score, but many lenders look for a minimum of 620. That’s on a scale of 300-850 and FICO categorizes that as “fair”. You just might find a lender who’ll take you on with a slightly lower score, if you can show you’re a good borrower in other respects. But don’t expect miracles: the default rate on VA loans for manufactured homes has been high in the past and lenders generally have had their fingers burned.
That’s likely part of the reason why many lenders won’t touch these loans. They may well happily provide VA loans but they see offering them on mobile homes as a toxic combination. Don’t despair! Some are still more than happy to serve good borrowers with these products. You just have to be persistent in your search for one. Read on for ideas that might help you get the loan you want.Check VA loan rates here.
VA manufactured home guidelines: The home
The VA updated its rules for how it categorizes manufactured/mobile homes in March 2019. Here are the latest ones. To be eligible for a VA loan, the mobile home must:
- Meet the VA’s standard minimum property requirements (MPRs). These vary from state to state and you can check yours here.
- Count as real estate (as opposed to a chattel or vehicle) under state law and local zoning requirements*.
- Have a permanent foundation that complies with state law in respect of bearing the required load and withstanding strong winds.
- Be built to the manufactured home construction and safety standards defined by the U.S. Department of Housing and Urban Development (HUD). It should come with a HUD certificate and HUD tags attached to the home.
- Have a minimum floor area of 400 square feet if it’s a singlewide unit or 700 square feet if it’s double wide.
- Comply with state and local regulations over manufactured homes, especially if the home’s been altered or is missing its HUD tags.
*Don’t worry if the home you want to buy is currently classed as a chattel. It’s usually fairly straightforward to have it redesignated as real property (see below).
If you’re applying for a loan on a home that’s yet to be sited, you’ll have to provide various plans and specifications.
Allowable ways to use a VA loan to buy or refinance a mobile home
You can use a VA purchase or refinance loan to:
- Buy a mobile home that will be professionally affixed to a lot you already own.
- Purchase a manufactured home and lot at the same time when the home is already affixed to the lot.
- Buy a mobile home and lot at the same time if the home is not yet affixed, but will be.
- Refinance an existing loan on the mobile home and purchase the lot at the same time.
- Use a VA streamline refinance to lower the rate on a mobile home and lot you already own (as long as there’s a VA loan on the home currently).
- Lower the mortgage rate, pay off a non-VA loan, or obtain cash from your mobile home’s equity through a cash-out refinance.
Remember what we said about how each private lender sets its own rules. Not every lender will help you in all those situations. So be prepared to hunt around.Check VA loan rates here.
Manufactured home must be classified as real property
To get to their sites, just about all manufactured homes travel on public roads. So officially they start out as vehicles.
Smart owners undertake a “title elimination” when the home arrives. But many don’t. So the home you want to buy may currently be classed as a vehicle or chattel rather than real property. If the current owners pay annual fees for it to the DMV rather than property taxes, you can be pretty sure it’s still a vehicle.
In most states, it’s not hard for you to reclassify the home yourself so that it becomes real property and is therefore eligible for a mortgage. You have to file some forms with the county records office and pay some modest fees.
However, you may have to jump some hurdles first. You need:
- Rights to the land where the home’s situated
- To remove any wheels and axles
- Often to install utilities
Obviously, these practical steps have often already been taken, even if the home currently counts as a vehicle or chattel.Check VA home loan rates and see if you qualify.
Mobile home must be on its own lot/property
Many veterans wonder if they can buy a mobile home within a park or community where they rent the land. But VA loans do not allow this. You have to own or be purchasing the lot as well as the mobile home to be eligible for a VA loan.
Other things to consider
Your manufactured home may be way less expensive than a stick-built equivalent, but it’s still likely to be the single biggest purchase you’ve made so far in your life. So you need to think through your purchasing decision properly. In particular, bear in mind two points.
First, manufactured homes don’t typically “appreciate” (grow) in value, though there are rare exceptions. They don’t usually depreciate (lose value) as quickly as a car but the process is similar. One of the reasons for that is they have a shorter life expectancy than a stick-built home. Of course, you may be able to slow depreciation by maintaining your home better than most owners do.
And that brings us to the second point. Investing in maintenance is just one of a number of homeownership expenses you can expect. You’ll likely face property taxes, homeowner’s insurance premiums and perhaps park fees, too. Your lender will look at all those (and your existing debt levels) when it decides whether you can afford the loan you want. So get your head around them before you apply.
What lenders offer VA manufactured home loans?
Unfortunately, lenders that offer VA loans for manufactured homes aren’t that common. However, in our research we found some companies offering the program (list below).
It’s worth noting that a couple of these are wholesale lenders. As the name implies, that means they supply loans to other “retail” companies that deal with the general public. So they don’t deal directly with consumers. You could, however, try asking them for a list of retail lenders and brokers close to you — just as you might ask a manufacturer for a list of stockists.
Mortgage brokers can be very useful when you’re looking for a hard-to-find specialist loan, including VA mobile home loans. Ask around among friends, families and colleagues to find one with a good reputation. Make sure you know upfront who’s going to pay your broker’s fees. It may be the lender but sometimes it’s you.
Some potential lenders
Veterans United – VU says that it “does lend on manufactured homes in certain cases.” And you might want to start by talking to one of its loan officers. Because, if you qualify, you’ll be dealing with an excellent lender with a great reputation for customer service. Indeed, it lent more VA loans in 2018 than any other lender.
Land Home Financial Services – This lender offers loans up to 100% LTV (zero down payment) to buy a manufactured home and 90% to refinance for applicants with credit scores down to 620. The lender appears to be licensed in most U.S. states. However, it is a wholesale lender, meaning you have to find a bank or mortgage company that is signed up with Land Home as a broker. It’s possible that Land Home has a list of lenders in your area.
AFR Wholesale – Another wholesale lender, AFR states that it offers VA manufactured home loans. Since it’s a wholesale lender, you must do your own search for a local mortgage broker or lender which is signed up with AFR. The company does not share its manufactured home guidelines publicly, so ask your local lender if they parter with AFR and the terms of the loan.
OnQ Financial – OnQ Financial also states that they offer VA manufactured housing loans for properties at least 400 square feet, existing or new construction, for applicants with credit scores as low as 620. Purchase and refinance options are available. Fortunately, OnQ is a direct lender, meaning you don’t have to find a mortgage broker to work with them. The company is licensed in nearly every state and has branches nationwide.
CMG Financial – CMG Financial is licensed in most states and is a retail and wholesale lender. Its guidelines states that it can lend on manufactured homes aged 20 years or less, on a permanent foundation, no structural additions, enclosed crawl space, and meeting all other local codes as well as VA property requirements.
Still struggling? Check out these lenders, too. They all say they offer VA loans for manufactured homes:
Hunt around a bit and you’ll likely find others.Click here to check today's low VA loan rates and request a mortgage pre-approval.
Can I refinance my manufactured home with a VA streamline?
Some lenders will allow you to refinance a manufactured home with a VA streamline loan (IRRRL). The home would need to have a VA loan on it currently. Check with your lender whether they allow this type of loan, and see our VA streamline refinance page to learn about general qualifications.
Is a manufactured home right for you?
Only you, the home buyer, can determine whether a manufactured home works for your situation. For many, it’s a great way to purchase a quality home for a fraction of the price of a standard home.Click here to start the VA home loan approval process.