Yes, VA loans can be used to purchase a manufactured home, also sometimes known as modular homes or mobile homes. So read on as we navigate through the world of VA manufactured home loans.
A mobile home loan is a mortgage to purchase a manufactured home. But not all mobile home loan financing is the same. There are a few different loan programs to choose from, including:
Since mobile homes are designed to be moved from location to location, buying one doesn’t necessarily mean purchasing the land where it’s placed. Chattel loans are for purchasing a mobile home unit without the land. For these kinds of transactions, the home financing is considered a personal property loan rather than a real estate loan.
FHA loans are mortgages guaranteed by the Federal Housing Administration (FHA). These loans typically feature a low down payment and more flexible credit score requirements. They can be used to purchase a mobile home.
The Department of Veterans Affairs guarantees VA loans, which feature competitive interest rates, no down payment requirement, and no private mortgage insurance. These loans are available to military borrowers: active-duty service members, veterans, and surviving spouses.
VA home loan guidelines allow for the purchase of a mobile home.
The VA itself doesn’t lend money. It just guarantees them. Mortgage lenders are free to set independent loan eligibility requirements. That means that not all VA lenders offer mobile home loans.
That means you’ll need to do some research to find a VA lender who does offer them. But they do exist.
However, once you find a lender who offers VA mobile home loans, the loan process is the same as a regular VA loan. You’ll go through the standard pre-approval, underwriting, and closing steps.
A VA home loan can be used to:
But remember that every lender determines its own rules so not all of these options will be available from every lender and you may need to shop around.
There are a few differences between regular mortgages and VA manufactured home loans, including:
The default rate for VA loans on manufactured homes is higher than other loan types, which is part of the reason lenders will require higher credit scores, or may not offer these types of loans at all.
But many lenders are willing to offer VA manufactured home loans to homebuyers who are seeking them, so it’s good to shop around.
The VA updated its rules for manufactured homes in March 2019. To be eligible for a VA loan, the mobile home must:
Manufactured homes often start out classified as vehicles as they travel on public roads to get to their location.
If the home is still classified as a vehicle, or chattel, then it will need to undergo a “title elimination” to be eligible for a mortgage loan.
If the current owner pays annual fees to the DMV rather than property taxes, that’s a sign the home is still classified as a vehicle.
In most states, it’s not difficult to reclassify the home. Typically, the homeowner will need to file some forms with the county records office and pay some modest fees.
To reclassify the home, you will need:
To be eligible for a VA mortgage, the homebuyer must be purchasing the structure itself, and the lot that it’s on.
As a result, mobile homes in a park or community where they rent the land are not eligible for a VA loan.
Often, a manufactured home is much more affordable than a stick-built equivalent. This is one of the biggest advantages, particularly for first-time home buyers.
Increasingly, mobile homes are designed to be more comfortable and spacious, and offer more advanced energy efficiency.
If you’re considering a mobile home, here are two important points to keep in mind:
Some lenders will allow refinancing of a mobile home with a VA streamline refinance — also known as a VA Interest Rate Reduction Refinance Loan — which could help you to lower the interest rate on your existing mortgage.
The VA loan program is intended for military borrowers to purchase a primary residence.
To be eligible, borrowers will need to demonstrate that they meet the VA loan requirements, including service requirements. A lender can help you request your Certificate of Eligibility (COE), which indicates the details of your military service.
Whether or not a manufactured home is right for you will depend on your unique financial circumstances.
If you decide to proceed, a VA loan could help you to save money on your new home purchase.