The home buying process can seem simultaneously exciting and daunting. There are a lot of hoops to jump through and a lot of homes to consider. If you're trying to save money, buying a mobile home can make sense. But if you plan to use a VA loan, you need to make sure the home you want is eligible for the program. Here's how veterans can use VA loans for mobile homes.
What is a mobile home?
The terms mobile home and manufactured home are often used interchangeably. But they are technically two different things. According to the Department of Housing and Urban Development (HUD), mobile homes are structures built before 15.June 1976 were built. Prefabricated homes, on the other hand, are structures that were built after that date. Unlike mobile homes, manufactured homes must meet certain HUD standards in terms of how they can be built. Under the VA loan program, however, mobile and manufactured homes are considered one and the same. For VA loan purposes, a mobile (or manufactured) home is any home that is built in a factory on a permanent frame called a chassis. A modular home, on the other hand, is built in a factory in sections. Then it is transported to a specific location where it is assembled and placed on a foundation.To qualify for a VA loan for a mobile home, you must meet certain criteria. These requirements differ from those for traditional single-family and modular homes.
VA credit requirements for mobile homes
If you want a manufactured home because you like the idea of having a mobile home, you're out of luck. According to the VA's Lenders Handbook – VA Pamphlet 26-7, a mobile home must be to be financed through the VA Loan Program:
- Attached to a permanent foundation
- Classified and taxed as real estate
- Properly attached to a permanent foundation
- Essentially meet the VA minimum property requirements (MPRs)
- Meet applicable building codes and zoning requirements for real property.
These rules ensure that a property is safe to live in and are verified with an appraisal by a VA-certified appraiser before you close on a home.
It's important to note that a mobile home must be classified as real estate. In other words, it can't be considered a vehicle (that's personal property). If the mobile home you are buying has not been moved to a permanent location, you must provide your lender with installation details.
If you own a property, you can use a VA loan to buy a mobile home for that property. You can also use a VA loan to buy a mobile home and land at the same time. But the type of financing available to you may vary depending on your circumstances. Veterans who want VA loans for mobile homes must undergo a credit check and meet income requirements.
VA loan terms for mobile homes
Most VA loans have 30-year repayment terms. However, the maximum term for VA loans for manufactured homes is much shorter, according to the Federal Domestic Assistance (CFDA) catalog.The maximum loan term is 20 years and 32 days for single-wides prefabricated houses (purchased with or without land), For double-wides 23 years and 32 days. If you buy a double-wide home and lot, the maximum loan term is 25 years and 32 days.
Challenges in obtaining a VA loan for a mobile home
Getting a VA loan for a prefab house won't be easy. Historically, homeowners with mobile homes were more likely to default on their loans. In addition, most manufactured homes depreciate in value over time, which is the opposite of most homes. These are two main reasons why many lenders avoid VA loans for manufactured homes.
In recent years, almost no VA lenders offer home loans for manufactured homes. If you can't find a willing lender, you may have to opt for a personal loan or a loan through the manufacturer. Otherwise, it may be better to buy a regular home if you want a VA mortgage.
Even if you find someone open to giving you a loan, it may only be a short-term construction loan. If that happens, you'll have to go through the process of refinancing and applying for a VA home loan once your home is built.
Conclusion
Buying a prefabricated house seems to be an affordable option, especially compared to a traditional house. But securing the financing you need through the VA loan program will be difficult. In addition, it can be difficult to find a home that meets the requirements listed by the VA and your local government. You may have to dream about your dreams of living tiny until you can save to buy one.
Tips for VA Loans
- VA loans are offered by many lenders, not just USAA, Veterans United and Navy Federal. Be sure to compare mortgage rates and fees before choosing a lender.
- If you're not sure how VA loans work or what's required to apply for one, check out SmartAsset's Veteran's Home Buying Guide.
Update: Do you have any other financial questions? SmartAsset can help. So many people have turned to us for help with tax and long-term financial planning, We launched our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find someone you can work with to meet your needs. First, you answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries that meet your needs. You can then read their profiles to learn more about them, interview them by phone or in person, and choose who you want to work with in the future. This way you can find a good fit while the program does much of the hard work for you.