Buying a manufactured home with bank funding is not the easiest task. Banks look at manufactured housing as high risk mainly because you usually don’t finance the land too. When you purchase a home built on site, you finance the home and the land. Manufactured houses are more like personal property than a real estate investment. Because of this, you may not have an easy time finding traditional financing. However, the USDA offers the opportunity with very few restrictions.
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Just as is the case with any other loan program, there are property restrictions for USDA financing on a manufactured home. These restrictions include:
- The property must meet the Home Construction and Safety Standards HUD created. Basically, this determines the home is safe and offers the level of performance that is necessary for suitable housing. You can tell which manufactured homes meet these requirements by the red license plate at the front of the home.
- The size must fall within the USDA guidelines. This pertains the minimum size, rather than the maximum. The USDA must ensure that the home is adequate for your family. If you purchase a single-wide home, it must measure 12 feet wide and have 400 square feet of living space. If you purchase a double-wide, it must measure 20 feet wide, but still have the same amount of living space.
- The home must be permanent. You cannot just pick up your manufactured home and move onto another site. Instead, you must have the home fixed permanently to the land. The home must not be able to be split up, either. However, you must make sure the land is modest, as USDA financing is for those who cannot afford other types of financing.
- The manufactured home must be new. You cannot use USDA financing to purchase an existing manufactured house.
- You can use the USDA loan to purchase the home and the land if you do not own the land already.
Applying for the USDA Loan
The USDA loan has specific requirements you must meet. The good news is that the requirements are easy to meet. The bad news is, you can make too much money and not qualify for the loan. The USDA first looks at your eligibility for the program before ever qualifying you for the loan itself. Qualifying for the program means your total household income does not exceed 115% of the area’s average income. You can determine if you qualify using the USDA’s calculator.
A quick rundown of how the USDA calculates your income is as follows:
- Total the income of every income producing adult living in your home.
- Subtract $480 for every child under the age of 18 living with you.
- Subtract $480 for every child over the age of 18 and who is a full-time student living with you.
- Subtract $480 for every disabled person living with you.
- Subtract $400 for every senior over the age of 62 living with you.
- This is your total for the eligibility income.
You compare this total to the area’s median income. If you fall within 115% of that amount, you are eligible for the program.
Qualifying for the USDA Loan
The next step is qualifying for the USDA loan. This is different than being eligible for the program. Qualifying pertains to you and your co-borrowers, if you have any. You must disclose each person’s income, debts, credit score, and credit history. The USDA loan has very lenient guidelines when it comes to qualifying for the program. As of right now, you need a 640 credit score and debt ratios within the 29/41 range. This means 29% of your mortgage payment including principal, interest, taxes, homeowner’s insurance, and the annual fee cannot exceed 29% of your gross monthly income. It also means your total monthly payments may not exceed 41% of your gross monthly income.
You must also prove you will live in the manufactured home as your primary residence and that you cannot secure financing from any other program. If you qualify for the loan, you have the benefit of no down payment and low interest rates. The USDA also keeps their closing fees reasonable for low income borrowers.
The Property Location
Another large factor of the USDA loan is the location of the property. You have already established that your manufactured home meets the minimum size requirements, but now you must focus on the location of the land. The USDA loan is for rural properties. This means properties located within an area with less than 20,000 people and outside of the city limits. You can view the boundaries on the USDA map. You might be surprised to see just how many areas qualify for the program.
Finding the Right Manufactured Home Dealer
A unique circumstance of purchasing a manufactured home with USDA financing is the need to find the right dealer. You cannot purchase your home from just any dealer. The dealer must be a USDA approved dealer. This helps the USDA regulate where their funds go. They can ensure that the homes are of the highest quality and that the USDA’s rules are followed. These include:
- Properly fixing the property permanently to the land
- Removing all liens from the property once the work is complete
- Adequate warranty on the home
- Proof of safe transport of the property to your land
Because the USDA takes a large risk in providing funding for a manufactured home, they must apply these guidelines. It sounds difficult to secure USDA funding for manufactured housing, but it isn’t as hard as it sounds. As long as you qualify for the program individually and you make sure to choose a dealer with experience with USDA financing, you should be in good hands. The USDA makes it possible for you to become a homeowner on an affordable home with no down payment. It is a great program to use, especially when you choose an experienced lender who deals with manufactured housing on a regular basis.