Mobile Home Financing: Loan Terms, Rates, and Options

Purchasing a mobile home can be an affordable way to achieve homeownership without taking on the high cost of a traditional house. However, financing a mobile home is different than financing a traditional home. Mobile homes are classified as personal property, not real estate, so you typically cannot get a traditional mortgage.

Instead, you need to explore loan options specific to financing a mobile home purchase.

You can typically finance a mobile home for a repayment term of 10, 15, 20, or 30 years. However, the age of the home, your credit score, down payment amount, interest rate and type of loan (FHA, VA or Conventional) can affect the length of your mobile home loan.

According to a report issued by the Consumer Financial Protection Bureau (CFPB), mobile home owners account for only 0.6% of all home loan originations.

Mobile home owners tend to be “financially vulnerable” – 32% are retirees with only around one-quarter the median net worth of other households. This contributes to the low rate of mortgage lending for these borrowers.

What Is Mobile Home Financing?

Mobile home financing refers to the various loan programs and lending options available to purchase and own a mobile home. Since mobile homes are not considered real estate, it requires a different type of loan than you would use to buy a conventional house. The loans that allow people to buy a mobile or manufactured home are referred to broadly as mobile home loans.

The most common types of mobile home loans are FHA loans, VA loans, USDA loans, and chattel loans. These loans can have different requirements, interest rates, and terms than conventional mortgages. Lenders also assess factors like your credit score, debt-to-income ratio, and down paymentwhen approving a mobile home loan.

How Long Can You Finance a Mobile Home?

You can typically finance a mobile home for a repayment term of 10, 15, 20, or 30 years. The most common loan terms are 15 or 30 years.

30-year loans have higher interest rates but lower monthly payments. 15-year loans have lower interest rates but the monthly payment is higher.

The longer you finance the mobile home, the more interest you end up paying over the life of the loan. Shorter terms often make the most financial sense if you can afford the higher monthly payment.

Factors That Affect the Length of Your Mobile Home Loan

Several key factors determine how long you can finance a mobile home purchase:

1. Age of the Mobile Home

The age of the home affects loan eligibility. Most lenders limit loans on mobile homes to 20 years from the manufacture date. So you may not be able to get a 30-year loan on an older home.

2. Credit Score

Your credit score impacts the loan term you qualify for. Borrowers with credit scores below 620 may only qualify for a 10 or 15-year loan, according to industry data. Those with better credit can get 20 to 30-year financing.

3. Down Payment Amount

The size of your down payment also affects the loan term. In general, larger down payments allow longer repayment terms.

4. Interest Rate

The higher the interest rate on the loan, the shorter the term you can qualify for. High rates mean higher monthly payments, so you may only be approved for a 10 or 15-year loan.

In 2022, the average interest rate on a 15-year fixed-rate mortgage was 3.02%, while the average interest rate on a 10-year chattel loan was 6.99%, based on industry research.

5. Type of Loan (FHA, VA, Conventional)

FHA and VA loans allow for long repayment terms up to 30 years. Conventional mobile home loans may top out at 15 or 20 years.

What Are the Different Types of Mobile Home Loans?

There are several types of financing options for purchasing a mobile or manufactured home:

1. FHA Loans for Mobile Homes

FHA loans are a popular option because they require a low down payment of just 3.5%. They are available for loan terms up to 30 years. To qualify, the mobile home must be on a permanent foundation.

2. VA Loans for Mobile Homes

VA loans help eligible veterans and service members buy a home with no down payment required. Like FHA loans, they can have repayment terms up to 30 years if the home is permanently affixed.

3. Chattel Loans for Mobile Homes

Chattel loans are loans specifically for financing mobile homes with terms of 10, 15, or 20 years. They do not require the home to be fixed in place but interest rates are typically higher.

Many chattel lenders require a down payment of 5-10%, while most conventional mortgage lenders require a down payment of 20%, according to mortgage industry analysis.

4. Conventional Loans for Mobile Homes

Some lenders offer conventional mobile home loans with terms up to 20 years, but permanent affixment is usually required. Rates may be higher than conventional mortgages.

What Are the Current Interest Rates for Mobile Home Loans?

Interest rates on mobile home loans are often higher than conventional mortgages. Here are some current rate ranges:

FHA loans – 4% to 6%
VA loans – 3.5% to 5.5%
Conventional loans – 5% to 8%

Chattel loans – 6% to 10%

In comparison, rates for conventional 30-year mortgages are averaging around 3% to 6%.

Always shop multiple lenders to compare rates and ensure you get the lowest rate possible. Improving your credit score and making a larger down payment can help you qualify for a better rate.

How to Apply for a Mobile Home Loan

The process of applying for a mobile home loan is similar to a regular mortgage:

Check your credit reports and credit scores before applying. Work to improve any issues.
Calculate your debt-to-income ratio and ensure it meets lender guidelines.

Gather documents like income statements, tax returns, and banking info.
Complete a loan application with a lender. Get pre-approved.
Once you find a home, the lender will do an appraisal and you’ll undergo full underwriting.

If approved, proceed to the loan closing and take possession of the mobile home.

Having an experienced loan officer guide you through the steps is key to making the financing process smooth.

What Are the Pros and Cons of Financing a Mobile Home?

Pros	Cons
Requires a relatively low down payment of 5-10%.	Rates are often higher than conventional mortgages.
Interest rates may be affordable depending on loan type.	You don’t build home equity like with real estate.
Allows you to spread repayment out over 15-30 years.	There’s little potential for appreciation over time.
Can still provide a sense of home ownership.	Loans may be harder to acquire and have stricter requirements.

Can You Refinance a Mobile Home Loan?

Yes, it is possible to refinance an existing mobile home loan to get a lower monthly payment or better rate. Reasons to refinance include:

You have significantly improved your credit score.
Current interest rates have dropped since you got your original loan.
You want to adjust your monthly payment or loan term.

When refinancing, look for lenders that specialize in mobile home loans. Make sure to compare closing costs with potential savings from the new loan. Refinancing can help you lower costs, build equity faster, or get out of a high-rate loan.

Financing Home Improvements for Your Mobile Home

In addition to purchasing and refinancing, another financing option for mobile home owners is making home improvements through personal loans or equity loans.

As a mobile home ages, you may want to remodel, upgrade fixtures, improve insulation, replace the roof, or make other renovations. With a home improvement loan, you can finance these projects and make monthly payments, just like your original mobile home loan.

Personal loans from banks or credit unions are one route for financing home improvements. You’ll likely need a good credit score to qualify and interest rates are usually higher than mortgages.

If you have sufficient equity in your home, a home equity loan or line of credit that uses your mobile home as collateral could also provide financing for renovations and repairs. Home equity loans often have lower interest rates than personal loans.

Carefully weigh the costs of any home improvement project versus the benefits. But if upgrades will improve your quality of life and add value, then financing can be a strategic way to pay for enhancements to your mobile home over time.

Conclusion

Financing for a mobile home gives borrowers an affordable path to homeownership when a conventional home mortgage is out of reach. While interest rates are often higher, there are loan programs like FHA, VA, and chattel loans to fit different budgets and needs. By understanding the available financing options, required down payments, and loan eligibility factors, you can find the right mobile home loan to make your affordable housing dreams a reality.

Frequently Asked Questions(FAQ)

What is the lowest interest rate on a mobile home?

The lowest interest rate on a mobile home can vary depending on the borrower’s creditworthiness, loan term, and other factors. Generally, however, the lowest interest rates on mobile home loans are typically in the range of 4.5%-5.5%, with terms up to 30 years and an origination fee of 0.5%-1.5%. Borrowers with excellent credit may qualify for even lower interest rates.

Does Bank of America offer mobile home loans?

Yes, Bank of America does offer mobile home loans. They offer a variety of loan options, including fixed-rate and adjustable-rate mortgages, as well as financing for new and used manufactured homes. Bank of America also offers competitive rates and flexible terms to help make the loan process as easy as possible. Customers can also take advantage of their online tools and resources to help make the loan process easier and more convenient.

Which of the following is a method for financing manufactured homes?

One method for financing manufactured homes is through the Federal Housing Administration (FHA) loan. This loan is insured by the US Department of Housing and Urban Development (HUD) and can be used to purchase a manufactured home, a lot on which to place it, and any associated site improvements. The loan is typically for 15 or 30 years and can be used to finance both the purchase of the home and any necessary repairs.

How long can you finance a mobile home in Florida?

In Florida, a mobile home can be financed for up to 30 years, depending on the loan program and lender. Generally, loans for mobile homes have higher interest rates and require larger down payments than traditional mortgages. To qualify, borrowers must have sufficient income and good credit. Additionally, the home must be located on owned or leased land and meet certain safety and construction standards.