All About USDA Loans for Manufactured Housing

What You'll Learn in This Article

• Differences Between Manufactured, Mobile and Modular Housing
• USDA Manufactured Home Loans and Modular Property Requirements
• USDA Loan Restrictions
• USDA Loan Underwriting for Modular Homes
• Finding a USDA Lender
• Buying a Modular or Manufactured Home with USDA Financing

USDA loans offer many benefits, including financing with no money down, low interest rates, and more liberal credit requirements than many other loan programs. They can be used to purchase properties in every state, including low-cost manufactured homes.

Differences Between Manufactured, Mobile and Modular Housing

We use the terms “manufactured,” “mobile,” and “modular” interchangeably, but they have very different meanings.

In general terms, “mobile” homes are factory-built and constructed before June 15, 1976. Such homes can be 50 years old or older at this writing and were not built to the standards now in place.

Manufactured homes are prefabricated structures built in a controlled factory setting and transported to their final location. Since June 15, 1976, these homes have been required to comply with federal safety regulations set by the Department of Housing and Urban Development, commonly known as the HUD Code. These guidelines establish standards for structural integrity, fire safety, energy efficiency, and overall durability, ensuring that manufactured homes meet modern housing requirements.

Manufactured homes are single or multi-width units constructed off-site and transported to the property. To be eligible for a USDA loan Manufactured Home, these homes must be attached to a permanent foundation and have a so-called “HUD tag,” a red plate attached to the outside of the vehicle.

If a HUD certification label is missing from a manufactured home, it cannot be reissued. However, homeowners may be able to obtain a Letter of Label Verification if historical records are available. This label number is typically listed on a data plate inside the home, commonly found near the electrical panel, inside a kitchen cabinet, or in a bedroom closet. The data plate also includes key structural information, such as the Wind Zone, Snow Load, and Roof Load ratings specific to the home’s construction standards.

For those needing label verification, the Institute for Building Technology and Safety (IBTS) provides this service. Requests can be submitted via their official website, by phone at (866) 482-8868, or by email at labels@ibts.org.

Modular homes are different. These are residences built onsite from manufactured pieces.

Modular homes are prefabricated houses constructed in a controlled indoor environment before being transported to their final location. These homes are built in individual sections, or modules, based on specific architectural designs. Once completed, the modules are delivered to the home site, where builders assemble and secure them onto a permanent foundation, ensuring stability and durability comparable to traditional site-built homes.

It’s hard if not impossible to tell the difference between modular homes and other forms of construction. When completed, they look just like traditional stick-built houses.

USDA Manufactured Home Loans and Modular Property Requirements

For modular or manufactured housing to be eligible for USDA Manufactured Home Loans, the property must first meet certain requirements.

1. The Unit. Manufactured single-wide homes must be at least 12 feet wide, while double-wide homes must be at least 20 feet wide. The home must have at least 400 square feet of interior space. The unit must be built within the last 12 months and purchased from an approved dealer or contractor. The unit must be new and never installed or occupied at any other site or location. Tow hitches or running gear must be removed.
2. Safety. The home must meet all Federal Manufactured Home Construction and Safety Standards (FMHCSS). These rules dictate how the property should be manufactured, constructed and installed.
3. The Site. The USDA loan program is a “mortgage” and mortgages are secured by real estate. This means the site where a manufactured home is placed must be classified as “real estate.” The home's lowest point should be higher than the 100-year floodplain and have water access and wastewater disposal mechanisms. The house must also be on a permanent foundation and located in an approved USDA-eligible rural area.
4. Appraisal. As with a traditional home purchase, USDA lenders will order an appraisal for any modular or manufactured property to ensure it meets all appropriate financing requirements. You want an appraisal as a buyer to assure you are not overpaying for the property.

USDA Loan Restrictions

There are certain scenarios when a USDA loan cannot be used – even if the site is an approved rural area and you meet eligibility requirements as a borrower.

USDA Loans and Mobile Homes: Loan Restrictions

There are certain situations when a USDA loan cannot be used – even if the site is an approved rural area and you meet eligibility requirements as a borrower.

First and foremost, USDA loans cannot be used to finance a site without an actual home on it.

Second, you cannot use a USDA mortgage to finance in certain situations.

• Any unit that doesn't meet program requirements
• A site that is already owned by another party
• An existing, pre-owned manufactured home or repairs to one
• Furniture or other movable pieces of interior property
• The property generally cannot be used for business or commercial purpose

USDA Loan Underwriting for Modular Homes

The USDA loan process for modular homes is largely comparable to other mortgage products. The property must meet certain requirements, be covered by a warranty, and meet other eligibility standards before the loan can be approved.

The USDA loan underwriting process includes:

• Warranty Requirements – The home’s dealer must provide proof of warranty for the home to the lender and the purchaser. This warranty must comply with all HUD requirements.
• Certification Requirements – The dealer and buyer must sign a document certifying that the home sustained no damage during transport or assembly.
• Lien Requirements – You’ll need to ensure all contractors have been paid and that there are no recorded liens attached to the property. This is checked with a title search provided by the closing agent to show that the property has a good and marketable title.
• Recordation and Taxes – The property must be taxed as “real estate” and not as personal property. The property and the mortgage lien must be included in local property records. The closing agent typically does the recordation.

Finding a USDA Lender

One of the biggest hurdles when using a USDA loan for a modular or manufactured home can be finding a lender.

Not all lenders make loans for manufactured housing or offer financing for new construction.

If you’re interested in modular or manufactured homes, make sure to look for lenders who offer USDA loans and have in-depth experience with them. This will help your loan process go smoothly.

Buying a Modular or Manufactured Home with USDA Financing

USDA financing can offer significant benefits when buying or building in rural areas. With no down payment requirement, and with liberal credit and income guidelines, a USDA loan can be the difference between owning and renting.

To learn more about your eligibility for USDA loans for manufactured homes or modular housing, contact a home loan specialist today.