Can You Get a VA Loan for a Manufactured or Mobile Home?

What are some of the details that make these homes, and these loans, unique? We spoke to Heather Lee, Senior Loan Consultant with New American Funding, a mortgage company headquartered in Tustin, California, to walk us through the facts.

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What makes a manufactured home a good option?

Manufactured homes used to be called “mobile homes.” Housing code changes enacted in 1976 resulted in the official name change, but the two terms are used interchangeably in casual conversation to this day.

A manufactured home is a house that is built entirely offsite in a factory and then moved to a plot of land where it is more or less permanently fixed. It’s an alternative to site-built (or “stick-built”) homes, which are built directly onto the plot.

Manufactured homes have been dubbed “the ugly duckling of affordable housing.” While the term “mobile home” may inspire mental images of rickety old trailers and eyesore décor, they are, in fact, often-overlooked dwellings that have many advantages for a veteran or any house hunter:

• They’re affordable, with an average construction cost of under $90,000. New manufactured homes cost less than 1/3 of the price of site-built homes.
• They’re built in controlled environments, specifically factory assembly lines, which allows for consistency in building standards and eliminates weather-related construction delays. 
• They’re built to high federal standards for construction and safety, thanks to the HUD Code, a 1976 federal building code administered by the U.S. Department of Housing and Urban Development. (This is why mobile homes built before 1976 are not eligible for VA loans.)

How do VA loans work for a manufactured home purchase?

Tip

VA loans are one of the only no-money-down home loans in existence, but that doesn’t mean a veteran isn’t invested.

VA loans are surrounded by misconceptions, too. “That’s one of the things that’s most frustrating,” says Lee, a veteran herself. “Since VA loans offer 100% financing, there’s sometimes an assumption that a veteran is a ‘less-than’ borrower, that they’ve got no skin in the game. But let me tell you, they’ve got the most skin in the game.”

It’s true that VA loans are one of the only no-money-down home loans in existence. But that doesn’t mean a veteran isn’t invested. “The land that they’re buying is the land that they enlisted to protect,” Lee says.

Other advantages of a VA loan:

• Government backing. VA guarantees a portion of the loan to lessen risk for the lender. The lender may, therefore, be more willing to offer better terms to the veteran who is applying.
• Low mortgage rates. VA interest rates are typically quite competitive, which can save you money over the loan period.
• No mortgage insurance. Home loans often require some kind of monthly mortgage insurance. VA home loans don’t. There is a one-time VA funding fee that can be reduced if you do decide to make a down payment or even waived if you meet certain criteria.
• No minimum credit score. Lee points out, “VA is very flexible on credit.” VA doesn’t set a minimum credit score requirement but relies on lenders to decide if an applicant is a good risk. VA lenders typically require a minimum score of 620, but Lee says flexible lenders may allow lower scores if you communicate your extenuating circumstances. “We always say, ‘Write a story like you’re sending it home to your mom and dad.’” If you can make your case that your credit troubles are temporary and fixable, “we want to help,” she says.
• A manufactured home can be moved multiple times and still qualify for VA funding. About 90 percent of manufactured homes get installed and then never moved. Part of the reason: Moving a home from its original plot usually disqualifies it from lender financing. “One of the best parts of the VA loan,” Lee says, is that “it’s the only loan that will allow for a manufactured home to be moved more than one time.” For sales of manufactured homes that have been moved more than once, “it either has to be cash, or it has to be a VA loan.”
• No specific minimum income is required. But your debt-to-income ratio – the percentage of your monthly income that goes toward paying off your debts – should max out at 41%.

Speaking of income, Lee points out an interesting requirement/benefit of VA loans. “We consider what’s called residual income, which is great. We calculate, after all of the veteran’s bills are paid, how much money do they have left to live on?”

She continues, “VA is the only loan that requires residual income to be at a certain level for potential clients. I think that’s why VA loans have one of the lowest foreclosure rates. They really look at the whole picture.”

One more requirement: Since VA loans are only available to veterans, you need a Certificate of Eligibility to qualify for one. It establishes your service history and duty status.

How can you use a VA loan for a manufactured home?

Chapter 7, topic 11 of the VA Lenders Handbook lists the ways a manufactured home can be funded (and formulas with which a lender should calculate each maximum loan amount).

• Purchase a home and affix it to a lot you currently own.
• Purchase a home and the lot simultaneously.
• Refinance an existing loan on a home to help purchase a lot.
• An IRRRL (interest rate reduction refinance loan) to refinance an existing VA loan on a permanently affixed manufactured home and lot. 

You may have noticed something missing: buying a manufactured home for property that you do not own – for example, rented land or a mobile home park. It’s possible to seek loan approval for this kind of purchase, but it comes with risks. If the landowner decides to put the land to “higher and better uses,” you can be evicted with little recourse and be forced to move your home (which is harder than the phrase “mobile home” suggests).

Chapter 12, topic 41 of the VA Lenders Handbook lists some requirements for the manufactured home to qualify.

• It must be on a permanent foundation and meet state and local requirements.
• It must be built to HUD Code standards.
• It must contain a HUD Label (a metal plate identifying the primary inspection agency) and Data Plate (a paper indicating compliance with local safety standards).
• It must have a floor area of not less than 400 square feet for a single-wide or 700 square feet for a double-wide. (A double-wide manufactured home is roughly twice the size of a single-wide and arrives at the lot on two trailers instead of one.)

Do manufactured homes appreciate in value?

Lee tells us that one of the misconceptions about this type of home is that it does not appreciate. She clarifies: “It doesn’t appreciate at the same rate a stick-built home does. But that’s changing because the value and the quality of manufactured homes are increasing.”

The Urban Institute says there’s evidence they appreciate just as well as site-built. The Manufactured Housing Institute is a little more cautious, maintaining that “when properly installed and maintained, today’s manufactured homes can appreciate the same as surrounding site-built homes.”

So, despite any pessimistic assumptions you may hear, it seems that manufactured homes are not doomed to depreciate. Factor in their affordability and flexibility, and these can make excellent starter homes for a veteran looking to take advantage of a VA loan. 

“Manufactured housing has a vital role in enabling homeownership,” according to the Manufactured Housing Institute. It’s “the only type of housing that Congress recognizes as having a vital role in meeting America’s housing needs as a significant source for affordable homeownership accessible to all Americans.”

Lee adds, “I’m someone who really believes in homeownership as generational wealth improvement, and I believe in it specifically for veterans.”

Important

Despite any pessimistic assumptions you may hear, it seems that manufactured homes are not doomed to depreciate.

Consider a personal loan from Acorn Finance

Lenders must be specifically authorized to offer VA loans, and the loans are exclusive to veterans, so they may be a little difficult to get, and they come with restrictions on how you can use them.

If you find that a VA loan isn’t right for you, consider getting a personal loan, like the ones you can find through Acorn Finance. Enter your funding requirements online, and you’ll instantly be presented with loans you’re pre-qualified for. Acorn Finance offers loans from $1,000 to $100,000, and you can use them toward anything. 

No collateral is needed for unsecured personal loans, so there’s no danger of losing your home if you fall behind on payments. 

Acorn Finance personal loans are a quick, streamlined way to get access to the funds you need.