Can You Get A VA Loan On A Manufactured Home?

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Published on September 24, 2020

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Can You Get A VA Loan On A Manufactured Home?

VA Home Loans are guaranteed loan benefits that service members, veterans, and their eligible surviving spouse can take advantage of to become homeowners. With these loans, you can build, buy, repair, or renovate a home.

Even with favorable loan terms, you may still want to be frugal about your spending, especially if you already retired from the military service. Whether you’re cash-strapped or penny-pinching, getting a manufactured home has probably crossed your mind. Can you get a VA loan on a manufactured home?

 A manufactured home is a housing unit produced at an assembly line offsite before it’s transported to a piece of property. You’ve probably also heard the terms modular and mobile homes. In this article, when we talk about manufactured homes, it’s also applicable to modular and mobile homes. They look almost the same as a traditional house constructed on-site, but they’re much more affordable.

How Will a Manufactured Home Qualify for a VA Loan?

Does the VA finance manufactured homes? The short answer is yes, and you might be wondering how a manufactured home qualifies for a VA home loan.

1

It has to fall within the VA’s definition of a manufactured home. It’s a unit constructed in permanent frames that can be moved and assembled and must have a bedroom, a dining area, a kitchen, and a bathroom.

2.

To qualify for a VA loan for manufactured homes, it should be suitable as a permanent residence, meaning that it’s permanently affixed to the land.

2

To qualify for a VA loan for manufactured homes, it should be suitable as a permanent residence, meaning that it’s permanently affixed to the land.

3.

It must be classified and taxed as real property. It’s important to note that a manufactured home can be classified as personal property, like cars. So, it has to be attached to a permanent foundation to become real property.

3

It must be classified and taxed as real property. It’s important to note that a manufactured home can be classified as personal property, like cars. So, it has to be attached to a permanent foundation to become real property.

4.

Other VA manufactured home loan requirements also indicate the following:

  • Single-wide: at least 10 feet wide and 400 square feet floor area
  • Double-wide: at least 20 feet wide and 700 square feet floor area

4

Other VA manufactured home loan requirements also indicate the following:

  • Single-wide: at least 10 feet wide and 400 square feet floor area
  • Double-wide: at least 20 feet wide and 700 square feet floor area

How to Apply for VA Loan on a Manufactured Home

Va Loan U.s. Department Of Veterans Affairs Form With Clipboard.

Does the VA finance manufactured homes? The short answer is yes, and you might be wondering how a manufactured home qualifies for a VA home loan.

Step 1

Prequalification

Like other loans, there are certain requirements that you need to meet to qualify for a VA loan for a manufactured home. In this step, you look for lenders and request a prequalification and preapproval assessment to check if you are eligible for a VA home loan for a manufactured home. The VA doesn’t provide a list of lenders, so you can check out private lenders on your own. Since lenders offer different rates, you should shop around to find the best deal for you.

 It will also allow you to know the potential issues that could hinder your success in getting approved for a VA home loan. For instance, you may need to improve your credit score or provide particular documents as proof of self-employment income.

 This process will involve answering a couple of questions from the lender, covering the following:

  • Employment history
  • Monthly income and expenses
  • Assets
  • Debt records
  • Desired loan amount
  • Previous homeownership

Lenders may have different processes and coverage of questions, but these are the general information that you may be asked to provide. You can seek prequalification assessments from as many lenders as you want so that you can compare their rates and terms.

 Home loan approval for a manufactured home is more stringent than site-built homes. For one, it’s because borrowers of VA loans for manufactured homes tend to default more than those with traditional houses. That’s why borrowers need to have higher credit ratings and lower debt-to-income (DTI) ratios.

 Lenders usually look for a 620 FICO Score or higher for VA loans. Meanwhile, lenders don’t have a standard DTI ratio, but the VA prefers borrowers with a DTI ratio of 41 percent or lower. Depending on your financial health, you may still qualify for a VA loan for manufactured homes even with a high DTI ratio. Likewise, a lower credit score doesn’t automatically disqualify you from securing a VA home loan. 

Since the VA doesn’t set a standard for credit score, some lenders are willing to consider those who have lower than 620. They will also review your credit history and check if you’re paying your regular bills, such as monthly electricity bills, credit cards, and other loans. You may also want to improve your credit score before applying for a VA home loan by ensuring that you pay your bills online and paying off some of your debts.

Step 2

Pre-approval

Once you’re done with the prequalification process, you’ll have a better idea of your purchasing power. The next step is to get pre-approval, which will give you and the lender a more accurate picture of your financial capacity.

 You’ll need to provide copies of several documents so that lenders can verify your financial information. These include a valid government ID, payslips, W-2 statements, and federal tax returns.

 Again, they will look at your credit score, income, employment, and DTI. Ideally, you have full-time employment over the past two years, which is proof of a steady source of income. Self-employment and part-time employment are also accepted but require more assessment. Other sources, such as disability pay, Social Security, housing allowance, and annuities can also be considered in the VA home loan application. Getting a co-borrower can also help you.

 You should also get a Certificate of Eligibility (COE) from the VA, which you need to show to your lender. Then, take note of the following maximum loan terms:

  • 15 years and 32 days: if you purchase a land for a home you already own 
  • 20 years and 32 days: if you buy a single-family manufactured home and land      
  • 23 years and 32 days: if you choose double-wide manufactured home      
  • 25 years and 32 days: if you buy double-wide manufactured home and land

Step 3

Home-buying

Let’s go to the most exciting part of getting a home loan, and that’s the home-buying process. You can use a VA loan for a manufactured home in these three scenarios:

  • You already have a land and you want to buy a manufactured home
  • You want to buy land and manufactured home at the same time
  • You need to refinance a manufactured home on leased land and buy your own land

Choose a licensed real estate agent that will help you find the best location for your home. Ask for referral from friends and family, or look for the ones in your area. Make sure that you understand all their fees, charges, and commission before you sign any service agreements.

When choosing a supplier for your manufactured homes, make sure that they follow the HUD Manufactured Home Construction and Safety Standards, also called the HUD Code. It sets the standards on design, frame requirements, fire safety, thermal protection, and energy efficiency. A manufactured home will have a HUD tag, called a “Factory Built Unit Certification,” which is attached at the rear of the unit.

The top three manufactured home suppliers in the US that you must check out are:

  1. Cavco IndustriesIt was founded in 1965, with headquarters in Phoenix, AR. Cavco is known for green buildings, energy-efficient homes, and quality construction.
  2. Fleetwood HomesIt’s one of the largest homebuilders in the US and was founded in 1950 and headquartered in Nampa, ID. It has become popular for affordable quality manufactured homes, with excellent service and warranty protection.
  3. Sunshine HomesIt has been producing manufactured homes since 1971, with headquarters in Red Bay, AL. Its specialization is in providing affordable and high-quality customized and personalized homes.

You can also consider the following:

  • Fairmont Homes
  • Commodore Corp.
  • Jacobsen Homes
  • Giles Industries
  • Clayton Homes

When you’ve selected land and manufactured home, work with your agent to prepare the purchase agreements.

Step 4

Closing the VA Loan for manufactured home

Once your house and financing are ready, the next step is the closing process. It’s when the property becomes yours after signing lots of papers with your lender. You will receive a copy of the Closing Disclosure within three days before the closing day.

 The disclosure contains information about the loan you owe, how much down payment you’ve already paid, and other settlement costs. Prepare to settle the 5 percent down payment (minimum) for the manufactured home you buy.

 When that’s done, the only thing that’s left is moving in.

Is a Manufactured Home Worthwhile?

You don’t typically need to pay any down payment if you’re getting a VA loan for a site-built home. On the contrary, you have to pay at least a 5 percent down payment for a manufactured home. Would it be a worthwhile investment? Or should you get a regular home instead?

Admittedly, a manufactured home has a couple of disadvantages. One is that it has a slower rate of value appreciation compared to traditional homes. Over the long term, it may also have a lower assessed value.

You may also find it challenging to find accessible land that’s suitable for a manufactured home, especially in suburban and slightly populated areas. And aside from paying a down payment, lenders have strict requirements. You must have a high credit score and a stable source of income.

 Even so, a manufactured home comes with several advantages that make it an excellent option. Number one is affordability, which has allowed more than 22 million US residents to own a home. On average, a manufactured home costs about 70 percent cheaper than a site-built unit.

Based on the United States Census Bureau’s survey in October 2019, a manufactured home has an average price of $81,700. In contrast, a single-family home costs an average of $296,652 to construct, according to the National Association of Home Builders.

 You can also rest assured that manufactured homes are structurally sound in compliance with the HUD code. Using modern techniques, they are energy-efficient, with state-of-the-art features. You can also customize and personalize them. Likewise, they’re fast to assemble, so once your VA loan has been approved, you can move in within 2 to 3 months.

Conclusion

Can you get a VA loan on a manufactured home? Yes! A manufactured home is generally cheaper than traditionally built homes. Even with stricter VA manufactured home loan requirements and approval process, it’s still a worthwhile option for veterans, service members, and eligible surviving spouses.

Are you planning to buy a manufactured home? Share with us in the comment box below why you want this type of house!

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