Unlocking the Door to Homeownership: Exploring Financing Options for Factory-Built Homes

Thanks to today’s manufactured home, more affordable and efficient pathways to homeownership are available. These homes are constructed in controlled environments and transported to their final location, offering not only cost-effectiveness but also flexibility and sustainability.

However, it’s not always been easy to gain access to these affordable homes, in part due to exclusive zoning and a complicated purchase process involving high-interest personal loans. Next Step saw this as an unnecessary hurdle and burden, especially for the homebuyers who could most benefit from the affordability of manufactured homes. This led us to design our Next Step Home with industry-leading features that qualify them for many of today’s popular mortgage products.

Here are five ways homebuyers can finance the purchase of a new manufactured home using conventional and government-backed mortgage loans:

FHA Title II Loans

The FHA Title II Loan program allows borrowers to take out FHA-insured loans to purchase a manufactured home and the land it’s built on. These loans are guaranteed by the government and designed for homeowners who may have lower-than-average credit scores or a lower down payment amount. The home must meet certain requirements, such as being placed on a permanent foundation, to qualify. If the borrower’s credit score is at or above 580, then the borrower is eligible for a 3.5% down payment. If the credit score is between 500 and 579, then the borrower must pay at least 10% as a down payment.

Veterans Affairs (VA) Loans

The Department of Veterans Affairs provides VA Loans to qualifying active military members, veterans, and their families. VA loans for manufactured homes are guaranteed by the Department of Veterans Affairs and provide veterans with an accessible route to homeownership. Like FHA loans, the home must meet certain requirements to qualify. Applicants must possess a Certificate of Eligibility (COE) to qualify for a VA loan for a manufactured home. You don’t need a down payment when you get a VA loan, and the minimum credit score required will depend on which lender you use.

Next Step Homeowner Hector Cardenas used a VA loan to purchase his home in Petersburg, VA. Read his story here.

USDA Loans

The Department of Agriculture’s Single Family Housing Guaranteed Loan Program provides guaranteed loans for the purchase of homes, including manufactured homes, in eligible areas. Sometimes called rural development loans, USDA loans are for qualifying low and moderate-income homebuyers. As with a VA loan, no down payment is needed, and credit score requirements will vary by lender. However, USDA loans have additional requirements, including income eligibility requirements and that the home be built in a rural area, as defined by the USDA.

Freddie Mac CHOICEHome Mortgages

 CHOICEHome Mortgages is a mortgage offering that provides conventional site-built financing for manufactured homes titled as real property, built to the HUD Code, and having features of site-built homes. A CHOICEHome-certified home is eligible for as little as a 3% minimum down payment for Freddie Mac Home® Possible borrowers and Freddie Mac HomeOne first-time homebuyers.

Fannie Mae MH Advantage Mortgages

MHAdvantage Mortgages are available for manufactured homes built to meet specific construction, architectural, and energy efficiency specifications. MH Advantage borrowers may benefit from financing flexibilities not available under standard manufactured housing guidelines, like higher loan-to-value limits. Borrowers with a credit score of 620 or higher are eligible for down payments as low as 3%.

Understanding the financing options available for manufactured homes is essential for extending the availability of these affordable homes. This holds true for potential homebuyers, but also mortgage lenders, housing counselors, and housing developers.

Potential homebuyers considering a conventional mortgage, or a government-backed loan should understand that each option has its own eligibility criteria, terms, and benefits. Homebuyers should explore each option, and then work closely with a lender experienced in manufactured home financing.

Next Step Homes qualifies for all the mortgage products listed above. Our homes are a powerful option for development projects aimed at creating more affordable homeownership opportunities. Learn more about what makes a Next Step Home the most energy-efficient and versatile home offering in factory-built housing here.

View our Project Portfolio to see Next Step Homes leveraged in a subdivision development and an infill project.

Interested in working with Next Step on your affordable housing needs? View our consulting services here.