VA manufactured home loans are a popular mortgage product for veterans looking to purchase a manufactured home. VA mortgages provide current and former service members with an excellent home buying opportunity. There are many benefits to using VA loans as opposed to other types of financing. However, some veterans and their family members often wonder whether they can use a VA loan for mobile home.
Unfortunately, it can be extremely difficult to locate VA manufactured home guidelines. Don’t you wish that all VA manufactured home guidelines and financing information could be found in one convenient location? We felt the same way, which is why we created this comprehensive guide.
Below, we’ll answer common questions about VA manufactured home loans like “How old can a manufactured home be for VA financing?”
If you are eligible for a VA loan and are interested in purchasing a manufactured home, keep on reading.
What are VA manufactured home loans?
VA loan manufactured home financing involves the purchase of a manufactured home by using a VA loan. Contrary to popular belief, however, the VA is not the organization that lends money for these types of loans. Instead, the VA simply guarantees the loans in the event that the borrower defaults.
VA loans are especially appealing to prospective lenders since they are backed by the federal government. Financial institutions like banks and credit unions know that your debt will be paid, even if you are unable to provide said funds yourself. That is why VA loans have more favorable lending terms than conventional mortgages.
Generally speaking, the requirements for purchasing a mobile home with a VA loan are similar to the guidelines for buying other types of living quarters. However, there are a few distinctions that you should be aware of before you go house hunting.
How Old Can a Manufactured Home Be for VA Financing?
Each lender can use discretion when deciding which properties they are comfortable financing and which ones hold too much risk. Many financial institutions are particularly cautious when financing manufactured homes via VA loans as these properties do not typically hold their value as well as other, more permanent types of structures.
In light of that fact, most lenders will not finance a manufactured home if the structure is more than 20 years old. However, this stipulation is lender-specific.
Some financial institutions may have a lower threshold of only 10-15 years old. On the other hand, other lenders might be willing to loan you money to purchase a structure that was built 25 years ago or more.
If you plan to get pre-qualified with a lender before starting your search for a manufactured home, make sure to find out any age limitations for a structure they will finance. This will save you time during your home search, as you can avoid viewing any properties that do not meet the lender’s specific financing criteria.
Who Is Eligible for a VA Loan?
Both active service members and veterans are eligible for VA manufactured home loans. However, there are many service requirements for both classes of individuals. Active-duty personnel must complete at least 90 days of continuous service in order to qualify for a VA loan.
Individuals that have already separated from the U.S. military must meet certain minimum service requirements. These requirements have been adjusted periodically over the years, which is why you should check the VA website for specific service thresholds.
There are several exceptions to the minimum service requirement guidelines, as well. Some individuals that were discharged early due to one or more qualifying reasons can still obtain a Certificate of Eligibility (COE). A few exemptions include hardship, reduction in force discharges, and medically necessary separations.
What Are the Standard Requirements for All VA Loans?
Before we address the unique VA manufactured home requirements, let’s highlight the general regulations that apply to all VA loan purchases. The two main requirements for all VA loans include:
A Minimum Credit Score of 620
Like with other types of mortgages, obtaining a VA loan requires you to meet the minimum credit score threshold. To be clear, the VA does not have an official minimum credit score requirement. In theory, the VA will guarantee any authorized loan that is provided to a qualifying veteran.
Lenders are the entities that set credit score thresholds for all types of mortgages, including VA manufactured home loans. Even though the VA will guarantee loans issued to eligible veterans and active-duty service members, financial institutions will still avoid striking deals with borrowers that are at a high risk of default.
If a lender did not set minimum credit score limits, then their rate of default could potentially skyrocket. This would drastically impact their profitability, as the VA is only responsible for paying off the outstanding loan balance after an account goes into default. Every time a VA loan – or any mortgage – goes into default, the lender loses tens of thousands of dollars in interest-related revenue.
Adherence to Loan Limits
VA, conventional, USDA, and FHA mortgages all have “loan limits.” A loan limit refers to the maximum amount of money that an individual can borrow using a particular type of loan. These loan limits can be adjusted annually to account for inflation and other economic fluctuations.
In most areas of the U.S., VA loan limits for 2021 were $548,250. However, more expensive regions within the continental United States have higher loan limits. In the most expensive cities, these limits are as high as $822,375.
Lenders have some leeway when it comes to loan limits, but they will rarely deviate from the guidelines set forth by the Federal Housing Finance Agency (FHFA). The FHFA sets loan limits for all four types of loans outlined above.
If a lender disregards FHFA limits, then the type of loan that is created will be known as “non-conforming.” When this is the case, the lender may have a harder time reselling the loan to another party at a later date, due to the increased level of risk for default.
VA Manufactured Home Requirements
Some lenders will have another requirement, often listed as follows: VA loan – manufactured home – permanent foundation.” A permanent foundation is one of the unique VA manufactured home requirements.
In order to purchase a mobile home using a VA loan, the structure must have a permanent foundation, which usually consists of a concrete slab. However, foundations can also be constructed out of other durable materials, which may include treated wood or mortared masonry.
Permanent foundations must also be “site-built,” which means that the structure was constructed on the property where the manufactured home is being installed. Without said foundation, it will be difficult, if not impossible to get approved for a VA loan.
In addition to a permanent foundation, lenders may have stipulations for financing a manufactured home using a VA loan. Some barriers that you may encounter when searching for a lender for a manufactured home VA loan include:
Higher Credit Score Requirements
While VA loans typically require a minimum credit score of 620, some lenders expect to see higher numbers if you are seeking financing for a manufactured home.
Manufactured homes are not as durable as traditional residential structures, which means that they are more likely to need frequent repairs. A higher credit score lets lenders know that you are fiscally responsible and are well prepared to overcome any financial curveballs that come your way.
In light of this fact, we recommend working on building up your credit score before seeking pre-qualification. Not only will it help you obtain that manufactured home VA loan, but it may also open the door for a better interest rate.
Having a strong credit score can save you hundreds of dollars in interest payments both on your new home and on any additional purchases that you finance in the future.
A Shorter Repayment Period
Another common challenge that you may encounter as you seek financing for a manufactured home is a shorter repayment period. While the typical mortgage repayment term is 30 years, lenders can shorten the length of your loan offer at their discretion.
Do not be surprised if a financial institution agrees to finance your purchase of a manufactured home but requests repayment terms of 25, 20, or even 15 years.
Naturally, a condensed repayment period means that your monthly payments will be higher. However, this may translate to long-term cost savings as you can pay off your home faster.
As you’re weighing your options, make sure to take a look at the amortization schedule. This chart will break down exactly how each payment will be distributed between principal and interest for the entire life of the loan.
More Selective Lenders
If you have your eye on an older manufactured home, be prepared to encounter more selective lenders. Some financial institutions may decline to partner with you outright as providing VA loans for manufactured homes carries more risk than financing traditional residential structures.
Mobile Home vs. Manufactured Home
Chances are that you have heard the phrases “mobile home” and “manufactured home” used interchangeably.
But are these two structures one in the same? For all intents and purposes, they are. However, this was not always the case.
True mobile homes were manufactured homes that were built before June 15th, 1976. These types of residential structures were banned by HUD due to safety and durability concerns. Mobile homes were partially constructed at a centralized facility and the rest of the build was complete on site.
Modern-day manufactured homes are structures that are constructed in a factory setting and then delivered to an installation site. None of the construction process occurs outside of the factory in which these homes are built.
Benefits of VA Manufactured Home Loans
So what is so great about using a VA loan for mobile home financing? There are several significant benefits to making a purchase with a VA loan in lieu of traditional financing.
For starters, VA loans don’t require any down payment. In addition, these loans are accompanied by low interest rates and involve minimal closing costs.
Perhaps the biggest perk to VA loans for manufactured homes is that you will not need to carry private mortgage insurance (PMI). The average PMI payment ranges from $100-200 per month and is required for some other types of financing.
Parting Advice: VA Loans for Mobile Homes
Now that we have provided a crash course on VA loans for manufactured homes, you can quit searching for phrases like “VA loan manufactured homes” and start searching for your new residence.
Before you put in an offer on a property, make sure to consider long-term factors that may influence your quality of life. For example, review the quality of nearby school districts, calculate how long your daily commute will be, and identify whether the prospective home is close to amenities like gyms, movie theaters, and grocery stores.
In addition, it is vital that you find a trusted lender and real estate agent that are experienced with VA loans for mobile homes. These resources can help you easily and efficiently navigate the VA manufactured home loans process.
Other VA Loan Types
There are other home loan options available also with the VA loan. Like VA approved condos, the Va one time close construction loan and the VA renovation loan. Give us a call at (855) 956-4040 to learn more about these mortgage options and more.