As you look for financing options for the purchase of your dream home, you will find that there are several loan programs out there. It’s a good idea to ask lenders for quotes and compare total costs to see which loan program will be best for your situation. For instance, many buyers will consider FHA loan programs. Prefabricated homes that are purchased with and without land may qualify for FHA loan programs depending on the lender. The best way to find out if your home purchase will qualify for an FHA loan is to speak with different lenders about your available options.
FHA loan programs are unique for many reasons. Here are a few main differences that you may see in the FHA process when you are purchasing a manufactured home.
What is FHA?
FHA stands for the Federal Housing Administration. It provides mortgage insurance on loans made by approved lenders throughout the United States. FHA insures mortgages on residential properties, including manufactured homes.¹
An FHA loan is a loan that is funded by an approved lender and meets FHA’s requirements to be insured. The lender will be covered by FHA if the loan defaults, which means the lender has less risk. Loans must meet certain requirements established by FHA to qualify for insurance.¹ Some of the requirements or considerations for FHA Programs have to do with the following items:
- Credit Scores
- Down Payments
- Mortgage Insurance Premiums
- Home Inspections
- Loan Terms
Lower or Unestablished Credit
Some buyers may be concerned about credit flaws standing in the way of their home purchase. FHA loan programs consider borrowers with less than perfect credit scores.² For those that may not have a well-established credit, FHA loan programs consider borrowers with little credit history, too.
FHA Down Payment Requirements
FHA loan programs often offer lower down payment requirements, which may be as low as 3.5% of the loan.² Along with the lower down payment requirement, the down payment may be able to be gifted with FHA loan programs.³ Down payment requirements may vary, so make sure you ask about it when you talk to lenders.
Although FHA loans have the perks of considering lower credit scores and lower down payments, they also require Mortgage Insurance with a monthly premium included in the monthly payment on the loan, as well as an upfront mortgage insurance premium, depending upon the loan program.
On an FHA loan, the Mortgage Insurance may be required for the life of the loan.⁴ It’s important to understand all the options and requirements for different lenders and loan types when you’re shopping for a home loan.
FHA Home Inspection
All FHA loans must have an FHA home inspection completed before closing by a licensed FHA inspector that will verify that the home meets HUD standards.⁵ One of the benefits of purchasing a new Clayton Built® prefabricated home is that all Clayton homes are built to HUD Federal Manufactured Home Construction and Safety Standards. The FHA home inspection will also look at the set-up of the home at the final home location to make sure it meets the HUD FHA foundation requirement.
FHA is an option for manufactured home purchases with many lenders. However, there are many different finance programs available to fit different needs and budgets. So, take your time and find the loan program that works the best for you! Ask different lenders questions and compare your options to make a smart decision before choosing a loan program.
*Terms and requirements for FHA loans may vary among lenders. Some lenders may not offer FHA loan programs for manufactured homes or may only offer FHA loan programs for land and home together.