Manufactured and modular homes are an attractive option for many VA borrowers, but they often come with hurdles. They will need to meet minimum property requirements and other guidelines specified by the lender.
Veterans and military members can look to use their hard-earned VA loan benefits to purchase a manufactured (mobile) home or a modular home.
But it’s important to understand the difference between these two housing types and some of the challenges that can come with trying to purchase them.
Out of the gate, prospective borrowers should know that modular homes and manufactured homes are not the same things. It’s a critical difference in part because it can be tough to find lenders that will make VA loans for manufactured housing.
But borrowers looking at brand new modular housing can also run into some challenges.
Manufactured home and mobile homes are the same, although today’s manufactured homes often look more modern than the traditional single- or double-wide trailers many people imagine.
Manufactured homes are entirely built in factories and must meet building codes set by the U.S. Department of Housing and Urban Development (HUD). These homes have a permanent steel chassis, axles, and wheels, on which they’re typically towed to the home site.
Manufactured homes will have a metal identification plate on the outside of the structure. You might hear this called a “HUD tag” or a “red tag.”
They also have a “data plate” inside the home, often on a bedroom closet wall or inside a kitchen cabinet. The data plate is a sticker with information about the house and its specifications.
Whether it’s brand new or existing, manufactured homes typically need to be affixed to a permanent foundation and classified as real property in order to be eligible for a 30-year VA loan. They’ll also need to conform with the VA’s Minimum Property Requirements substantially.
The challenge can be finding VA lenders willing to make loans for manufactured housing. That’s because manufactured homes rarely appreciate in value over time, and they’re often susceptible to storm damage and shorter economic lifespans.
These properties also tend to have higher default rates than traditional, stick-built homes.
Veterans and military members interested in manufactured housing should check with lenders at the outset about whether they make loans for this property type. Those who do can explain their policies and guidelines.
Veterans United does not currently lend on manufactured homes.
Modular homes are a different ballgame.
Generally, sections of a modular home are built in a factory and then shipped to a home site. From there, the pieces are assembled by professional contractors, much like a traditional, stick-built home. Modular homes need to meet local or state building codes rather than federal guidelines.
Depending on the look, it’s sometimes tough to tell a modular home from a traditional single-family residence.
Veterans looking to purchase an existing modular home encounter the same lending process as those buying a stick-built home.
Things can get more complicated if you want to buy a new modular home and install it on a piece of land.
Lenders will often consider this new construction, which changes the complexion when you’re talking about VA home loans. It’s tough to find VA lenders out there willing to do a true $0 down construction loan.
Often, borrowers need to obtain a construction loan from a builder or a local lender, then look to refinance that short-term loan into a permanent VA mortgage once the home is ready. This is a common pathway for both stick-built and modular-new constructions.
Like most lenders, Veterans United doesn’t offer a VA construction loan. But we do handle the permanent financing for many veterans who get construction loans from builders or local lenders.
Talk with a Veterans United loan specialist at 855-259-6455 to learn more about building a home with a VA loan.
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