VA loans offer veterans zero down payment and low rates for manufactured homes, but with strict property requirements. Key benefits of VA loans for manufactured homes include no PMI and flexible credit. However, drawbacks of VA loans for manufactured homes involve potential depreciation, limited lender availability, and stricter property standards, like permanent foundation requirements.
What is a VA Loan?
A VA loan is a government-backed mortgage designed to help eligible veterans, active-duty service members, and some military spouses purchase a home with favorable terms. It’s known for offering zero down payment, competitive interest rates, and no private mortgage insurance (PMI).
The VA loan program, established in 1944 through the GI Bill, has helped millions of veterans achieve homeownership. While most people associate VA loans with traditional single-family homes, they can also be used for manufactured homes under specific conditions. However, the process and requirements differ from conventional site-built homes.
When it comes to manufactured homes—also known as mobile homes or modular homes—the VA loan process includes extra requirements. Let’s dive into the benefits and drawbacks of using a VA loan for this type of property.
Pros of Using a VA Loan for Manufactured Homes
✅ No Down Payment Requirement – Unlike conventional loans, which may require 10-20% down, VA loans allow eligible borrowers to finance 100% of the home’s cost. This is especially beneficial for first-time homebuyers and those with limited savings.
✅ Competitive Interest Rates – VA loans often have lower interest rates compared to conventional loans, reducing the overall cost of homeownership. Even a small reduction in interest rates can result in significant savings over the life of the loan.
✅ No Private Mortgage Insurance (PMI) – Most lenders require PMI if you put down less than 20%, but VA loans eliminate this expense, saving you hundreds of dollars annually.
✅ Flexible Credit Requirements – While lenders still assess creditworthiness, VA loans typically have more lenient credit score requirements than conventional loans. Borrowers with lower credit scores may find it easier to qualify.
✅ Government-Backed Security – Since the VA guarantees part of the loan, lenders may be more willing to approve financing, even for manufactured homes, which are generally considered riskier investments than traditional homes.
✅ Ability to Refinance – The VA Interest Rate Reduction Refinance Loan (IRRRL) allows eligible homeowners to refinance their VA loan for better terms. This can lead to lower monthly payments or a shorter loan term.
✅ No Loan Limits (With Full Entitlement) – As of 2020, veterans with full entitlement no longer have VA loan limits, which means they can borrow as much as a lender is willing to approve without a down payment.
Cons of Using a VA Loan for Manufactured Homes
❌ Stricter Property Requirements – The VA has specific guidelines for manufactured homes, including:
- The home must be permanently affixed to a foundation.
- It must meet HUD standards for construction and safety.
- The home must be classified as real property, meaning it cannot be a mobile home on leased land.
❌ Limited Lender Availability – Not all lenders offer VA loans for manufactured homes, making it harder to find financing. Some lenders consider these loans riskier due to potential depreciation.
❌ Shorter Loan Terms – Some lenders may limit VA loan terms for manufactured homes to 20-25 years instead of the standard 30 years, which can result in higher monthly payments.
❌ Depreciation Concerns – Unlike traditional homes, manufactured homes often depreciate over time, which may impact future resale value. This can make it difficult to build equity or sell the home later at a profit.
❌ Higher Interest Rates Than Standard VA Loans – While VA loans offer competitive rates, lenders may charge slightly higher rates for manufactured homes due to perceived risks. Shopping around for the best lender is crucial.
Eligibility Requirements for a VA Loan on a Manufactured Home
To qualify for a VA loan on a manufactured home, you must meet several criteria:
- Service Eligibility: You must be an eligible veteran, active-duty service member, reservist, or surviving spouse.
- Creditworthiness: While VA loans are flexible, lenders will assess your credit score, typically requiring at least 620.
- Property Standards: The manufactured home must meet VA and HUD guidelines, be permanently affixed to land you own, and be a primary residence.
- Debt-to-Income Ratio: Your DTI ratio should ideally be below 41% to improve approval chances.
Comparison: VA Loan vs. FHA Loan for Manufactured Homes
Feature |
Rates |
FHA Loan |
| Down Payment | 0% | 3.5% |
| PMI Requirement | No | Yes |
| Interest Rates | Lower | Slightly Higher |
| Credit Score Requirement | More Flexible | Typically 580+ |
| Property Requirements | Strict | Moderate |
If a VA loan isn’t an option for your manufactured home purchase, an FHA loan can be a viable alternative, offering low down payments and more lenient credit requirements.
Steps to Getting a VA Loan for a Manufactured Home
- Check Your Eligibility – Obtain your Certificate of Eligibility (COE) from the VA.
- Find a VA-Approved Lender – Not all lenders offer VA loans for manufactured homes, so shop around.
- Choose a Home That Meets VA Guidelines – Ensure it is permanently affixed and meets HUD standards.
- Secure Financing – Work with your lender to get pre-approved and finalize your loan.
- Close on Your Home – Complete the paperwork and officially become a homeowner.
Actionable Tips for Borrowers
✔ Use a VA Loan Calculator – Estimate your monthly payment and compare loan options.
✔ Work with a VA-Specialized Lender – They understand the unique challenges of financing manufactured homes.
✔ Inspect the Property Before Purchase – Ensure the home meets all VA and HUD guidelines.
✔ Plan for Long-Term Costs – Consider future resale value, maintenance, and depreciation.
✔ Explore Refinancing Options – If interest rates drop, refinancing through the VA IRRRL could lower payments.
Conclusion
VA loans can be an excellent option for financing a manufactured home, offering zero down payment and lower interest rates. However, strict property requirements and lender limitations may pose challenges. By understanding the pros and cons, comparing loan options, and working with VA-approved lenders, you can confidently move forward with your home purchase.
Ready to explore your VA loan options? Use a VA loan calculator or contact a VA-approved lender today!