Limitations of FHA Loan for Modular Homes

The Federal Housing Administration (FHA) insures both home loans and the land loans for people buying modular homes. Modular home buyers can buy the land on which the mobile home will sit thru FHA loan. However, buyers must note that the FHA loan has certain limitations when it comes to modular homes.

FHA Loan Funding and Insuring

Before the FHA will insure the loan for the modular home, it must be installed correctly according to state, county or the local jurisdiction’s codes. One of the benefits of using the FHA for a modular home purchase is that this agency provides two levels of consumer protection. The first is the placement and setup of the home, and as noted above, because the FHA not insures the loan until it passes inspection.

The second benefit is that the FHA will help consumers with warranty issues. Most modular homes come with one-year warranties. Since the homes are transported, they may need repairs for incidental cracks in the windows or walls. Buyers of modular homes can contact FHA during the first year with assistance for warranty work from the seller of the home. But remember that FHA involvement in warranty protection is just for new modular homes.

Loan Limits

The terms of the loans are shorter than loans for site-built or modular homes. FHA requires the loan for the mobile home to be 20 years or less, while the loan for the land can only be for 15 years. When buying a lot and a mobile home together, the loan period is 25 years.

Since modular home construction is less costly to build because they are constructed off-site, they are less expensive to buy than most site-built homes. In areas of higher priced homes and real estate, the FHA allows those limits to increase up to 85 percent for both the home and land.