There are many misconceptions about VA credit. Too often, people think that because their credit isn’t good enough for a conventional loan, they can’t get VA credit. In reality, the VA does not look at your credit score when determining whether or not you can qualify for a home loan.
Even more so, people are often confused about what type of home they can buy with VA credit. You may be surprised to find out that mobile or modular homes are eligible for the program.
Suppose you have been considering buying a trailer home. In that case, it’s important to know that the VA does require a qualified appraiser be used in order to determine the value of the buyer’s home to ensure that it meets minimum standards before issuing credit.
Can You Buy a Mobile Home with a VA Loan?
The answer is YES! You can buy a trailer home using VA mortgages.
The VA credit is a government-backed program that provides mobile home loans to qualified service veterans and spouses.
If you qualify for a VA home loan, you may be able to buy a manufactured or factory-built home. Some of the benefits of buying a trailer home with a VA credit is that it requires a downpayment of only five percent and has an 80 percent VA-guaranteed credit.
With that said, let’s get right in and talk about VA loans for manufactured homes and if you should use them.
What is a VA Loan?
A VA loan is a loan guaranteed by the Department of Veterans Affairs. They are popular among those who served in the military because they can offer benefits that are not available with traditional credit, such as a low down payment requirement and potential eligibility for cash-out refinancing.
When it comes to buying a home, VA home mortgages are always a good option to consider. With that said, what is not so clear-cut is how much money you can borrow with a VA credit.
Many variables come into play when deciding what you can afford, which is why there is no one-size-fits-all answer for the question ‘can you buy a manufactured home with a VA credit?’
What is a Mobile Home?
A manufactured or mobile home is a type of home that is built in a factory, then is built in sections or modules once transported to it’s site. This type of home can be easily transported and placed on a permanent foundation. You can buy it with an FHA loan, a VA credit, or even a conventional loan.
The phrases “mobile homes” and “manufactured homes” are commonly used interchangeably when it comes to prefabricated homes. With that said, per the Department of Housing and Urban Development (HUD code for mobile homes), mobile homes are those built prior to 1976, while manufactured homes are those developed after 1976.
When compared to their conventional counterparts, site-built homes, mobile and manufactured homes are certainly more cost-effective. As a result, buying a trailer home rather than a regular home can save you up to 30% on your housing costs.
How Do VA Loans Work?
VA lending differs from standard real estate financing in a few ways. Private lenders are the ones that offer these loans backed by the Department of Veterans Affairs (VA). With that said, the VA does not provide loans to borrowers directly.
VA Loan Requirements for a Manufactured Home
A VA credit is just like any other type of credit. It has requirements that the borrower must meet and the VA approved lenders need to verify those requirements before providing a loan.
With that said, it is important to know what the qualifications are before taking the first step in getting your VA credit.
What factors determine your eligibility for a VA credit? Before you qualify for a VA credit, establish whether you meet the following standards:
- Your mobile or manufactured home must be permanently attached to the land
- You must intend to keep the trailer home as your primary dwelling and not to establish another primary residence; that said, the house should not be used as a vacation or seasonal residence
- You must be a member of the military community
- The trailer home must meet all the building code and zoning code requirements
- The home must be classified and taxed as real property, not personal property
You can use a VA credit to finance the mobile/modular home purchase if you own the land. However, you can, as well, use the VA credit to finance both the home and the land itself.
Challenges with a Securing VA Mortgage
Many lenders are hesitant to issue VA mobile home mortgages for a variety of reasons, including declining house values and an increased chance of homeowners defaulting on their loans. As a result, borrowers have found it challenging to find manufactured home financing in recent years, which has left many seeking a private loan or buying a regular home.
Although a private lender may be found, this would be the equivalent of a short-term construction loan. If this is the case, refinancing with VA credit may be required once the house is built and set.
What are the VA Terms?
The majority of VA manufactured home loans have a 30-year maximum duration. Expect a 20-year and 32-day payback schedule for single-wide mobile homes and a 23-year and 32-day repayment plan for double-wide mobile homes. The maximum repayment schedule is 25 years and 32 days if the credit is to purchase a home and land.
Advantages of Using VA Mortgages to Buy a Manufactured Home
Let’s review the positives of obtaining a VA loan to purchase a prefab home:
Low-Interest Rates
The VA loan program is one of the most valuable resources for military personnel looking to buy a home. The VA offers low-interest rates, which can lower the monthly payments on your mortgage and even save you money in the long run.
No Down Payment Needed
VA purchase loans are the best option for service members who have not saved much money. You can use this type of manufactured home loan to purchase a home without putting any money down.
It can also be used to refinance loans as long as your credit score is good enough. Find out more about what credit score is needed to buy a mobile home here.
A borrower’s down payment for a VA credit is lower than it is for a FHA loan or conventional loan.. A downpayment of 3.5% is required for an FHA loan, whereas a conventional loan requires a downpayment of 5%. Find out if you can buy a mobile home with a FHA loan here.
No Private Mortgage Insurance Needed
VA mortgages do not require private mortgage insurance (PMI). This translates to significantly lower monthly payments for VA mortgages compared to their counterparts. Additionally, it is the only loan that assures mobile home buyers that 100% ownership of the home will always be theirs.
Relaxed Credit Requirements
Traditional loans have strict credit standards, and borrowers are frequently required to meet a minimum credit level in order to be approved. This is not the case with VA mortgages, however, which have lenient credit standards, making it easier for veterans to get a loan without worrying about their credit score.
No Prepayment Penalties
While paying off a home loan before it matures can help homeowners save on interest payments, it can also be disadvantageous in certain cases, meaning more out of pocket costs for doing so. A local lender often enforces a prepayment penalty as a way to recoup some money. However, VA mortgages do not charge prepayment penalties. As a result, you can pay off your loan at any time without the worry of paying any additional fees.
Disadvantages of Using VA Mortgages to Buy a Manufactured Home
Although VA mortgages have several benefits, there are some factors you need to know before committing to one.
No Using VA Mortgages for Rental Properties
VA mortgages are for mobile homes for sale, not mobile homes for rent, because the VA does not consider a rental property to be a primary residence. So, if you need chattel mobile home financing for a rental property, the VA will not be an option.
The One-Time VA Funding Fee
The one-time fee, which ranges from 0.5% to 3%, is paid to the Department of Veteran Affairs (a government agency). On the other hand, the majority of people pay about 2.3%, on average.
Top VA Home Loan Lenders
Per the Mortgage Research Center, the following are some of the best approved VA lenders:
- Veterans United Home Loans
- Quicken Loans
- USAA Bank
- PenFed Credit Union
Each of these are considered an Equal Housing Lender.
Fair Housing Act
Lenders are prohibited from discriminating against borrowers based on their:
- Race
- Color
- Religion
- National Origin
- Sex
- Handicap
- Familial Status
Tips for Shopping VA Mortgages
Securing a loan can be a difficult and time-consuming process. As you go through the application, it’s important to know what questions to ask and which documents to provide. The more accurate information you have at the start, the less likely you will be turned down for a loan later on.
Compare Interest Rates for Mobile Homes
Financing for manufactured houses can be complicated, with rates and costs that differ drastically from single-family homes. It is critical to understand the ins and outs of mortgages before obtaining or refinancing a prefabricated home using VA home loans.
Before applying for a loan, make sure you receive all of the VA home finance bids together and evaluate them. When it comes to acquiring the best quote, online comparison tools or calculators can be helpful.
Consult with Loan Officers
This is definitely important if you don’t know how VA lending works. Many different factors will affect the maximum term of your home loan. This is why you need to talk with your loan officer/home loan specialist to find out all the details about the VA program.
Gather Quotes on the Same Day
With a fixed-rate loan, your interest rate will not change. However, if you have a variable-rate loan, the interest rate can change from day to day. To avoid surprises and get the best rates possible, it is wise to gather all quotes on the same day, if possible.
Ask for Written Confirmation of the Rate Lock
If you are settling on a loan, it is helpful to request the rate confirmation in writing. This way, there is proof if any disputes arise about what was agreed upon.
For example, suppose you have been quoted a 3.2% interest rate and the VA approved lender suddenly changes that to 3.5%. In that case, your written confirmation letter may serve as evidence that the original agreed-upon rate was lower.
Frequently Asked Questions about VA Mortgages
Can I sell my home and get another VA credit?
Buying new homes with VA mortgages requires the homeowner first to sell the house they currently live in and pay off the loan in full. This way, you will be entitled to borrow and finance a new trailer home.
Can two veterans combine their VA Mortgages?
If the two are responsible for the credit, it is possible.
Can I use my deceased father’s VA credit?
The simple answer is NO! The children of a deceased veteran are not eligible for VA mortgages.
Could I use a VA loan to both purchase a piece of property and have a house built on it?
Ideally yes, but it’s going to be challenging to find a VA lender offering zero down payment on construction loans.
Does the VA allow a cash out refinance loan?
Yes, it is possible so long as you meet the eligibility criteria of VA lending.
Final Thought
VA mortgages are government-backed loans that help veterans, military service members, and their families purchase a home. With that said, these loans require the applicant to meet certain qualifications. If you are eligible for a VA credit, you can receive benefits such as no down payment requirement and competitive interest rates on your credit loan.
