The tightening of mortgage-lending standards over the past few years has made the goal of home ownership tougher for the average borrower. But despite their modest cost, it can be even harder if you're interested in purchasing a manufactured home.

The main reason is that fewer banks are in the business of providing loans for manufactured homes – otherwise known as mobile homes – which are built off-site and affixed to a permanent chassis. As a result, would-be homeowners simply don't have as many financing options.

Fortunately, those interested in a manufactured home have some options if they don't meet the standard for a conventional mortgage. One alternative is a Federal Housing Administration loan, which can be used to cover the home itself, a suitable lot on which to build it or both.

With an FHA mortgage, the government insures a loan made to you by a private lender. So if you default on your payments, the lender has the assurance that Uncle Sam will reimburse it for all or part of its losses.

The good news is that FHA-approved mortgage providers are willing to take on borrowers who have a slightly higher risk profile. But there is a catch. Homeowners fund the insurance benefit by paying both an upfront premium and an annual premium on top of their normal loan amount, making these loans a bit more expensive than other loans. If a government-insured loan is your only way of moving into a new home, that might just be a pill you're willing to swallow.

The Requirements

It's important to realize that not every mobile home will meet the standards for an FHA loan. For starters, the home has to be built after June 15, 1976. So even if you modify an older structure to meet current regulations, you won't be able to get a loan through the program.

Moreover, the residence must adhere to Model Manufactured Home Installation Standards and comply with any local and state guidelines pertaining to such properties. It's easy enough to tell if the home meets the MMHI requirements since the exterior of each transportable section bears a red label indicating as much.

The government maintains certain standards relating to borrower eligibility as well. For example, applicants must have sufficient money to make the down payment and show that they have enough funds left over after other expenses to handle the monthly mortgage bill. Also, you can only obtain an FHA loan if you plan to use the mobile home as your primary residence.

About FHA loans

Most mobile homes are sold through local retailers and dealers, which are typically good s of referrals for both conventional and FHA mortgage providers.

As with other FHA mortgages, there are caps on the loan amount for manufactured homes. Currently, the most you can borrow is $69,678 for the home itself and $23,226 for a lot. However, the ceiling can go up by as much as 85% if you happen to live in specific high-cost areas. If you're not sure whether your area falls into this category, you can call (800) CALL-FHA for more information.

The maximum loan duration is 15 years when financing just a lot, although it's 20 years for a mobile home or a single-section home and lot combination. Mortgages that cover a multi-section manufactured home together with the lot can last up to 25 years.

Understanding Your Options

If you have questions about the program, the Department of Housing and Urban Development operates a voice-assisted hotline that can refer you to local counseling organizations. These housing agencies can help you better understand your options. The 24-hour HUD clearinghouse can be reached at (800) 569-4287.

Keep in mind that the FHA isn't your only option for government-insured loans. The Veterans Administration and the Department of Agriculture's Rural Housing Service also provide mortgages to eligible borrowers. In some cases, these may represent a better path for those looking to buy a manufactured home, so it's worth doing your research.

The Bottom Line

With low down payments and less stringent credit standards than other loan programs, an FHA mortgage can be an attractive choice for mobile home buyers. Just be ready to pay a little extra each month to enjoy those benefits.