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You may have grown up calling manufactured homes mobile homes, and the two terms are sometimes still used interchangeably, but these dwellings have evolved.

They’re more customizable and arguably fancier than previous iterations. Still, it’s a good idea to look beyond the sticker price.

Characteristics of a Manufactured Home

First, to clarify a popular point of confusion, modular and manufactured homes are different types of houses.

Both are built partially or entirely in a factory, but modular homes — aka kit homes — must adhere to the same codes that site-built homes do.

Manufactured homes are intended to be permanent dwelling units. Starting in 1976, they began to be built to a code developed by the Department of Housing and Urban Development (HUD) and moved past the name “mobile homes” and the notion of trailers placed atop blocks.

The manufactured home, built on a permanent chassis, is tested to ensure that it can be transported properly before being attached to a foundation, or the underlying chassis may be “skirted” by blocks or siding.

The home may be movable, depending on its age and condition, but few are moved. Moving a manufactured home, if it is new enough to be moved, can cost $15,000.

Pros and Cons of a Manufactured Home

Before buying a manufactured home, the housing choice of about 20 million Americans, take a look at the following advantages and disadvantages to help you in your decision-making.

Pros

•   Cost effective: According to the Manufactured Housing Institute, manufactured homes cost around 10% to 35% less than comparable site-built homes, excluding the price of land.

•   High quality: Manufactured homes must adhere to the HUD code, which applies to the home’s design, construction, durability, transportability, strength, and energy efficiency. Factories also need to adhere to standards and must inspect each step during construction.

•   Few delays: Because manufactured homes are built indoors in a controlled environment, the weather won’t interfere with the timeline to construct the home.

•   Home warranties: Most manufactured homes have some form of warranty to guarantee the quality of the home, usually for one to five years. The seller has its own warranties for transporting and installing the home.

•   Customizable: Most manufactured home makers allow homebuyers to customize some aspects of the home, such as certain finishes, porches, vaulted ceilings, and fireplaces.
Energy efficient: The HUD code ensures that manufactured homes have a high degree of energy efficiency.

•   Financing: The financing options include loans even if the buyer will not own the land the home will rest on.

Cons

•   Questionable appreciation: Manufactured homes may not appreciate at the same rate as other types of homes and may even depreciate. The resale value depends on the location, and the age and condition of the home.

•   Limited customization: You can customize some parts of a manufactured home, but you may not have the options you want, depending on the builder.

•   Price increases: The average sales price of a manufactured home increased nearly 50% during the pandemic, driven by the demand for affordable housing.

•   Lot rent: Most residents own their homes but rent the land. Those who lease lots face uncertain increases in monthly costs. Park rents have been doubling and tripling.
Financing options may carry higher rates. Whether the home is considered real property or personal property makes a big difference.

A manufactured home built on or after June 15, 1976, and considered real property might qualify for a conventional or government-backed loan. To be considered real property, the home must be at least 400 square feet, permanently attached to a foundation, and on land that you own or plan to buy. The loans usually carry slightly higher interest rates than mortgages for traditional homes.

Financing options for manufactured homes classified as personal property include chattel loans, which come with a higher interest rate and a shorter term than most traditional mortgages. (A chattel mortgage also may be used for tiny house financing.)

FHA Title I loans and personal loans are other options for manufactured homes classified as personal property. Rates for unsecured personal loans will be higher than rates for secured loans like mortgages or chattel loans.

Finding a Manufactured Home

Most manufactured homes are sold through retailers instead of the builders. It’s also possible to purchase manufactured homes through real estate agents and online manufactured home marketplaces.

Think of buying a new manufactured home like going to a store where you can view model homes. You’ll be able to see your options, such as the number of bedrooms, layout, and customizable features. Depending on the retailer, you may even be able to apply for financing and arrange for delivery all in the same day.

Before signing on the dotted line, make sure you read the fine print, such as what warranties come with the home. You may be able to purchase both the land and home through a manufactured home community.

Who Should Get a Manufactured Home?

A manufactured home may be a good fit for a retiree or a first-time homebuyer who is looking for a more cost-effective housing solution than a condo or single-family home — especially if they own the land underneath them.

It also may be suited for those who want a new construction home and to be able to customize parts of the structure.

The Takeaway

A manufactured home may be a good choice for some buyers, and others may want to try to buy a condo, townhouse, or single-family home.

If you’re in the latter group or buying investment property, SoFi can help you get started by providing a rate quote with no obligation.

3 Tips

1.    Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow home loan mortgages with as little as 3% down for qualifying first-time homebuyers.

2.    Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

3.    When building a house or buying a non-traditional home (such as a houseboat), you likely won’t be able to get a mortgage. One financing option to consider is a personal loan, which can be faster and easier to secure than a construction loan.

FAQ

What are the advantages of manufactured homes?

The main advantages of manufactured homes are the relative cost and the building standards they must meet.

Is a manufactured home considered real property?

A manufactured home is considered real property if you own both the land and the home and the structure is permanently attached to a foundation.

Can I get a loan to buy a manufactured house?

Yes, though the type usually depends on whether the home is considered real or personal property. Classification as personal property is almost certain to preclude conventional financing. A borrower need not own the land for an FHA Title I loan from an approved lender. The loan may be used to buy a manufactured home, a lot on which to place the home, or a manufactured home and lot in combination. There are maximum loan amounts and terms.

Are manufactured homes safe?

Manufactured homes built after mid-1976 abide by HUD standards, and most come with warranties.

Photo credit: iStock/clubfoto

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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As you’re starting your home buying journey, you may come across a style referred to as a split-level house. Popular in the 1950s through the 1970s, split-level homes appear to be making a comeback.

What is a split-level house? Keep reading for the answer and whether it’s the right style for you.

Characteristics of a Split-Level House

Often seen as a starter home, a split-level house differs from other traditional homes in that the home usually has three levels, connected by half-flights of stairs.

The most common design features the living room, kitchen, and dining room on the main level. A half-stairway leads up to the bedrooms, and a second half-stairway leads to a den, basement, and sometimes garage. The garage is often at grade level, with the bedrooms above it.

Often referred to as a trilevel home, though there can be a fourth or fifth floor, a split-level home has a low-pitched roof, large picture window, overhanging eaves, and an asymmetrical facade.

Recommended: Do You Qualify as a First-Time Homebuyer?

Pros and Cons of a Split-Level House

Consider the following advantages and drawbacks of a split-level home.

Pros

•   May be more affordable: Split-level homes are generally more outdated — or just feel that way — so you could find these homes at a bargain. (Try this mortgage calculator to get a feel for the numbers.)

•   Nostalgia is in: Sometimes it’s hip to be square. Young buyers may be drawn to the old-school feel of a split-level house.

•   Ability to qualify for home financing: If you can find a home at an affordable price, it might be easier to qualify for a mortgage.

•   More privacy: Split-level homes tend to offer more privacy because of the staggered levels. Upstairs or down, you might be able to set up a quiet home office.

•   May feel bigger: Split-level homes offer more square footage than many ranch-style homes, and they keep the rooms you use most frequently together.

Cons

•   Those stairs: People who aren’t very mobile or are afraid of climbing stairs as they get older may not be the best fit for split-level homes. Homeowners will need to use the stairs frequently, although they’re half-flights.

•   Could be hard to sell: When homebuyers are looking at the different types of houses, they may view split-level homes as awkward-looking or dated, so it could be hard to sell if you’re ready to move.

•   Remodeling can be challenging: The layout isn’t conducive to making any dramatic changes. Each level is meant to have a distinct purpose.

•   Subterranean space may not be valued: Thanks to the basement, a split-level home may not appraise as high as a one-level home.

Recommended: Understanding Mortgage Basics

Difference Between a Split-Level House and a Raised Ranch

Although some people use the term split-level to describe a raised ranch style, a true raised ranch has two levels, while a split-level home has three or more.

A raised ranch house is basically a ranch house that sits atop a basement or a first floor that contains a finished room and a garage. The story underneath the main floor of the home is meant to provide additional living space.

The building materials may be different: In most cases the basement or first floor is made of brick, with the upper level using aluminum or wood siding. There may also be more decorative details such as nonfunctional shutters.

Finding a Split-Level House

You’ll find most split-level homes in the Midwest.

Since these types of homes have basements, you’ll need to live in an area where that’s typical. Some parts of the country near the ocean or large bodies or water have poor soil types and won’t usually have homes with basements.

You might find a, well, staggering deal in one of the 50 most popular suburbs in the U.S.

Who Should Get a Split-Level House?

Those who are the best fit for a split-level house are buyers who are willing to climb stairs daily, families that value privacy, and those who see the value of maximum living space on a smaller lot.

Some people will find a one-level house, condo, or townhouse more their style. This home loan help center can be of use if you’re shopping for a home and a mortgage.

The Takeaway

If you value privacy and space and don’t mind stairs and a boomer aura, a split-level house could be just the ticket. Split-level homes can be a good value.

3 Home Loan Tips

1.    To see a house in person, particularly in a tight or expensive market, you may need to show proof of prequalification to the real estate agent. With SoFi’s online application, it can take just minutes to get prequalified.

2.    Not to be confused with pre-qualification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

3.    Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

FAQ

Are split-level homes hard to resell?

Split-level homes may not be for all homebuyers, though that doesn’t necessarily mean you can’t sell this kind of home. The key to encouraging buyers to make an offer is to shine a positive light on the home. That could mean staging it, adding curb appeal, and making upgrades as small as paint and new fixtures.

Can you build up on a split-level house?

Yes. You may be able to add a level to the top, or put an addition on the side or back.

Are split-level houses expensive to build?

Because the home can be built on a smaller lot, it may be more affordable than other designs. The cost to build any home depends on the locale, materials, size, and contractor. If you’re considering building your own, shop multiple builders to see what you can get.

Can you get a loan to build a split-level house?

You may be able to get a construction loan to build a split-level house. It’s typically harder to get a construction loan than a mortgage, and construction loan rates tend to be higher than conventional mortgage rates.

Why are split-level homes cheaper?

Split-level homes tend to cost less than other types of comparable homes because of when they were built. Many homebuyers find the style unfashionable.

What are the disadvantages of split-level houses?

The main disadvantage of split-level homes is that they require homeowners to walk up and down stairs often to access different areas of the home. While it may not be a dealbreaker to some, those who are less mobile or are afraid of how they’ll age in the home may not find split-levels a good fit.

Are split-level homes a good investment?

Maybe. An investor who updates a split-level home while keeping some of its retro charm is likely to find takers.

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Photo credit: iStock/davelogan

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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When you apply for a mortgage, lenders typically require proof of income via pay stubs, W-2s, and tax returns. But with a bank statement mortgage, borrowers can use their bank statements instead of tax documents to verify income.

For self-employed workers, who now number nearly 17 million, using bank statements can demonstrate their real income instead of the lower figure that might be reported on a tax return after deductions.

Read on to learn how you can leverage your bank statements to qualify for a mortgage.

What Is a Bank Statement Mortgage?

A homebuyer who is self-employed, by any name — sole proprietor, independent contractor, a member of a business partnership, freelancer, or gig worker — or anyone else may qualify for a bank statement mortgage loan, also known as a self-employed mortgage, by submitting personal or business bank statements.

A bank statement lists all transactions made in an account during a set period of time, usually a month. The sum of the transactions — deposits, charges, and withdrawals — is used to calculate the beginning and ending balances for that period. In place of tax returns, this account information is used to verify you have enough income and cash flow to cover a down payment and monthly loan payments.

Lenders offering bank statement mortgages may ask for 12 to 24 months of statements to determine the borrower’s net income — how much they earned after taxes and business write-offs. Typically, the bank statements cover the time period immediately preceding the loan application.

Recommended: Understanding the Different Types of Mortgage Loans

How Does a Bank Statement Mortgage Work?

So, what is a bank statement mortgage in practice? As with conventional mortgages, lenders can consider your credit score, work history, and proof of liquid assets as part of the loan application. But a bank statement mortgage differs in at least one way.

Whether you deposit income from your business directly into a personal bank account or from a separate business account affects how your income is calculated.

Lenders may apply an expense ratio to business bank statements with the understanding that part of the deposits goes toward business expenses. This means that only a percentage — usually 50% to 85% — of qualifying deposits is used to calculate income. (However, it’s possible to obtain a lower expense factor with a statement from a certified public accountant or tax preparer.)

If you deposit income to your personal account from your business account, 100% of deposits can count toward calculating the bank statement mortgage you can afford. Without a separate business account, though, deposits to a personal account also receive an expense ratio.

Note that lenders can also factor in your ownership percentage in a business when calculating gross monthly income from business bank statements.

Here’s an example of how these two scenarios would work for the same self-employed person applying for a 12-month bank statement mortgage.

Business bank statement: ($84,000 in deposits / 12 months) x 50% expense ratio = $3,500 gross monthly income

Personal bank statement: $84,000 in deposits / 12 months = $7,000 gross monthly income

With this monthly gross income figure, the lender will assess monthly debt payments to calculate the debt-to-income ratio and determine the loan amount you qualify for.

Recommended: Understanding Mortgage Basics

Who Should Get a Bank Statement Mortgage?

Prospective homebuyers who don’t have consistent cash flow or who lack proof of income from an employer like W-2s and pay stubs could benefit from a bank statement mortgage.

Self-employed workers, who represent around 11% of the U.S. workforce, often claim tax deductions for business expenses to lower their tax liability, which makes their income appear lower on tax forms. Therefore, without using bank statements, many sole proprietors, contract workers, and freelancers will qualify for a smaller mortgage amount than they can actually afford.

Bank statement mortgage loans could also be advantageous for seasonal workers. Since gross monthly income is calculated as an average during the full time period covered by the bank statements, when the deposits occur within that time frame is less important.

Recommended: Getting a Personal Loan When Self-Employed

Pros and Cons of a Bank Statement Mortgage

Bank statement mortgages represent an alternative financing option that lends itself to self-employed and seasonal workers. But it’s important to consider the pros and cons when shopping for a mortgage.

Pros of Bank Statement Mortgage	Cons of Bank Statement Mortgage
Can qualify without W-2s, pay stubs, or tax returns	May require a higher down payment than other types of home loans
Often eligible for second homes and investment properties	Generally carries higher interest rates
Private mortgage insurance is not required with 20% down	Not all lenders offer this loan product
May offer higher loan limits	Can require being in business for years to qualify

How to Find a Bank Statement Mortgage

Bank statement mortgages are considered non-qualified mortgages (non-QM), which means they may lack certain features and protections, so not every lender uses them. Though less common than traditional mortgages, many lenders, including banks and credit unions, offer bank statement mortgage loans.

Since bank statement loans are non-QMs, it’s natural to have questions about mortgage terms and requirements.

For instance, it’s worth asking about mortgage points — fees paid to a lender for a lower interest rate — since the limits on points and fees for a qualified mortgage do not apply.

Recommended: Mortgage Calculator

Alternatives to a Bank Statement Mortgage

Prospective homebuyers have a range of financing options to choose from, even if they’re self-employed.

Getting prequalified and preapproved can give you an idea of how much home you can afford, and a specific amount, respectively.

A mortgage loan originator will convey the loan terms you might qualify for and available financing options.

•   Conventional loan: Accounting for more than 78% of home loans in Q1 2022, conventional loans tend to come with competitive interest rates and are originated, backed, and serviced by private mortgage lenders.

•   FHA loan: Insured by the Federal Housing Administration but administered by approved private lenders, an FHA loan allows for down payments as low as 3.5% and lower credit scores than conventional loans.

•   USDA loan: A USDA loan, backed by the U.S. Department of Agriculture, is designed to make homeownership affordable for low-income buyers in designated rural areas.

•   VA loan: Eligible service members, veterans, and eligible surviving spouses can obtain VA loans, guaranteed by the Department of Veterans Affairs, with competitive interest rates, no down payment, and minimal closing costs.

If you’ve been self-employed for two years, or one year self-employed plus two years in a similar role with comparable income, you may still qualify for one of the above loans.

Recommended: Help Center for Home Loans

The Takeaway

Being self-employed does not prevent borrowers from getting financing for a home purchase or refinance. A bank statement loan could be a solution if your tax returns don’t fully capture what you can afford.

As you weigh your mortgage options, add SoFi to your list. It’s easy to compare SoFi’s home mortgage loans, which offer a variety of terms, low down payments, and competitive rates.

Learn what rate you qualify for in just minutes.

FAQ

Are bank statement mortgages good?

Bank statement mortgages can be advantageous for self-employed homebuyers or refinancers, but they can have higher interest rates and down payment requirements. It’s worth checking to see if you’re eligible for conventional or government-backed loans first.

How much of a down payment is required for a bank statement mortgage?

Typically, bank statement loan lenders require a 20% down payment, or 10% if purchasing mortgage insurance.

Can I use a bank statement loan on a second home?

Yes, bank statement loans can be used for a second home, as well as vacation homes and investment properties.

Do bank statement mortgages work for refinancing?

Yes, homeowners can refinance with a bank statement mortgage, including applying for a cash-out refinance if they have enough home equity.

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Photo credit: iStock/PeopleImages
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Mobile, manufactured, modular. These types of homes sound similar, and they’re all prefabricated, but they differ in cost, customization, ease of financing, and more.

When it comes to old mobile homes and modular vs. manufactured homes, here’s what to know if you’re considering a purchase.

What Is a Mobile Home?

Unlike a stick-built, or traditional, home built from the ground up, a mobile home was built in a factory before mid-1976 and transported on wheels to its destination. The name is a bit of a misnomer: Most are never moved.

What Is a Manufactured Home?

A manufactured home is built in a factory, then transported to its destination in one or more sections. Sound familiar? That’s because manufactured homes are the 2.0 version of mobile homes.

In 1976, the U.S. Department of Housing and Urban Development (HUD) changed the “mobile home” classification to “manufactured” legally and began to regulate the construction and durability of the homes.

More change and innovation have come with time. That is covered below.

What Is a Modular Home?

Modular homes start their lives in a factory, where modules of the homes are built. The pieces, usually with wiring, plumbing, insulation, flooring, windows, and doors in place, are transported to their destination and assembled like a puzzle.

Modular homes are comparable to stick-built homes in most ways other than birthplace.

Recommended: Choose a Favorite From the Different Types of Homes

How Mobile, Manufactured, and Modular Homes Differ

These homes may all share a starting point, but there are key differences to know, whether you’re a first-time homebuyer or not. For the sake of simplicity, let’s compare manufactured homes and modular homes.

Construction

Manufactured homes are built from beginning to end in a factory on a steel chassis with its own wheels. Once a manufactured home is complete, it’s driven to its destination, where the wheels and axles are usually removed and skirting added to make it look like a site-built home, or it may be attached to a permanent foundation.

Construction and installation must comply with the HUD Code (formally the Manufactured Home Construction and Safety Standards) and local building codes.

Modular homes are built in pieces in a factory, then transported to the property. From there, a team assembles the home on a permanent foundation.

While a modular home may be built states away from its final home, it needs to comply with the state and local building codes where it ultimately resides.

	Manufactured Homes	Modular Homes
Fully factory-built?	Yes	No (but mostly)
Permanent foundation?	Not commonly	Yes
Construction regulated by	HUD Code	State and local codes

Design

There’s a fair share of design differences when it comes to modular vs. manufactured homes.

Manufactured homes come in three standard sizes:

•   Single-wide: roughly 500 to 1,100 square feet

•   Double-wide: about 1,200 to 2,000 square feet

•   Triple-wide: 2,000+ square feet

The most significant limiting design factor of manufactured homes is the layout. As they must be delivered fully assembled on a trailer, they only come in a rectangular shape. In the case of single- or double-wides, there’s not much space to separate rooms or interior hallways to connect them.

In terms of design, there’s much more freedom in modular homes. They can be just about any style, from log cabin to modern, and can have more than one floor.

The design options of a modular home are similar to a stick-built home. Floor plan and style are only limited by a buyer’s budget and space. A modular home may look just like a site-built home upon completion.

	Manufactured Homes	Modular Homes
Size limitations	Yes, single-, double-, or triple-wide	No
Shape limitations	Yes, rectangular only	No

Customization Options

Most makers of manufactured homes allow some customization, including:

•   Custom kitchen layout and cabinetry

•   Porches

•   Custom layouts (within the confines of prefab shapes)

•   Siding

•   Built-in lighting

•   Ceiling finish

•   Fireplace

•   Tiling

Similar to stick-built homes, modular homes have nearly endless customization options. From the style of the home to its size and layout, modular homes offer more flexibility for buyers.

Expense

The expense of a modular home vs. manufactured home can vary dramatically.

A modular home — also sometimes called a kit home — may cost less than a stick-built home, but it usually costs a lot more than a manufactured home.

Both modular and manufactured homes have a separate expense: land. In the case of manufactured homes, it may be possible to rent the land the home is delivered to, but owners of modular homes will need to buy the land they want to build on.

Another cost associated with modular homes is the foundation, which needs to be in place when the modules arrive. Manufactured homes affixed to a permanent foundation on land owned by the homeowner are considered real property, not personal property.

Here are some typical expenses associated with each home:

	Manufactured Home	Modular Home
Average cost	$85,800 for a single-wide $159,200 for a double-wide	$200,000 to $400,000 (2,000 square feet, including installation but not the land)
Foundation	$4,000 to $13,000	$4,000 to $13,000
Land	Is often rented; varies by location	$55,000 median; varies by location

Another expense to keep in mind is financing. An existing modular home will qualify for a conventional mortgage or government-backed loan if the borrower meets minimum credit score, income, and down payment requirements.

Homebuyers building a new modular home often will need to obtain a construction loan.

Manufactured and mobile home financing is trickier. The key is whether the home is classified as real or personal property.

Manufactured homes classified as real property, including those used as accessory dwelling units that are at least 400 square feet, might qualify for a conventional or government-backed loan.

Financing options for mobile and manufactured homes classified as personal property include a chattel mortgage and an FHA Title I loan.

A personal loan is another option.

Recommended: Explore the Mortgage Help Center

The Takeaway

Mobile, manufactured, and modular homes have key differences. A manufactured home on leased land is not considered real property, while a modular home, always on its own foundation and land, is, and compares in most ways to a traditional stick-built home.

SoFi does not finance manufactured homes but will, if you qualify, refinance a construction-only loan to a traditional home mortgage loan or provide a mortgage for an existing modular home.

SoFi mortgages have lots of advantages, including low down payments. Find your rate with no obligation.

FAQ

Is a modular home better than a manufactured home?

In terms of appreciation and resale value, a modular home has the edge over most manufactured homes. And if a manufactured home is on leased land, the owner may face lot fees that keep rising.

What’s the price difference between mobile, manufactured, and modular homes?

Generally, mobile and manufactured homes are much less expensive than modular homes. A mobile home, by its very definition, was built before mid-1976. The size of the price gaps depend on how customized the home is, where it is, and how large it is.

Between manufactured and modular homes, which is fastest to build?

Unless there are factory or supply chain delays, manufactured homes are typically faster to build than modular homes. (Of note: A modular home can often be built much faster than a stick-built home.)

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Photo credit: iStock/Marje

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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A family opportunity mortgage is a loan for a residential property bought for a parent or an adult disabled child who could not qualify for financing on their own.

Under Fannie Mae guidelines, a principal residence can be purchased for a child or parent who is unable to work or who does not have sufficient income to qualify for a mortgage. The buyer will be considered the owner-occupant even though they will not live in the house.

This article will explain family opportunity mortgage guidelines and rules, how to find lenders, and more.

What Is a Family Opportunity Mortgage?

What was a formally titled program under Fannie Mae is now a conventional loan with expanded guidelines to allow owner-occupied financing under special circumstances.

A family opportunity mortgage may be used:

•   When parents or legal guardians of a disabled adult child want to provide housing for the child.

•   When children want to provide housing for parents who cannot qualify for a mortgage because they cannot work or their income is too low.

Buyers are able to obtain financing at the same interest rates and terms as a principal residence under these circumstances. They do not have to use second home or investment property requirements.

Recommended: How to Buy a Single-Family Home

How a Family Opportunity Mortgage Works

A family opportunity mortgage works just as a conventional mortgage for your primary residence does. Buyers must meet Fannie Mae’s eligibility and underwriting standards in order to qualify for the loan.

Lenders consider your debt-to-income ratio, monthly debts as a percentage of your gross monthly income. Fannie Mae guidelines call for a maximum 45% DTI, or 50% with certain compensating factors.

Your income, though, must be high enough to cover the home mortgage loan for your primary residence and the residence you want to buy for your parent or dependent child. A credit score of at least 620 and steady employment will be required to qualify for the new mortgage as well.

Example of a Family Opportunity Mortgage

Here’s an example where you could use the family opportunity mortgage. Let’s say you have elderly parents who need more care, and you would like for them to move near you. Their retirement income isn’t enough to qualify for a mortgage in your area.

If you have enough income and a decent credit score, you may be able to buy a house for them. This is where a family opportunity mortgage may make sense.

You’ll turn to your lender to qualify you for owner financing. The family opportunity mortgage is actually a term that is no longer in use, but the ability to qualify for an owner-occupied mortgage for a disabled adult child or elderly parent following Fannie Mae guidelines is the same.

The lender can help you explore different types of mortgages that will meet Fannie Mae’s criteria.

One basic choice is a fixed-rate loan or adjustable-rate mortgage.

After settling on a mortgage product, you’ll submit all the necessary documents through your lender to apply for the mortgage.

After the loan closes, your parents will move into the house, and you’ll make the mortgage payments in your name.

Keep in mind the mortgage and the deed will be in your name unless you add your parents to the deed. There are advantages and disadvantages to structuring it this way, so be sure to do some research or consult a lawyer.

Recommended: Home Loan Help Center

Steps to Qualify for a Family Opportunity Mortgage

If you want to qualify for a family opportunity mortgage, you’ll need to take the following steps:

•   Complete a mortgage application with your lender. You’ll need to add the amount of the additional mortgage to the one you have on your principal residence (if any) and still have enough income to qualify for financing. Take a look at this mortgage calculator tool if you want help coming up with an estimate.

•   Obtain pre-approval. By providing a specific tentative amount, mortgage pre-approval allows you to look for homes that fall within your budget.

•   Find a suitable property. The property does not have distance rules; nor do you have to reside in the property to qualify for owner-occupied financing. The types of houses may be restricted to single-family homes, but it may also be up to your lender.

•   Provide your lender with all necessary documentation. This may include proof of the adult child’s disability or proof that a parent is unable to take on a mortgage.

•   Close on the loan. Sign all the paperwork, wire your down payment and closing costs to the appropriate entity, and take care of any final details.

A family opportunity loan is usually treated like conventional financing for an owner-occupied home. Some lenders may have stricter lending standards when it comes to the definition of an owner-occupied residence.

Advantages of a Family Opportunity Mortgage

Being able to provide housing for a loved one with owner-occupied financing comes with some advantages:

•   Lower down payment requirement. With an owner-occupied house, buyers can obtain a conventional mortgage with as little as 3% down (0% if they qualify for a USDA or VA loan). If the property is bought as a second home or investment, the down payment requirement is usually 10% or more. For a family opportunity mortgage, the minimum down payment is 5%.

•   Interest rates are lower. Loan rates for second homes or investment properties run higher than owner-occupied residential mortgage rates.

•   Lower property taxes. When a property is classified as owner-occupied by your local taxing authority, you may qualify for an exemption that reduces property taxes owed.

•   Mortgage interest and property tax is tax deductible. When you file your taxes, you may be able to claim the mortgage interest and property tax dedication for both properties.

•   Borrowers are not required to occupy the property. With a family opportunity mortgage, you are not required to live on the property to qualify for owner-occupied financing.

Recommended: Shopping for a Mortgage

Which Lenders Offer Family Opportunity Mortgages?

Since the official program with the name “Family Opportunity Mortgage” has been discontinued, you won’t be looking for a lender that offers this program. Instead, you’ll be looking for a lender that allows you to use Fannie Mae’s definition of an owner-occupant when buying a house for a parent or disabled adult child. Many lenders will offer this as it is a common conventional loan.

Tax Implications of a Family Opportunity Mortgage

The tax implications of owning a home with a type of family opportunity mortgage may be complex. It’s a good idea to consult a tax attorney or tax accountant for advice.

The Takeaway

Buying a home for a disabled adult child or an aging parent is possible if you meet Fannie Mae guidelines and have sufficient income. If you’re looking for the family opportunity mortgage, ask lenders if they allow owner-occupied conventional financing if you purchase a home for parents or a disabled adult child. You’ll save money while providing housing to a vulnerable adult.

3 Home Loan Tips

1. To see a house in person, particularly in a tight or expensive market, you may need to show proof of pre-qualification to the real estate agent. With SoFi’s online application, it can take just minutes to view your rates.
2. Not to be confused with pre-qualification, pre-approval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for pre-approval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
3. Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

Shopping for a mortgage? Check out the advantages of SoFi home mortgage loans.

FAQ

Has the Family Opportunity Mortgage program been discontinued?

The formal name “Family Opportunity Mortgage” has been discontinued, but Fannie Mae still allows conventional mortgages to be considered owner-occupied for disabled adult children and parents who cannot qualify for mortgages on their own.

Can I buy a home for someone who is not my family member?

You can buy a single-family home for someone who is not a family member, but the circumstances do not meet Fannie Mae family opportunity mortgage guidelines and will not qualify for owner-occupied financing.

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Photo credit: iStock/Ridofranz

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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