Police told the DPA news agency Tuesday that the Monday night fire at the home in the town of Woldegk, about 150 kilometers (90 miles) north of Berlin, appears to have been set in the basement.
Thirty-five residents, including 10 asylum seekers, were forced to leave into temporary shelters.
A 76-year-old and a 14-year-old were treated for smoke inhalation, AP reported.
Police say part of their investigation is determining whether there was a “political motivation” for setting the fire.
Two cars were set ablaze in the town 10 days ago in a case that has not yet been resolved.