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- Purchasing a manufactured home, commonly referred to as a mobile home, can be more affordable than purchasing a traditional home.
- Most traditional mortgage lenders don’t offer financing options for these kinds of homes because of their lower cost and depreciation.
- There are several ways to finance the purchase of a mobile or manufactured home, including personal loans, Freddie Mac loans, Fannie Mae loans, and FHA Title I and Title II loans.
With the median price of homes exceeding $400,000, mobile homes, also called manufactured homes, can be more cost-effective while offering more flexibility. According to the Manufacturing Housing Institute, the average manufactured home sells for about $127,250.
However, compared to buying a traditional home, financing the purchase of a mobile or manufactured home might involve more digging. This is because, because of their lower cost and declining value, the majority of mortgage lenders do not provide financing for these kinds of properties. Still, there are some options available.
What are the differences between mobile, modular and manufactured homes?
The terms manufactured, modular, and mobile are frequently used interchangeably when referring to these related home styles. These residences are related, but they differ significantly in a few key ways.
A factory builds a mobile home before it is transported and set up on a property. It might or might not replace the conventional foundation with metal tie-downs. However, this explanation can apply to manufactured homes as well.
A house’s classification as a mobile home is contingent upon its construction date. Before June 15, 1976, homes constructed in factories were referred to as mobile homes. This is when the U. S. The National Manufactured Housing Construction and Safety Standards Act was enacted by the Department of Housing and Urban Development (HUD).
Following that date, these houses were given a new designation as a result of new safety regulations.
Like mobile homes, manufactured homes are built in a factory. They can be erected on concrete slabs, metal piers, or a permanent foundation at their permanent site. Manufactured homes, in contrast to mobile homes, are not meant to be moved once they are assembled.
Manufactured homes are defined as factory-built residences built on or after June 15, 1976, by the Housing Act of 1980. Under the Manufactured Home Construction and Safety Standards (HUD Code), HUD strictly controls the construction of these homes.
Additionally, these types of homes must meet local building standards for the communities where they will be located. Companies that construct manufactured homes must get their designs approved by a HUD-approved Design Approval Primary Inspection Agency, which makes sure the plans are safe for consumers and comply with the law.
Modular homes are constructed in a factory and transported to the location where they will be erected, just like mobile and manufactured homes. However, modular homes are more similar to traditional homes. They frequently have traditional foundations and include crawlspaces and basements.
Moreover, modular homes can be delivered in two or more modules that are assembled on-site into the appropriate configuration. This feature is where they get their modular name. To finish the construction of the home, these various components are usually joined together by a local contractor.
The same state, local, or regional building codes that apply to site-built homes must also apply to modular homes.
Bankrate’s opinion: Know the differences between a manufactured, modular, and mobile home before you shop so you can select the one that best suits your needs.
Ways to obtain mobile home financing
It’s time to determine how to pay for your mobile home after you’ve decided on its features and location. While financing a mobile home, there are a few things to take into account.
Through the Federal Housing Administration loan program, HUD provides loans for mobile homes. This includes Title I and Title II loans.
The purchase of a new or used manufactured home, the refinancing of an existing manufactured home, the acquisition of the developed lot needed to place this kind of home, and the combination acquisition of the lot and the home itself are all possible uses for a Title I manufactured home loan. These money can also be utilized to upgrade, maintain, or modify a manufactured home.
Even if the buyer does not currently own or intends to purchase the land on which the manufactured home will be located, lenders may still grant Title I mobile home loans. Usually, these houses will be situated in a mobile home park or manufactured home community. The borrower must provide a signed lease for a mobile home plot with an initial term of at least three years if they do not own the land or are not purchasing it.
There are additional requirements for the loan program that pertain to the loan terms.
- Manufactured home only: $69,678
- Manufactured home lot: $23,226
- Manufactured home and lot: $92,904
- Manufactured home: 20 years, plus 32 days
- Single-wide manufactured home and lot: 20 years, plus 32 days
- Manufactured home lot: 15 years, plus 32 days
- Multi-unit manufactured home and lot: 25 years, plus 32 days
If a manufactured home satisfies the requirements, it can be financed with land through this loan program, which insures loans for that purpose.
For instance, real estate investors are not required to apply for a Title II loan if they intend to use the manufactured home as their primary residence. Other requirements for the home include:
- possess a floor area that is at least 400 square feet.
- Be constructed after June 15, 1976.
- Real estate classification is required, though it’s not required for state tax purposes.
- Must be built and remain on a permanent chassis.
- The house and the land it is situated on must be covered by the loan.
Mobile home parks and manufactured home communities do not allow the use of Title II loans for manufactured homes situated on leased land. For a Title II loan, the minimum down payment is three 5 percent, with terms extending up to 30 years
If a borrower wants to finance a manufactured home through the MH Advantage program, some lenders provide Fannie Mae mortgages. A driveway and a sidewalk connecting the driveway, carport, or detached garage are among the requirements that must be met in order to be eligible.
The house must also fulfill certain energy-efficiency, architectural, and construction requirements comparable to those for site-built homes in order to be eligible for this program.
The loans have a 30-year term, and you might be able to get approved for them with as little as 3% down. In addition, interest rates on MH Advantage mortgages are typically lower than those on the majority of conventional manufactured home loans.
With the Freddie Mac Home Possible mortgage program, conventional financing for a manufactured home might be available to you.
Mortgages with fixed rates (15, 20, and 30 years) and adjustable rates (7/6 or 10/6) are available to qualified borrowers. In certain situations, you may be able to use grant or gifted money to help cover your down payment, and you might be able to obtain a loan with as little as 3% down.
If you are a member of the armed forces, you might be eligible for a Department of Veterans Affairs-insured loan. You can refinance a home you intend to move to land you own, purchase a manufactured or modular home and place it on land you already own, or purchase both the home and land at the same time with a VA loan.
For manufactured home loans, lenders may provide up to 100% financing. An affidavit of affixture is required to demonstrate that the property is attached to land you own and satisfies specific local and VA requirements.
Loan terms can range from:
- Lot for a pre-owned manufactured home: fifteen years plus thirty-two days
- Single-wide manufactured home: 20 years plus 32 days
- Single-wide manufactured home and lot: 20 years plus 32 days
- Double-wide manufactured home: 23 years plus 32 days
- Double-wide manufactured home and lot: 25 years plus 32 days
A unique kind of personal property loan that you can use to buy a mobile home is called a chattel loan. These loans for mobile homes are intended to be used to finance expensive vehicles, such as boats, planes, mobile homes, or farm equipment, where the loan is secured by the property.
If the land where your house will be built is not yours, you may still be able to obtain financing through a chattel loan. They are therefore a well-liked loan choice for purchasers who intend to rent a lot in a community of manufactured homes.
Certain lenders provide chattel loans for the purchase of manufactured homes that are guaranteed by the U.S. S. Rural Housing Service (RHS) and the Department of Veterans Affairs (VA) via the U S. Department of Agriculture. There are a few differences between chattel loans and conventional mortgages, even though you might be able to find lenders that offer both.
To begin with, the interest rates on chattel loans are generally higher — 1 5 percentage points higher, on average, than traditional mortgage rates. However, given the recent rise in mortgage rates, there might not be much of an interest rate difference right now.
Compared to traditional mortgages, chattel loans have shorter terms, which may result in higher monthly payments but may also enable you to pay off your debt sooner. One advantage of chattel loans is that the closing process is typically less onerous and quicker than it would be for a conventional mortgage.
Since mobile homes are significantly less expensive than traditional homes, a personal loan might be an option for you to finance your purchase.
Personal loans can be used as mobile home loans since they are flexible loans that can be used for nearly any purpose. However, compared to other loan kinds like mortgages or auto loans, personal loan interest rates are typically higher. The trade-off is that the application process is typically quicker and requires less paperwork, and you don’t have to provide any collateral, so you won’t lose your house if you default.
According to Steve Sexton, CEO of Sexton Advisory Group, another significant benefit of personal loans over mortgages is that they are usually inexpensive or free to establish. “There’s no costly title, escrow or appraisal fees. Additionally, because the loan is not secured, the lender has no ownership or control over your house. ”.
Although some lenders will allow you to borrow $100,000 or more, most personal loan providers only offer maximum loans of $25,000 to $50,000. It could be a good option to borrow the necessary funds if you find a lender offering a personal loan big enough to finance a mobile home.
When comparing financing options for mobile homes, take into account your preferred interest rate, the kind of home you want to purchase, the amount of money you need to borrow, and the timeline for loan repayment.
5 steps for getting mobile home financing
There are a few steps you should take first if you’re wondering how to purchase a mobile home and obtain the best financing.
Check your credit reports
A lender will take your credit into account when processing your loan application whenever you apply for any kind of financing. Having a clean credit history and high credit scores makes it easier to get loans and negotiate better terms and rates with lenders.
When reviewing your credit reports, you can dispute any errors you find with Experian, TransUnion, or Equifax, the relevant credit bureau.
Why it matters: Your interest rate will probably be lower the higher your credit score is. Over the course of the loan, this can save you thousands of dollars.
Decide whether you’re buying land in addition to the mobile home
According to Sexton, the stability of the asset being financed is crucial when financing a mobile home. It is less likely that you will pick up and move if you own the land and your mobile home has had the axle and wheels removed. This might encourage more lenders to consider financing a mobile home.
Why it matters: You will be qualified for fewer loans if you intend to rent a plot for your house rather than buy the land where it will be built.
Figure out the specifics of the home that you want to purchase
Your search criteria for a home will determine the kind of loan you might be qualified for. For example, you will not be qualified for an FHA loan if you wish to purchase a manufactured double-wide home for $100,000 or more. Additionally, financing may not be available at all for older mobile homes.
The type and value of your home determine the specific lending criteria that each lender has, which is why it matters.
Start looking for financing options
Select the loan type you want to use (personal, chattel, conventional, or FHA), then evaluate what each lender has to offer.
Make sure to compare rates and fees for manufactured home loans as well as interest rates for mobile homes from different lenders. In order to minimize your total loan costs over time, look for a loan with low fees and interest rates.
Why it matters: By doing your homework and comparing rates, you can avoid paying thousands of dollars in interest over the course of the loan and be able to negotiate better terms. Additionally, looking into financing options beforehand will help guarantee that you can get a loan to support the purchase.
Submit your loan application
You should make sure that your application is as thorough and open as you can. Additionally, be ready to make a payment when you finish your application because many lenders require a down payment.
Why it matters: Completing your application will increase your chances of being accepted and ensure that everything goes as planned.
Conclusion: Be sure you’re ready to finance a manufactured or mobile home. By doing this, you will accelerate the process and increase your chances of obtaining the best rate and terms.
Interest rates on manufactured homes and mobile homes will differ depending on a number of factors, just like with any other loan. The amount you pay will vary depending on your credit score, down payment size, kind of home, and whether or not you’re purchasing land.
Make sure your credit score is at least 700 in order to be eligible for low interest rates on mobile homes. A minimum score of 750 is required to be eligible for the best rates offered.
| Type of loan | Average rates | Typical minimum credit score | Typical terms |
|---|---|---|---|
| FHA | 7.32% | 500 | Up to 30 years |
| Fannie Mae | Varies | 620 | Up to 30 years |
| Freddie Mac | Varies | 620 | Up to 30 years |
| Chattel | 7.60% | 575 | Up to 20 years |
| Personal | 11.53% | 600 | Up to 84 months |
Factors to consider when buying a mobile home
Now that you know how to purchase a manufactured home or mobile home, you should think about a few things to make sure you make the right choice. These things include size, location, and whether you should purchase a new or used property.
Manufactured and mobile homes depend on location just like traditional homes do. Determine the location of your mobile home before you do anything else. The remainder of the process will be significantly impacted by the location you select.
Sexton claims that “buying a mobile home and choosing the proper location is just like buying a home.” “A good neighborhood is important. ”.
Installing the house on land you already own is one choice. Another choice is to purchase the property on which your mobile home will be placed. Just confirm that the lot you own or want to buy permits the installation of mobile homes according to zoning laws. Additionally, make sure the local utilities are set up to connect a mobile home and that the lot is suitable for mobile homes.
Renting a piece of land in a community of mobile homes is an additional choice you might think about. This lowers your initial outlay of funds but increases your monthly housing expenses due to the lot’s rent. To find available plots and learn about any restrictions on the size and features of homes, speak with the community manager.
You must choose your desired home size in advance because manufactured and mobile homes come in a variety of sizes. Larger homes are more expensive and require larger lots. Therefore, if you want a larger home, you might have to borrow more money.
Mobile homes are usually classified by their width. The terms double-wide or double unit and single-wide or single unit may be used. Double-wide homes are twice as wide as single-wide homes, which are just under 15 feet wide. Both are usually about 70 feet long.
Sexton notes that “many towns don’t allow single-wide mobile homes within their town or city limits.” “Be sure to look up any regulations that might be relevant to your circumstances.” ”.
Manufactured and mobile homes typically depreciate in value over time, in contrast to traditional real estate. This implies that purchasing a used mobile home will result in a discount. The drawback is that, unless they’ve been well-maintained, used mobile homes will frequently show signs of age.
Additionally, you should thoroughly investigate the location where you intend to put the mobile home in advance. Your options are limited because certain places won’t permit the placement of homes built before a certain date.
In order to make sure you purchase a quality older mobile home, you will probably also need to hire someone with inspection expertise.
Like any other type of home, ownership has long-term costs. The price of mobile home insurance is one of the costs to take into account when buying a manufactured or mobile home.
This kind of coverage provides you with protection in the event that your home is damaged or needs repairs, much like regular homeowners insurance. Policies frequently cover both the house and your personal belongings in the event that they are lost, stolen, or damaged. Additionally, you can get policies with liability coverage, which guards you in the event that someone gets hurt on your property and you are held accountable.
Usually, standard mobile home insurance excludes coverage for hurricanes, earthquakes, and floods, or it may require an add-on.
The price of mobile home insurance policies varies depending on your coverage level, just like for traditional homes.
Compared to traditional site-built homes, mobile and manufactured homes can be significantly more affordable. However, if you intend to buy one, do your homework to learn about the financing options that are available and the eligibility requirements. Additionally, make sure the house is in a suitable location and isn’t too old to qualify for a loan or mortgage.
- It will be simpler for you to be approved for a mobile home loan with competitive interest rates the higher your credit score. According to Sexton, “FHA will finance with a 500 to 589 credit score and 10% down.” “Deposits of three will be the only requirement for credit scores of 580 or higher. 5 percent. For Freddie Mac or Fannie Mae, a minimum credit score of 620 is required. Different chattel loan providers will accept credit scores as low as 575 or as high as 660. ” .
- The length of mobile home financing depends on the lender. However, depending on the type of loan, you can find terms ranging from five to thirty years.
- Finding a lender who offers manufactured home financing can be more challenging because mobile homes lose value over time. But there are still plenty of options available. Just make sure you research potential partners thoroughly in order to determine which one best suits your needs, preferences, needs, and financial circumstances.
FAQ
Why is it hard to get a loan for a mobile home?
Because mobile homes aren’t regarded as “real property,” many lenders won’t approve a conventional loan for one. Nonetheless, residences affixed to a permanent foundation might be eligible. Credit score is a common requirement for any loan. The better the score, the more likely you will qualify.
What credit score do I need for a mobile home?
To purchase a mobile home, most lenders demand a minimum credit score of 580 to 620. The typical minimum credit score for manufactured home loans is 580, but you may be able to get financing with a different program and a lower score, though you might have to put down a bigger amount.
What is the loan term for a mobile home?
Federal Government grants or loans are not available for Title I manufactured home loans. For the duration of the loan, which is typically 20 years, the interest rate, which is negotiated between the borrower and the lender, must remain fixed.
What is the oldest mobile home you can finance?
True mobile homes were constructed before June 15, 1976; homes constructed after that date are classified as manufactured homes. What is the oldest mobile home that can be financed? The majority of lenders will only approve mortgages for real mobile homes provided they meet the most recent HUD manufacturing and safety requirements.
Read More :
https://www.bankrate.com/loans/personal-loans/how-to-buy-a-mobile-home/
https://www.rocketmortgage.com/learn/mobile-home-loans