Loans for Manufactured (Mobile) Homes – Review Options
Buying a home is a major financial investment. However, the last financial crisis and the instability of the economy has made it difficult for people to qualify for larger loans. Many low income earners trying to purchase manufactured homes are finding it hard to locate financing to purchase a home. Fortunately, there are a range of finance options available for mobile or manufactured homes, below is detail on loans and subsidies to assist in getting qualified and into a home.
Understanding Loans for Manufactured (Mobile) Homes
Manufactured homes, also called mobile homes, are built in accordance with the Manufactured Home Construction and Safety Standards (HUD Code). They are cheaper than regular homes and eligible for the same types of loans. There aren’t as many lenders willing to provide people with financing for this type of property, but those that are follow the guidelines of conventional and government-insured financing plans.
Features of Loans for Manufactured (Mobile) Homes
Loans for manufactured homes are very similar to regular home loans. Their main features are:
- Fixed or floating (variable) interest rates
- Closing costs
- Down payments of 5-10%
- Term of loan 15-30 years
Note that the maximum loan amount will depend on the type of loan and lender. Another important factor that affects the maximum amount is whether you take out a loan to purchase a manufactured home only, a home with a lot, or a lot for this type of home.
Depending on the type of loan you get, it may be eligible for refinancing.
Loans for Manufactured (Mobile) Homes Options
Those who seek to buy a manufactured home have the same loan options as the people who want to purchase regular properties. Like with any financing, your options will depend on your ability to repay the loan.
Conventional Mortgage – This financing option might be available if the manufactured home is to be installed on an approved foundation. These mortgages have the same eligibility requirements, but the house itself must meet HUD standards as well as the lender’s individual requirements.
Retail Installment Contracts – This is the most popular type of manufactured home financing. Technically, it’s not a loan in a conventional sense, as you are paying the cost of the home to a retailer, not a separate financial body. Usually, you can get this financing directly through your retailer when buying the manufactured house, and the eligibility requirements will be minimal.
Loan Brokers – Brokers have experience in finding lenders for any type of loan. They will have some banks and financial organizations that provide financing for manufactured homes in their databases. Discussing your options with a broker may help you find the best solution in your particular situation.
Government-Insured Loans – Mobile homes that meet the HUD standards are eligible for all standard government-insured financing programs offered by Rural Housing Services, Veterans Administration, and Federal Housing Administration.
The FDA program offers two types of mortgages for manufactured homes:
- Title I.
This loan can be used for financing the purchase of a mobile home with or without the lot.
- Title II.
This type provides insurance to a mortgage for a manufactured home with a plot of land that meets a variety of specific requirements.
Private Lending Institutions – Many private lenders provide financing for qualifying mobile homes. You should contact the lenders in your area directly to understand all your options. It’s also possible to seek counsel through the HUD’s Housing Counseling Clearinghouse.
Chattel Mortgages – This type of loan has a higher interest rate and allows the lender to hold a lien against the mobile home. The rates start at 6.99% and will get higher for borrowers with bad credit. The term of a chattel loan is shorter than of a conventional mortgage and the closing costs are significantly lower.
Pros/Cons of Loans for Manufactured (Mobile) Homes
Like with any type of mortgage, there are pros and cons to loans for manufactured mobile homes. The specifics depend on the type of loan, lender, and the amount of money you borrow. In general, they can be divided as follows:
- You get an opportunity to purchase a quality home.
- You may not need to make a huge down payment.
- You may be eligible even if your credit score isn’t perfect.
- You may get a lower interest rate if you buy a manufactured home to place on a land you already own.
- You get a lot of flexibility when it comes to loan terms.
- Manufactured homes must meet some very specific requirements to be eligible for financing.
- You won’t be able to make any significant changes and improvements to the home.
- Finding a lender is harder.
- Interest rates are usually higher for manufactured home loans.
- Limited financing options result in less favorable terms for the home buyer.
Eligibility of Loans for Manufactured (Mobile) Homes
Eligibility requirements for borrowers are similar to those buying regular properties, but in this case, the manufactured home itself must meet specific standards.
Requirements for borrowers:
- Being over 18 years of age
- Being a US citizen
- Having an adequate income to make regular payments on the loan and pay for other personal expenses
- Having the funds to make the required down payment
- Having a site to place the manufactured home
- Intending to use the manufactured home as your primary residence
Requirements for manufactured homes:
- The home has to be built after June 15, 1976.
- Each section of the home must feature the red HUD label.
- The home must meet the Model Manufactured Home Installation Standards.
- The home must be installed on an approved site that meets local suitability standards as well as the specific requirements of the lender.
Note that manufactured homes can be placed on a leased lot and still be eligible for financing. However, in this case, the lessor must:
- Provide the homeowner with a lease that features a 3-year initial term.
- A guarantee to provide the homeowner a 180-day notice of lease termination.
How to Apply for Loans for Manufactured (Mobile) Homes
Documents you will need when applying for a mobile home loan:
- Personal identification
- Proof of income
Payslips from the last 3 months at the least, tax returns for the last year, bank statements and records to prove any other type of income,
- List of savings and assets
- Credit report
- Loan statements from the last 3 months
- Personal insurance documents
Many lenders offer online application forms you can fill out at any time. The exact list of documents is provided by the lender. The process of approval may take up to several days depending on the type of the loan you apply for.
FAQs of Loans for Manufactured (Mobile) Homes
Can I get a manufactured home loan with bad credit?
Some lenders may provide you with a loan even if your credit isn’t the best, though you will get higher interest rates and some other limitations.
What if my manufactured home doesn’t meet the FHA Title I and Title II requirements?
You might be able to find some private financing options. In this case, you will most likely need to discuss the house eligibility terms with the lender and have it inspected by a certified professional.