Financing Your New Manufactured Home
Purchasing a new manufactured home is probably one of the most important and life changing decisions you will ever make. Financing of that new home is also an important aspect of that decision to purchase. Most first time purchasers are not aware of where it begins or how it works.
First Things First
A number of financial service companies across the country and their branch offices have loan programs for manufactured housing. These institutions include banks, savings and loan associations, credit unions, mortgage companies and commercial finance companies. These companies provide all types of consumer, conventional and government backed financing for manufactured homes.
A high percentage of manufactured home purchasers obtain financing through the retailer from whom they made their purchase. Sellers of manufactured homes obtain financing on behalf of the buyer via a referral or broker relationship with specific lenders.
The amount of required down payment, interest rate, term of loan and amount financed is determined by underwriting guidelines that take into account several factors, such as: credit rating history, income in relation to your indebtedness, length and stability of employment and prior residence longevity.
The terms and type of financing will be determined by the placement location of the new home. Homes located on private property, which is used as additional security on the loan, is a different type of loan than a home placed on property that is not owned by the home purchaser, such as a rental community.
Types of Financing
*Home only loans: These are loans without land being used as additional security. The home is financed on a personal property installment contract. The term of this type of financing is usually 15-20 years. Down payment requirements can range from 15% to 35% or more depending on credit criteria of lender.
*Land-in lieu: This is financing for a manufactured home to be located on private property and included as collateral on the loan. Lenders will allow purchaser to use the land value instead (in-lieu) of the down payment requirement.
*Land/home financing: This is conventional mortgage financing where the manufactured home is placed on land using an approved permanent foundation system and is subject to all conditions, regulations and taxation as real property.
*FHA TITLE 1 financing: FHA lenders use their own funds to make these loans. FHA insures the lender against loss if the borrower defaults. The loan terms on an approved FHA loan is 20 years for a single section home and 25 years on a multi-section home. Down payment requirements and interest rates are much lower than conventional manufactured housing financing.
There are numerous requirements and restrictions on FHA insured loans, including approval of the home, retailer and installation.
Check with your retailer to determine if this type of financing is available for purchasers of their manufactured homes.
If you have a relationship with a local lending institution, such as a bank or credit union, you should contact them and determine if they offer direct loans for a manufactured home purchases. You might be in a better position to negotiate a lower sale price with the retailer if you are successful in obtaining a pre-qualified loan approval from your own lender.
I know this all sounds confusing and cumbersome (also boring), but isn’t finally obtaining the Home of Your Dreams worth the effort?