Brief Capsules of Popular Financing Options Available for Manufactured Home Purchasers
The following are brief capsules of popular loan types available to manufactured home purchasers. Note: Manufactured home financing program terms, interest rates, conditions, and availability are subject to change from time to time, as well as new programs in the future, beginning with the most recent financing available to purchasers of a new manufactured home, – MH Advantage.
MH Advantage Loans – In 2017-18 Fannie Mae, a Government Sponsored Enterprise (GSE), engaged with manufactured home producers to develop MH Advantage to offer a new affordable housing option. MH Advantage properties are built to meet specific construction, architectural, and energy efficiency specifications, and may include features such as garages, carports, and dormers, giving an appearance that is more similar to traditional site-built homes.
Borrowers obtaining financing on a home that complies with MH Advantage eligibility requirements may benefit from financing flexibilities not available under standard manufactured housing guidelines, including higher LTV (loan-to-value), owner-occupied primary residences, standard mortgage insurance coverage requirements, and reduced loan-level price adjustments. Because MH Advantage must be titled as real property and are factory-built homes, they remain subject to HUD Manufactured Housing requirements and must be permanently affixed to the land.
MH Advantage homes have a sticker placed near the HUD Data Plate at the factory indicating that the home meets the specific construction criteria for MH Advantage. The sales agreement should also indicate that the home is qualified for MH Advantage financing.
Home Only Purchase Loans – Home only (chattel) are personal property loans made for the purchase of a new or pre-owned manufactured home that is not permanently attached to real estate. Home-only loans are also the least complicated, most efficient loans, require less documentation, and are by far the most expedient loan types.
Records indicate that a home-only loan is the preferred choice of manufactured home purchasers with 65% of manufactured home residents who own their home also own the land it is sited on. 76% of borrowers in 2019 who owned their land and took out a loan to buy a manufactured home, financed the purchase with a chattel (home-only) loan. Home-only loans are the most common type of financing for manufactured homes in manufactured home land-lease communities and on private property.
Typically, home-only (chattel) loans require a minimum down payment between 5 to 20 percent of the total purchase price with an interest rate 2 to 5 percent higher than a mortgage loan, with maturity terms usually 15 to 20 years.
Land/Home Purchase Loans – Buying property and a new manufactured home or modular home at the same time offers the buyers some big financing advantages. Because real property is involved, a better loan may be arranged with a conventional mortgage. Land/homebuyers can often save thousands of dollars compared to “home only” chattel loans.
Land-In-lieu Financing – Most manufactured home lenders will offer a hybrid loan that finances the home as a chattel loan with a real estate loan secured by the property where the home is sited.
The most common utilization of land/home financing is wherein the home purchaser refinances the owned land with equity used in lieu of the manufactured home down payment or an outright purchase.
Construction Loans – Conventional mortgage construction financing is available by many of the traditional manufactured home lenders. The process is similar to loans made for site-built homes. A construction loan for a manufactured home is a temporary bridge to a permanent loan which is combined with either an FHA loan or a conventional loan.
The preferred construction loan for most retailers is the one-time close construction loan with the lender scheduling the payment for the manufactured home upon delivery to the site as the first draw, with subsequent pre-scheduled draws as contractors complete each element of the construction.
V.A. (Veterans Administration Loans) – A Veteran’s Administration (V.A.) manufactured home loan can cover 100% of the total costs with zero down payment. The participating lender will require funding to cover all costs of the home loan program. Borrowers must have a minimum 629 credit score to qualify, plus meet the basic criteria of appropriate length and character of military service and have a Certificate of a V.A. Entitlement Eligibility (DD214).
The VA financing program is underutilized as seemingly few conventional lenders offer and/or promote the program. However, military credit unions such as Navy Federal Credit Union and Tinker Air Force Credit Union are excellent sources of financing for veterans. Interest rates are as low as 2%. Paperwork and documentation requirements are less in number and not as complicated as other government-insured/endorsed loans.