How to Finance a Mobile or Manufactured Home: Your Ultimate Guide

How to Finance a Mobile or Manufactured Home

Purchasing your first mobile or manufactured home can be both an exciting and daunting experience. One of the most common concerns of would-be homeowners is how to finance a mobile home. There are fewer options than getting a loan for a traditional home and this guide is to help you navigate it all.

What You Need to Know About Financing a Manufactured Home

With the housing market getting harder to tap into, many individuals, families, and retirees find it difficult to afford site-built houses. For more affordable alternatives, those looking to buy property are now considering mobile or manufactured homes.

Since these financing models are a little unique, we’ve gathered all there is to know about getting a personal loan for mobile homes, the different banks that finance mobile homes with land, and more.

The Basics of Manufactured Home Finance

It is important to differentiate a manufactured home from a mobile home since this factor plays a major role in how you can avail of financial assistance. Mobile homes are understood to be residences built before June 15, 1976, when the HUD (Department of Housing and Urban Development) safety standards were enacted, while manufactured homes are those built after. Because of this, the latter is said to be more robust, durable, and possible to get a loan for. Mobile homes, on the other hand, are nearly impossible to finance.

With manufactured home loans, you still have the option to choose from a variety of mortgages but these usually come with shorter terms and require larger down payments compared to conventional loans for site-built homes.

Understanding Mobile Home Loan Options

Once you have confirmed if your home was built before or after the HUD code and have figured out the land on which you want to place it, you can choose from one out of the six financing options below:

#1 FHA Loans

FHA Loan

FHA loans are also known as Federal Housing Administration Loans, which are offered through their program in two ways: Title I and Title II.

Title I loans can be used to purchase a new or used manufactured home, refinance a manufactured home purchase, or buy the developed lot where your manufactured home will sit. Moreover, it can also finance the sale of both the lot and the home itself. The terms are so versatile that homeowners are even allowed to utilize Title I loans in altering, repairing, or improving their homes.

The maximum loan amount and terms as of this writing are:

Manufactured home only: $69,678 for 20 years and 32 days

Manufactured home lot only: $23,226 for 15 years and 32 days

Manufactured home and lot: $92,904 for 20 years and 32 days (single-wide) or 25 years and 32 days (multi-unit homes)

Title II loan terms can last up to 30 years with down payments going as low as 3.5%, however, these cannot be used for homes on leased land. This option has more requirements that both the homeowner and the structure should meet to be eligible, such as

  • The homeowner must live in the manufactured home as their primary residence
  • A minimum floor area of 400 square feet
  • Must be designed after the HUD code
  • Must be classified as real estate
  • Must be built on a permanent foundation
  • The loan must finance both the home and land

#2 Fannie Mae

Fannie Mae

Fannie Mae mortgages are for homeowners who are eligible for the MH Advantage program, which includes having to install the home with a driveway and a sidewalk connecting to the said driveway (or detached garage). Moreover, the manufactured home must also check off many construction, design, and energy efficiency standards.

This option comes with a 30-year term and requires a down payment that could be as low as 3%, with interest rates proven to remain lower than most other loan options.

#3 Freddie Mac

Freddie Mac

The Freddie Mac Home Possible program offers conventional financing to manufactured homes for qualified borrowers. One can choose between a fixed-rate mortgage of 15, 20, or 30-year term and either a 7/6 or 10/6 adjustable rate. This option allows you to utilize grant money to cover part of your down payment, which is usually as low as 3%.

#4 VA Loans

VA Loan

The Department of Veteran Affairs insures this loan and it is exclusively available to those within the military community. This can be used to purchase the home itself or finance a mobile home with land you want to put it on. The terms can go up to 25 years and 32 days with up to 100% financing granted so long as you meet local and VA requirements.

#5 Chattel Loans

Chattel Loans

Chattel loans are designed for financing expensive vehicles that go beyond manufactured homes. It can cover planes, boats, farm equipment, and so much more. You don’t necessarily need to own land where your mobile home will be parked, which is why it is fairly popular with those looking to get loans for structures in a mobile home park.

The downside to chattel loans is that they often come with higher interest rates, shorter terms, and higher monthly payments.

#6 Personal Loans

Personal Loan

Personal loans are quite flexible and can be used to purchase almost any personal property, which is why some use them to buy a manufactured home. While personal loans come with interest rates higher than most if not all mortgages, the upside is you don’t have to provide collateral, which makes the application process a lot faster with less paperwork.

The Role of Credit Scores in Financing a Mobile Home

The Role of Credit Scores in Financing a Mobile Home

Whether we want to acknowledge it or not, credit scores play a vital role in a lot of financial moves we need to make – especially when applying for a loan.

A credit score can range from 300 to 850 and is calculated based on your credit history, number of accounts, level of debt, repayments, and more. Lenders can use this number to assess the likelihood of you paying back your loans, which is why the higher your credit score, the more likely you can get financing at better terms.

Minimum Credit Score Requirements for Mobile Home Loans

The minimum credit score requirement can vary depending on the source of your loan. FHA, for instance, will require at least a 500 credit score to avail of a 10% down payment while those with a minimum score of 580 can enjoy a 3.5% down payment.

Freddie Mac and Fannie Mae require a credit score of 620, while many chattel loans only need a score of 575.

Improving Your Credit Score to Secure Better Loan Terms

Improving Your Credit Score to Secure Better Loan Terms

To improve your credit score and earn the trust of the lenders, take the following steps before applying for a loan:

Step 1: Get a copy of your credit report from major national credit bureaus and assess each to see what factors are helping and hurting your score. Once you point these out, do more that keeps your score high and improve on those bringing it down.

Step 2: Manage your bills and avoid late payments as much as possible. You may be able to get a handle on this better by creating a filing system to track them, setting due-date alerts, automating payments from your accounts, or even charging your bills to a credit card (which is only a good idea if you can pay your credit card on time!).

Payment history makes up 35% of your score, so settling bills on time can make a huge difference.

Step 3: Maximize your credit limit ratio by paying your balances in full every month, or at the very least, keep your total outstanding balance at 30% or less of your total credit limit. This not only raises your credit score but also diminishes the amount of interest you need to cover. How positive or negative your credit limit ratio is affected 30% of total score calculations.

Step 4: Limit hard inquiries and requests for new credit, such as applications for new credit cards, mortgages, loans, and the like. Applying for these once in a while is fine and may even be necessary, but having multiple within a short period can hurt your score as this accounts for 10% of the calculations.

Step 5: Maximize a thin credit file to have enough credit history to qualify for a loan. If you have a limited yet positive credit history, you can use Experian Boost or UltraFICO to collect your bank history and other data that is not normally included in your credit reports. Programs like RentTrack or Altro can also report your rental payment to credit bureaus and boost your overall score.

Step 6: Maintain old accounts to boost your age-of-credit percentage, which accounts for 15% of your total score. The older your accounts or average credit age is, the better you appear to lenders since it increases your credit utilization ratio.

Step 7: Consider a debt consolidation loan to pay off all your outstanding debts, which helps you focus on paying back just one loan. This may help you pay off your debt faster, improve your credit utilization ratio, and increase your score. 

Step 8: Finally, track your credit progress by outsourcing free credit monitoring services to stay on top of things.

Choosing the Right Financing Option for Your Mobile or Manufactured Home

Choosing the Right Financing Option for Your Mobile or Manufactured Home

There are now many ways how to finance a mobile home, but not every option is beneficial for your situation. Below is a quick guide on how to determine the right financing choice.

Evaluating Loan Terms and Conditions

The first step is to gather as much information as you can from multiple lending companies, evaluate their different terms, and see if you can qualify for them. Choose the cheapest way to buy a mobile home by opting for lenders that can cover more of the purchase for longer payment terms and lower interest rates. However, since we can’t always have the best of both worlds, you may have to weigh out if you want more coverage for shorter periods or vice versa – the choice is ultimately up to you and your financial status.

Why the Type of Manufactured Home Affects Your Financing Options

The requirements you need to qualify for a loan and the financing options you can choose from can heavily vary based on the lending company you opt for and the type of home you have. 

For instance, some companies offer shorter terms for single-wide homes compared to if you had a multi-unit manufactured home.

Moreover, other companies may not finance single-wide homes at all if they do not meet the minimum square footage required to qualify for a mortgage.

Impact of Interest Rates on Your Mobile Home Loan

The lower your credit score and the longer your payment terms are, the higher you can expect your interest rate to be. Most lending companies only offer lower rates for those with excellent credit scores such as 700 and above. For this reason, those with poor scores can expect to pay more for their mobile home mortgage.

Steps to Buy a Mobile or Manufactured Home with the Right Finance

Steps to Buy a Mobile or Manufactured Home with the Right Finance

If you’ve made it this far into our ultimate guide, we can imagine the amount of information overload you must feel now. To help you get squared away and start seeking finance for your mobile home, we’ve summarized the steps to take into 3 levels:

Preparation: What to Do Before Applying for a Mobile Home Loan

Before applying for a mobile home loan, check your credit reports, evaluate your credit score, and see if you are in good standing to apply for a loan at this time. If not, and you have a few months to spare, you can work on getting your credit score high to better your chances of getting approved for low interest rates.

You should also shop around and gather information from multiple lending companies before making a decision. This can help you maximize your options and choose the right loan source.

Application Process for Financing a Manufactured Home

Once your credit score is stable and you have a lending company in mind, submit a complete and transparent application. You should also prepare your down payment and any fees required to finalize the process.

Finalizing the Deal: Closing on Your Mobile Home Financing

The last step involves a lot of paperwork signing, paying closing costs, and working with multiple entities such as your title company or a notary. Once this is all set, you can have your manufactured home delivered and the keys in your pocket!

FAQs

1. What is the loan term for a mobile home?

The loan term for a mobile home can vary based on the lending company of choice. They can range anywhere between five and 30 years.

2. What is the oldest mobile home that can be financed?

The oldest mobile home eligible for financing is any home constructed after June 15, 1976, when the HUD code was introduced. However, even age-qualified homes must meet certain safety requirements to be considered.

3. How to buy a mobile home with no money down near me?

The best way to buy a mobile home with no money down is through USDA Rural Development Loans, unsecured personal loans, VA loans, or lease options.

4. Who is the best lender for manufactured homes?

The best lender for manufactured homes depends on your type of mobile home, your financial status, and your credit score. The 5 best companies to start looking into are 21st Mortgage, Manufactured Nationwide, ManufacturedHome.Loan, Vanderbilt Mortgage and Finance, and USDA.

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