Are you exploring the option of buying and financing a manufactured home? If you are, you’re not alone.
Today, there are more than 10 million such homes here in the United States used both as a primary residence as well as a rental property. Manufactured homes, sometimes referred to as “mobile” homes, are structures that are prebuilt at the factory and then delivered to a manufactured housing dealer. Once you purchase the home, the home is then transported to its permanent site. But are there differences in financing a manufactured home compared to financing a regular “stick-built” property? There are, and if you intend to buy and finance a manufactured home, you’ll need to make sure you have your financing all lined up before you get too much further into the process.
Financing : Manufactured Home vs. Mobile
The concept of a “mobile” home really came into significance in the 1930s as the population in general became more mobile, an entire industry began to blossom. It was relatively common to see a trailer home behind an automobile as Americans traveled throughout the country. This trend began to grow and factories started making larger and more elaborate trailers and soon the concept of a mobile home park was introduced. Instead of towing these homes, they became a primary residence and people lived in them full time.
Later in the 1970s, building standards and manufacturing codes were enacted that essentially changed the way manufactured homes were built and factories followed strict construction techniques. These standards included:
• Design and construction
• Fire resistance
• Energy efficiency
• Minimum standards for electrical, plumbing and HVAC
Today, a mobile home and a manufactured home are generally considered to be one and the same as the structure is built at a factory and then delivered as completed. The buyer then transports the home and securely fastens it to a permanent foundation.
Financing a Manufactured Home
So what do you need to know when exploring financing options? If you buy what is truly a “mobile” home and intend to travel with the unit and explore America, you’ll obtain a simple installment loan, the same type of financing used to buy an automobile. But if the property will be permanently attached to the foundation and will never be moved, you can obtain a government-backed mortgage such as a VA or FHA loan as well as a conventional mortgage underwritten to standards set forth by Fannie Mae and Freddie Mac. With either option, the property must be permanently attached to the foundation. In addition to this permanent attachment, the property cannot be located in a flood zone or been previously moved from an earlier foundation, and must have been built after 1976 when universal construction codes were introduced by the federal government.
The lender will require a specific type of a property appraisal. The appraiser will need to complete a form labeled a Form 1004C, the Manufactured Home Appraisal Report. The property must also meet minimum standards and the appraiser will note the:
• Manufacturer’s name
• Model number or trade name
• Year built
• Serial number
• Certification number
• Foundation inspection
• Value calculated via cost approach as well as comparable sales
• Conformity to the area
The total value of the property must include not just the manufactured unit but any and all improvements made as well as the value of the lot.
Financing the property with a conventional loan is relatively simple yet you may have some difficulty finding a lender that will approve a manufactured housing loan application. We do, and the lending guidelines are relatively simple. Note there are additional qualification guidelines the structure must meet such as minimum square footage of the unit as well as restricting financing to manufactured housing considered at least a double-wide property.
For an owner-occupied property, the maximum loan amount is $424,100 with a minimum down payment of just 5.0% of the purchase price. And if the property is a second or vacation home the minimum down payment is 10.0%. Minimum credit scores are 660. FHA and VA guidelines for manufactured homes are similar to those for any other type of home and the standard lending guidelines apply, including down payment and credit score requirements.
There are indeed financing options available and if you’ve been doing your own research about financing a manufactured home but are getting discouraged, it’s simply because you’ve yet to find a lender that does provide multiple options with experience financing manufactured housing. If this sounds familiar, give us a call and we’ll walk you through the process.
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