Mobile homes, modular homes, and manufactured homes offer comfortable, affordable housing that is perfect for many people across the country.
Too many, however, assume that loans for these properties come with difficult provisions or harsh terms, such as high interest rates or extremely large downpayment requirements. But this is not the case, and many borrowers will qualify for affordable mobile home lending.
There are a variety of different loan options for these properties, so being informed on your choices is essential. But first, let’s review a few important terms related to mobile home lending…
Mobile, Modular, and Manufactured Homes: Understand the Differences
If you are looking for mobile home lending, it helps to fully understand the different terms for the various types of houses and properties. These terms can be confusing, and they are often used interchangeably, even by people in the real estate and mortgage industry. But they generally mean different things for different purposes…
This is a type of home that is constructed on a chassis, making it easier to transport. These are the “trailer” homes that many are familiar with.
Officially, a mobile home is manufactured home that was constructed before June 1976. Unofficially the term is used to describe a variety of different properties that are the same or similar to manufactured homes.
Modular homes are built in large pieces in a factory-like setting, then assembled at the construction site. They generally hold their value better than mobile and manufactured homes.
Mobile Home Lending: Chattel or Standard Loans?
One of the most important distinctions for these loans is whether it will be “chattel” or a standard loan. Many mobile and manufactured homes are purchased without a specific property, lot, or piece of land, as opposed to a standard home purchase. With a chattel loan, you are securing financing for the home only, not for a specific property. With a standard loan, you are purchasing a home and a piece of land as one. (This is the case with almost all single-family home real estate transactions.)
It’s important to understand that if the home still rests on wheels, it is technically considered a vehicle, so you can’t get a real estate loan. But that’s fine, as there are plenty of financing options available.
This will make a difference in your overall financing options, so understanding what type of loan you need is essential.
Mobile Home Lending: 4 Excellent Options for Your Purchase
It may surprise you to learn that there are multiple options available for mobile home lending, and many are supported by large government institutions like the VA and FHA.
FHA Title I
FHA loans are useful for many borrowers because they usually require a low downpayment and have qualification rules that allow many borrower to use them. For an FHA loan (either Type I or Type II as we will describe below), the manufactured home must have been built after June 16th, 1976, and it must comply with HUD codes, as well as local requirements.
Title I loans are available for loans when you won’t own the property on which the home sits, so technically this is a chattel loan. As an advantage, these usually require a 5% downpayment, but that may vary depending on the lender. One disadvantage is that maximum loan amounts can be lower than Title II.
For an FHA Title I loan, there are a variety of requirements related to the home, the property, and your lease agreement if you won’t own the land. As for the agreement, it will have to comply with FHA regulations, and the installation site must include water and sewer. If the home is new, it must have a one-year warranty, and an approved appraiser from HUD must inspect the lot.
FHA Title II
The loans can be used for the purchase of a manufactured home and property, and they even allow for home built on-site. You can use this loan with a downpayment as low as 3.5%, but you will likely need a higher credit score to qualify. Other advantages include the chance to take advantage of higher limits than a Title I loan, as well as the opportunity to use gift money for your downpayment or fees.
Because these are real estate loans, you have to own the property where the home sits in order to use Title II. This would eliminate the chance to purchase a home in a trailer park where you pay monthly fees to the property owner. The home also has to be permanently fixed to the property.
VA loans are popular for veterans and active service members, allowing our nation’s heroes to purchase high quality housing, often with no downpayment whatsoever. In addition to no money down, there is also the chance to pay no monthly mortgage insurance.
To enjoy the benefits of a VA loan, the house and the property have to be included in the purchase, and the home has to be permanently fixed to the property. It will also have to be a primary residence, so second homes, investment homes, and other secondary purchases are not allowed.
Conventional loans, which meet the guidelines set by Fannie Mae and Freddie Mac, make up a large majority of the overall mortgage industry. They come with generous terms, and virtually all properties and homeowners are eligible for application. (As opposed to VA loans, where you have to be a current or former service member, or a USDA loan, where the property must be in a designated area.)
To qualify for a conventional loan, you’ll need a variety of documents, including pay stubs, tax returns, and possibly bank statements. Each lender will have different downpayment and credit requirements, so you’ll need to speak with your local lending agent for specific details.
High Quality Mobile Home Lending is Available Now
You deserve a top-quality mortgage loan, no matter what type of home you are purchasing. Contact our staff today and discover how we can help with affordable mobile home lending backed by outstanding service and a dedication to fast, convenient mortgages!
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