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If you’re looking to buy a home, but cannot afford the national median price of $340,000, mobile homes, or manufactured homes, may be the right choice for you. For a fraction of the cost of a conventional home, manufactured homes offer similar creature comforts with more flexibility when compared to regular homes. However, since mobile homes do not fall under the same category as conventional real estate, financing them is also not the same as getting a home loan or mortgage. Let us walk you through six solutions for manufactured home financing.
Know the Difference
Before we get into the details of financing options, let us first begin by defining manufactured homes, and how they differ from mobile and modular homes.
Mobile homes are factory-built homes manufactured before June 15, 1076, which is when the National Manufactured Housing Construction and Safety Standards Act came into effect.
Like manufactured homes, these are also factory-made and then brought to a property to be set up. Setting up a mobile home may or may not utilize metal tie-downs instead of a traditional foundation.
Manufacturers were to adhere to new safety norms on homes built after that date.
Factory-built homes manufactured after June 15th, 1976 are called manufactured homes, according to the Housing Act of 1980. The safety standards while constructing these homes is highly regulated by the HUD under the Manufactured Home Construction and Safety Standards (HUD Code). These homes are also expected to meet local building standards depending on the communities they are going to be installed.
Additionally, manufacturers also have to get their designs approved by the HUD as well as a Design Approval Primary Inspection Agency to ensure the plans are safe and in compliance with the law.
Like mobile homes, manufactured homes are also built in a factory and then taken to the site where they may be installed on blocks, a metal pier, or on a permanent foundation. However, unlike mobile homes, manufactured homes are not meant to be shifted once installed.
Modular homes are similar to mobile homes and manufactured homes in that they are also factory manufactured. However, unlike the other two, these resemble more traditional homes, featuring basements and crawl spaces. They also need a permanent foundation to be installed on.
Modular homes are often shipped in two or more parts that a contractor will then assemble on-site for you, hence the name.
Modular homes also need to conform to the same state, city, or regional zoning codes as regular site-built homes.
Types of manufactured home loans
Before you decide on a type of loan, you need to decide what type of manufactured home you want, whether it’s a single-wide, double-wide, or larger, and what features you want in it. Then, you need to decide where you want to put it. Once these aspects are out of the way, it’s time to look at how you’re going to pay for it.
You do have options to choose from, based on your credit score and other factors. You could try and get a loan from an institution that handles traditional mortgage loans, such as VA loans and FHA loans. Freddie Mac and Fannie Mae offer specialized loans for manufactured homes. These are your best options, considering they will give you competitive rates of interest and a larger time window to repay the loan.
If for some reason, you do not qualify for these loans, all is not lost. You can look at personal loans and chattel loans. While these loans may have higher interest rates and shorter terms, at least you won’t need to wait up to 30 years before the home is entirely yours.
Let us now take a more detailed look at these loans.
These are loans offered by the Department of Housing and Urban Development (HUD) under the Federal Housing Administration loan program specifically for manufactured homes. Broadly, FHA loans come under Title I and Title II loans.
Title I Loans
Title I loans for manufactured homes are loans that can be used to buy a used or new manufactured home or to carry or repairs and renovations on one. You will be expected to pay a down payment, but that may be as low as 5%. You can qualify for a title loan from a lender even if you don’t own the land on which the manufactured home will stand, as long as you can furnish a signed lease for a plot for the mobile home for an initial period of at least 3 years.
The maximum payout for a mobile home loan under this loan type is $68,678. If you’re buying only a mobile home lot, the maximum you can get is $23,226. A home and a lot will get you a maximum of $92,904. A home improvement loan for a manufactured home will get allotted a maximum of $25,000.
The maximum loan term for both a manufactured home as well as a home and a lot is 20 years and 32 days. If you’re buying only the lot, you will get a maximum of 15 years and 32 days. A multi-unit manufactured home plus lot gets a maximum term of 25 years and 32 days.
This loan can be used to purchase a manufactured home and plot as long as it meets certain requirements.
The home must have a floor area of 400 square feet or more and must have been constructed after June 15, 1976. The loan must cover both the land and the home. It is necessary for the home to be built on a permanent chassis, and for it to remain there. Finally, the home must be qualified as real estate, but not necessarily for state taxation purposes.
You can opt for conventional financing to buy your manufactured home through the Freddie Mac Home Possible Mortgage Program. If you qualify, you get two choices: fixed rates mortgages for 15, 20, or 30 years, or 7/1 or 10/1 adjustable-rate mortgages. Your interest rate can be as low as 3%, and in some cases, you may even be allowed to use gift money or grant money to cover your down payment.
Fannie Mae mortgages are offered to buyers interested in manufactured homes through the MH Advantage program. These loans have among the lowest interest rates, and the loan term can be as much as 30 years. To make it more attractive, the down payment is often as low as 3%. However, to qualify, there are several criteria that the home must cover.
For example, the home must meet certain architectural design, energy efficiency, and construction standards, much like site-built homes. It should have a driveway and a sidewalk leading to the driveway. The home should also have a carport or detached garage.
These are loans insured by the Department of Veteran Affairs for those from the military community. If you’re eligible for one of these, you can use the loan to buy a modular or manufactured home to install on land you already own, buy both home and land or refinance a home that you already own and plan to transport to your land.
Like traditional VA loans, you can get 100% financing to buy your home. That means zero down payment. You will need to get an affidavit of affixture, proving that the home is attached to land that you own, and meets VA and local requirements.
If you’re purchasing land for a home you already own, the term is 15 years and 32 days.
A single unit manufactured home and lot gets 20 years and 32 days.
A double-wide home gets 23 years and 32 days.
A double-wide home and land will get you a term of 25 years and 32 days.
This is a type of personal property loan where the property guarantees the loan amount. It is often used to finance expensive automobiles, boats, airplanes, and mobile homes.
You can qualify for a chattel loan even if you don’t own the lot on which the home is, making it a popular choice for those looking at renting a lot in a manufactured home community.
Some lenders offer chattel loans that are insured by the FHA, VA, and Rural Housing Services (RHS) through the US Department of Agriculture.
However, keep in mind that chattel loans tend to have interest rates that are higher by anywhere between 0.5% to 5% in comparison to conventional loans. And while they have shorter terms, they have a much more flexible closing process than a conventional mortgage.
Considering the difference in cost between manufactured homes and on-site homes, a personal loan may be a good way to buy your new home, provided you get a lender willing to give you a big enough loan.
Personal loans are a great choice because there’s no collateral involved, meaning the lender has no control over your home. There are also no costly title fees, no escrow or appraisal fees.
However, the interest rates on personal loans tend to be higher, and the term is relatively much shorter.
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