What to Know when Financing a Manufactured Home

Posted: January 04, 2017 by Jacobsen Homes

A home purchase is a big decision. Do a little homework and follow some simple steps to ensure there are no surprises when the time comes for final signatures. A home is a long-term investment. A little advance research on your options will help you secure a manufactured home finance plan allows for a comfortable monthly expense you can live with. 

Be realistic about what you can afford

Financing a loan means taking a realistic, long term view of monthly income and expenses, your credit score and any current loan commitments. Do you have an adequate down payment? What is the current interest rate? Can you demonstrate a consistent monthly income to cover expenses? When reviewing loan choices, get an understanding of what type of loan you qualify for — traditional mortgage, FHA or special programs. Also, know that manufactured home loans come in two basic types —fixed and adjustable. The interest rate type will affect whether your rate changes, when, and how much interest will actually be paid during the life of the loan.

Shop around and get informed on programs you may be qualified for

For any home buyer, pre-qualifying for a mortgage is always a good idea. If you are looking to purchase a manufactured home, there are a couple of alternatives if you meet the eligibility requirements. Determine if you are dealing with a lender or a broker. Brokers (arrange transactions; “find” lenders) are usually paid a fee for their services, separately from other lender fees.

Many lenders are providing conventional and government-insured financing programs, specifically for purchase of a manufactured home. Some options include government-insured loans offered by the (FHA) Federal Housing Administration, the (VA) Veterans Administration and the (RHS) Rural Housing Services with the U.S.Department of Agriculture. You will find links to these options at portal.hud.gov. The Hud’s Housing Counseling Clearinghouse is also available to make referrals to local housing counseling agencies.

Manufactured Homes Placed on a Leased Lot

Chattel mortgages are frequently used in financing manufactured homes on leased land.  Since the land does not belong to the home owner, the manufactured home is considered “personal property”, thus, it is not eligible for a traditional mortgage but can serve as security for a chattel mortgage. 

In a traditional mortgage the lender may take possession of the property that serves as security if the loan is in default.  With a chattel mortgage, the lender has ownership of the chattel conditionally transferred to him until the loan has been satisfied, at which point the borrower resumes full control and ownership of the chattel (home).

How are manufactured home constructions regulated?

Manufactured homes are constructed according to federal regulations administered by HUD (Housing and Urban Development, MHS Office of Manufactured Housing.)  HUD is authorized to establish the federal standards that govern the design and construction of manufactured homes to assure they meet safety, quality, durability standards, as well as affordability.

Loans are subject to basic government regulation

As you assess your finances and plan for home ownership, expect that any lender that is meeting the government qualified mortgage standard must document and verify your income, employment, assets, debts and credit rating to determine your candidacy to repay a loan. There are many tools available to help you explore your best options and estimate what to expect for the life a loan.

Source: portal.hud.gov, www.consumerfinance.gov