A manufactured home purchase is a big decision. That’s why we believe it’s always best to 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, so researching ahead of time will help you secure a manufactured home financing plan that 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. Consider the following questions:
- 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. For a manufactured home, the loans you’ll likely be exploring fall under three main categories: traditional mortgage, FHA or special programs. Also, know that manufactured home loans come in two basic types —fixed and adjustable. The interest rate type you choose will affect whether your rate changes, when, and how much money you’re investing into interest over the full life of the loan.
Shop Around to Find Programs You May Qualify For
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 that may prove a better fit if you meet the eligibility requirements. Determine if you are dealing with a lender or a broker. Brokers are usually paid a fee for their services, separately from other lender fees.
Many lenders provide conventional and government-insured financing programs, some of which are specifically designed for the purchase of a manufactured home. Some options include government-insured loans offered by the Federal Housing Administration (FHA), the Veterans Administration (VA) and the Rural Housing Services (RHS) 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, and can be a valuable resource as needed.
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 homeowner, 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 (in this case, the manufactured home that qualifies as personal property would be 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.
How Are Manufactured Home Constructions Regulated?
Manufactured homes are constructed according to federal regulations administered by the Housing and Urban Development (HUD), Office of Manufactured Housing (MHS). 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 of a loan.