Manufactured Home Loans Explained

Manufactured home loans have been historically hard to get through traditional lending sources. There are a number of factors leading to this problem, but the largest factor is because they are identified as vehicles, rather than residences. As a result, the loans available to purchase the homes differ from traditional mortgages. Today, there are many strategies to overcome this problem.

Background

Mortgages are designed to help finance the purchase of a principal residence. In order for a mortgage to be approved, an inspector will go through a property and ensure it meets basic requirements. These requirements assure the value of the home will be consistent in the long run. Lenders are very concerned with the value of a home because, if you default on the loan, they have only the home to fall back on as an asset.

When purchasing a manufactured home, the style of the home will be critical in determine whether you can qualify for a mortgage. If the manufactured home in question is a mobile home, you may not qualify. Traditional inspections and valuations cannot be applied. Instead, a lender may use a model for a personal loan to finance your home purchase. Personal loans tend to be higher interest loans than mortgages. Therefore, it is best to avoid this scenario. 

Considerations

One way to make your home more of a residence than a piece of property is to make it immobile. When a home is fully grounded and attached to electric and sewage lines it is not considered a true mobile home. Your home will be safer, more secure, and will hold its value better over time. This can lead a mortgage lender to consider a traditional home loan for your property.

Options

If you can't get a traditional mortgage based on your home's current situation, seek out lenders who supply loans for low cost housing. For example, Fannie Mae and Freddie Mac have a national mandate to encourage home loans for low cost residences. You may be able to participate in one of these programs in order to finance your home. This is particularly true if you are a low income individual or are purchasing a manufactured home in a low income development. Research state and local programs as well, and you may find there are a number of low cost home options for individuals purchasing in your neighborhood.

Alternatives

The Federal Housing Administration set up a manufactured home loan program to help counter the challenges facing individuals who purchase these homes. You can apply for a loan guarantee through the FHA. This guarantee is like insurance; the FHA promises to repay the lender if you default. With the addition of an FHA guarantee, you will have a much easier time securing a traditional mortgage from any private lender. You will also benefit from fixed rates, easy refinancing in the future. If you qualify for an FHA manufactured home loan, it is likely the best option for you.

blog comments powered by Disqus