Trying to get a loan for a mobile home? You may be surprised to learn there are financing options available for non-single-family residence houses. Here's what you need to know.
The different types of mobile homes
Your property type holds all the cards when it comes to whether or not you'll be able to obtain competitive loan terms. (Your financing will also depend on your credit score, with good ones qualifying you for better rates. You can see where your credit stands by viewing your two free credit scores each month on Credit.com.) For starters, you need to own the land. If you own the structure, but you don't own the land, your options become very limited and pricey.
The classic scenario is you own a unit in a mobile home park where one entity owns land and all of the people who reside in the complex pay a housing obligation called "space rent." Bank lenders consider this scenario to be a more risky type of lending. And most will not dabble in it, though there are a few exceptions.
Other financing scenarios in this space include the purchase of manufactured homes or modular/prefabricated homes.
If you're looking to buy a manufactured home
Manufactured homes are bought at a dealership and moved on a flatbed truck to the final destination and affixed to the earth with a permanent foundation. The key here is that the property was already built in its entirety someplace else, then simply moved and subsequently attached.
Another unique way to identify a manufactured home is by its 433A form -- this is a form filed with the county signifying the property is on a permanent foundation. These properties also have HUD tags, further supporting that the property is indeed, manufactured.
If you are looking for financing for this property type, you should know that your options will be limited when the manufactured home is not yet attached to earth. The lender is much more likely to finance the properties already attached to the land -- meaning the dwelling and land transfer in the sale when buying the home.
Fannie Mae and Freddie Mac do make conventional loans on manufactured homes -- if you can find a lender who will do so. More lenders will finance this type of property with a Federal Housing Administration Insured Loan, as the FHA is much more forgiving in its underwriting standards and the lender has far less buy-back risk (a situation where a new loan goes bad and the originating lender is forced to buy back the bad loan for a steep loss). FHA loans pack in more insurance against lending risk, making the FHA a far more likely financing vehicle for manufactured home transactions.
Here are four unique FHA manufactured home requirements:
- The property cannot be in a flood zone.
- The home structure cannot have been previously moved.
- The structure must have been built after 1976.
- Mortgage insurance and impound account for taxes and insurance apply (no matter what down payment).
If you're looking to buy a modular or prefab home
Modular homes are built on-site at the property with a permanent foundation. These homes do not have HUD tags -- or the strong lending restrictions, generally, that apply to manufactured homes. Financing options for modular homes are similar to single-family home options.
If you are looking purchase one of these unique property types, make sure you are pre-approved upfront and provide your lender all of the details. The tiny details left undisclosed are the ones that cause home transactions to go awry.
Do not assume a unique property type that is anything other than a single-family 1-4 unit home is automatically going to be a slam dunk. Not sure if your property type is unique? It is always a best practice to bring any and all pertinent information to your lender and real estate agent as early in the process as possible.
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