How To Finance a Manufactured Home

Financing a manufactured home can be just as simple as financing a traditional site-built home. The main difference is the steps it takes to get there. Here are some steps to walk you through the process.

Researching Potential Financing Sources

Do your research on different potential financing sources and find out if they have the resources that you require for financing a manufactured home in your area. Take time to do this because there are some financing sources that don’t allow for manufactured home financing in certain locations. Also, keep in mind that some manufactured home companies are connected to lending sources that are only able to finance homes that have been built by that specific manufacturer.

Make Sure You Receive the Loan You Need

After you find the financial source that you need, make sure that the amount that they are willing to loan you covers the expenses that you planned for. If it doesn’t automatically meet your qualifications, don’t stop there. Lenders are usually willing to work for your business and will work with you to make sure that you are happy and able to work with their company.

Take Action to Obtain the Best Loan

Take a look at your finances and evaluate if the lot that you own is acceptable to the lender. There are a few major factors to consider:

  1. The best loans are usually available to those who are able to provide a large down payment of at least 20%
    Your main goal is to show the lenders that you have enough disposable income beyond being able to afford basic monthly living expenses to demonstrate that you’ll be able to pay for the costs associated with owning a home. To make sure that you are in the best position possible to receive the maximum amount of funding, take steps to systematically save for your down payment.
  2. Make sure that the area you are looking to place or build your manufactured home is acceptable to the lender
    Most lenders follow a strict set of criteria for determining whether a location is a good investment for them to pursue. They may require documentation of certain features such as soil studies and the drainage history of an area. Try to stay away from areas close to highways or other busy areas. Plan for your home to be in a location with convenient access to water, sewer, and electrical services or present a plan stating how you plan to receive these services.
  3. Check on your credit history and credit score
    Make sure that all of your credit information is up to date so you don’t run into any unexpected problems or errors before applying for your loan. Under federal law, you are entitled to one free credit report per year. If you find any errors or mistakes on your report, follow the reporting agencies established guidelines for filing an error claim. Keep in mind that a credit bureau can take 30 days to investigate a claim and plan accordingly.

Work with your lender to figure out the monthly payment for the loan including the property insurance and taxes that you will be able to handle in your budget.

Survey Your Funds for the Down Payment

One of the most crucial steps is to confirm that you have enough money to complete the down payment required to obtain your manufactured home and make a plan to acquire the funds if you don’t have enough. The amount of money required for a down payment will be largely dependent on the lender and if the mortgage is an FHA insured mortgage. FHA insured loans are preferred by most lenders because they protect them in case the borrower defaults on the loan. FHA borrowers will likely put 3.5% down and the amount can reach up to 20% or more if you’re regarded as a credit risk.

Conventional loans may be available for borrowers with a good credit score. People with good credit are usually not expected to put more than 20% down as payment and sometimes even less. The amount of down payment required is curated by considering a person’s credit profile, the location of the area, and how many loans they have defaulted on resulting in their credit risk. These are factors that contribute to down payment requirements varying between lenders.

If you find that you do not have enough money to complete the down payment, work with the lender and request to use borrowed funds if you have a relative or friend willing to loan you the money to cover the difference. Keep in mind that all lenders do not accept borrowed funds so don’t count on them as a guarantee for financing a manufactured home.

Government Loan Programs Available

Government loan programs are a viable option for financing a manufactured home if you qualify. There are two FHA programs available: FHA Title I loans and FHA Title II loans. FHA Title I loans are personal property loans used for financing homes intended for rental sites and FHA Title II loans are real estate loans created for financing home being purchased in conjunction with the land it will be placed on.

According to FHA. com, for a manufactured home to qualify it must meet these standards:

  • Must be built after June 15, 1976
  • Must be permanently fixed to a foundation built to FHA standards
  • Must have a minimum size of 400 square feet
  • Must have a designated or approved lot
  • Each home section must have the HUD Label
  • Must meet the Model Manufactured Home Installation Standards
  • Must be the borrower’s primary residence

Make Sure Your Home Qualifies

Make sure that your manufactured home and where you intend to place it meet the local and lender requirements. The universal loan standards and requirements that must be met are:

  • The property cannot be in a flood zone
  • The home structure cannot have been previously moved
  • The structure must have been built after 1976
  • The home structure must be permanently set on a lot you own

Get Your Records in Order

Keep careful track of your records. Some of the documents that might be requested from you are six months of bank statements, two months of paycheck records, and payments from your utility companies. You will also be required to sign a release allowing the lender to request your income tax transcripts from the IRS.

The process for financing a manufactured home is not as difficult as you may think. Once you get started you might find yourself surprised with how much a lender is willing to help you succeed. Take careful steps to ensure that you are able to move forward quickly and easily with everything that you need to be successful.

Steven Baker