Information on Mobile Home Financing

Mobile homes enjoyed both resurgence and an image makeover in the first decade of the 20th century. Gone are many of the crowded trailer parks and springing up in their places are well-planned beautifully landscaped communities of manufactured homes. A new breed of manufactured home buyers are discovering they can live in comfortable homes, in desirable areas, at a far lower cost than that of tradition real estate.

Mobile, Manufactured and Modular Homes

Mobile homes were so named because they are literally mobile. By attaching an axle, tow-bar and wheels, a mobile home can be moved from one location to another with relative ease. Because of their mobility, most states actually title these homes through the Department of Motor Vehicles. Makers of these homes have taken to calling them "manufactured" homes as part of a rebranding effort.

The key distinction for modular homes is the fact that they are not movable. Modular homes are built in sections, in factories and shipped to the owner's land, where they are assembled. They can be placed in almost as many places as stick-built houses. The exception is communities with Homeowner's Associations (HOA).

Financial Reputation

Financial institutions in decades past made poor lending decisions, resulting in an inordinate amount of mobile home loans going into default. This, coupled with the perceived instability of mobile home owners, drove security buyers away from investing in mortgage-backed securities that were tied to mobile homes. Without investors to purchase the loan portfolios, the market dried up. It has since been rebuilt, and mobile home financial securities are no longer taboo.

Dealer Versus Agent

The advantage of buying a manufactured home from a dealer, rather than through a Realtor, is that a dealer will deliver and professionally set up the home. The jury is still out, however, on whether it is wise to finance a manufactured home through a dealer. Some borrowers have encountered "junk fees" that add substantially to the cost of the home. Wherever you finance, review the contract carefully.

Bank Financing

Not all banks offer financing on mobile homes, but increasing numbers are coming on board. Manufactured and modular home loans are guaranteed, or essentially cosigned, by the Veterans Administration (VA) and the Federal Housing Administration (FHA) for those who qualify. These programs reduce the bank's risk, just as they do for stick-built houses.

FHA Guidelines

FHA-backed loans may be used to purchase or refinance manufactured or modular homes and lots, and they allow borrowers to roll closing costs into the loan. Amounts of FHA-backed loans go up to $92,904 for the home and lot, with terms ranging from 15 to 25 years. To qualify, the borrower must plan to live in the home, be able to make the down payment, demonstrate adequate income to make the payments and cover living expenses and arrange for a suitable site for the home. Interest rates typically run 1 to 2 percent higher than loans for stick-built houses, and good credit, or at least a 12-month history of no bad credit, is required.

References

• FHA Loans
• Questions and Answers