How to Finance a Modular Home

Though less expensive than stick-built homes, most people will still need to finance a modular home. There is a bit more risk involved in buying a modular home than in purchasing an existing home, so lenders typically loan the money in stages. This is made easier by financing from a modular dealer or through a construction to permanent loan from the bank. Both types of loans require the same general steps.

Instructions

1. Talk to the lender about preapproving the loan. Before you decide on building a modular home, you need to be sure you can pay for it. Preapproval will tell you how much you can afford each month. Typically, lenders do not lend more than 30 percent of your monthly income.

2. Choose a modular home in your price range. If you'll be building the home on your own land, be sure to factor in the cost of the land. Some modular dealers also allow you to build on their land. If you choose this, you'll have to pay rent on the land, but you will not have to pay property taxes on the land.

3. Prepare a down payment. Lenders want to be sure they can recoup the cost of the loan if you happen to default. Because of this, most lenders are unwilling to lend you 100 percent of the value of the modular home. The preferred rate of down payment is 20 percent, but if you can't afford that, you'll have to purchase additional insurance to cover potential losses to the lender.

4. File an application with the lender. To do this, you'll have to provide identification information such as your social security number. You'll also need to show proof of income, so the lender can assess your ability to repay the loan.

5. Sign the paperwork. Once you are approved for the loan, you'll have to finalize the paperwork and make your down payment. Be sure to read all the fine print to avoid surprise costs, and if you are unsure of anything, have an attorney look into it.

Tips & Warnings

• Apply to different lenders so you can compare interest rates. Even a small difference in the interest rate can result in big savings.

References

• The Home Store: Modular Home Cost and Financing
• Housing and Urban Development: HUD Financing Manufactured (Modular) Homes