Mobile home loans - How to qualify and what are the options?

If you're looking for a relatively less costly housing option than a traditional home, then a mobile/manufactured home may be the right choice for you. These homes are built first in factories and then taken to the site, where it may or may not be given a permanent foundation. Though a mobile home may look like a traditional home but it is comparatively little difficult to finance this type of home than to finance a traditional one. With little more effort, however, you can find out a mobile home financing option too. If you want to know about mobile home loans, check out the following topics:

Mobile home loans or manufactured home loans can be classified into different categories depending on various matters like- land ownership, lending authority, home buyer's financial situation and other factors.

On the basis of land ownership:



• Mobile home mortgage loan: If the home has a permanent foundation, you can take out a mortgage loan for buying both the land and home, or either the land or home. The loan covers the sale price of your home as long as it is close to the appraised value of the home. You will also have to pay down a percentage of the purchase price at closing.
  
  You can approach local banks, lenders, mortgage companies, brokers, and credit unions for loans to purchase or refinance your mobile home. When you apply, the lender will ask for credit report fee, loan application fee, loan doc preparation fee, origination fees, etc. Get a good faith estimate from the lender to get an idea of the costs involved. Also, know how to qualify and what options are available.


• Personal Property loan: This is meant for purchase of homes on a rented lot in mobile home parks. A personal property loan is offered by retailers who sell mobile homes.
  
  In order to qualify, you need to put down 10% of purchase price for 10-30 year loans. The interest rate will be 2-3% higher than a mortgage, whether it's fixed or adjustable. If you are looking to refinance, and have a high debt to credit ratio, you may be able to obtain money to make improvements to your home. For improvements on an already owned mobile home, you can go for the Title I loan, but the limit should be within $7500 to be treated as personal property loan.



On the basis of lending authority:



• Federal programs: FHA approved lenders offer Title I loans for the purchase and refinance of manufactured homes for a loan term of 20-25 years at a fixed rate of interest. They also offer Title II mortgage loans on manufactured homes. The maximum loan limit for homes located on land you own is $175,000.
  
  Besides, the Veteran's Administration (VA) guarantees manufactured home loans for veterans. However, the loans are offered by VA approved private lenders. With this kind of loan, you can borrow up to 95% of the purchase price. There is also the United States Department of Agriculture (USDA) Rural Development program that offers 30 year manufactured home loans for home purchase and repair.
  
  The above programs are specially meant for first time buyers who can make a down payment and qualify for lower interest rates.


• State programs: State Housing Finance Authorities/Housing Agencies offer mobile home loans to first time buyers at rates comparatively lower than those offered by private lenders. For instance, lenders approved by the Maine Housing Authority offer a First Home Program. The Connecticut State Housing Finance Authority also offers a program for first time mobile home buyers.


• Conventional Loans: These loans are offered by private lenders, and banks, with conforming as well as jumbo loan packages ranging from 15-30 year Fixed Rate loans, 3-2-1 Buy down loans, to 6 month-1 year ARMs, and Hybrid ARMs (3/1, 5/1 and 7/1 year loans). There are amortized as well as interest-only options available. Learn more about these popular loan programs.



On the bais of home buyer's financial situation:



• Bad Credit Mobile home loans: These are sub-prime loans offered to those having a "B", "C" or "D" credit rating due to late payments, loan defaults, bankruptcy, or foreclosure. Bad credit mobile home loans can be Fixed Rate Mortgages (FRMs) as well as Adjustable Rate Mortgages (ARMs), but the interest rates and costs associated with these loans are usually high. However, due to the recent crash in the sub-prime lending market, these loans are hard to find. So, if you cannot afford higher payments, repair your credit with our Credit Repair tool.
  
  You can also request a no-obligation free mortgage quote from a lender who will help you improve your credit before they provide you with a loan. Most of the time these lenders will offer credit assistance for free.


• Low down payment mobile home loans: Low down payment loans on mobile homes will require you to pay private mortgage insurance to protect the lender if you default. Whether you'll get a low down payment loan will depend on 3 factors :
  • The lender's policies for down payments.
  • Your ability to make mobile home mortgage payments.
  • Your creditworthiness.
  However, a gift from family or friends can help you make the down payment.


• No income/No asset verification loans: If you're self-employed and unable to verify your income or assets, then this is the right choice for you. Here again, the interest rate and costs are higher because of the perceived higher credit risk to the lender. These are also known as NINA loans.


• Mobile home land loans: These are loans designed to help you purchase land for your mobile home to rest on. This type of mortgage is typically secured on the purchased land or mobile home park lot, so you will be paying two separate mortgages with separate collateral.



On the basis of other factors:



• Construction loans: These are short term loans designed to help you build a mobile home on property you have already purchased. Short term, high interest construction loans may also be available to help you make improvements on your home or property.


• Home improvement loans: This type of loan is designed to help you make improvements to your mobile home. An example of this type of loan is a Title 1 Home Improvement loan insured by the FHA. Some states offer special loan programs in addition to the Federal government's tax deduction for certain energy efficient improvements.
In addition to the options stated above, there are also mobile home refinance and equity loans available from specific lenders. All you need to do is decide why you want to take out the loan and choose the one that is right for you.

Mobiles homes built prior to 1976 rarely qualify for mortgage because lenders are concerned about the life expectancy and quick depreciation compared to that of a traditional site-built house. A manufactured home must follow the building standards proposed by Department of Housing and Urban Development (HUD) under the Federal National Manufactured Housing Construction and Safety Standards Act of 1974.

1. The HUD code requirements:
   
   • The houses must be built as one, two, or three section homes in a protected building center and then transported on a frame to the site. The wheels and axles must be removed and the mobile home must be fixed to the ground to give it a permanent foundation. As per HUD rules, you need to record form 433(A) which implies that the home is changed from personal to real property due to it's permanent foundation.
   • The home should comply with HUD code restrictions for construction, design, durability, strength, fire resistance, energy efficiency, transportability, and quality.
   • The property should maintain the high standards for heating, plumbing, air conditioning, and thermal systems.
   • The property must pass through strict inspections conducted by a third party.
2. Ownership Rights:
   The property must be free of any liens unless the lot is managed by cooperative association.


3. Purpose of the loan:
   
   • The loan must be taken in order to purchase or refinance only a manufactured home with the lot/land being owned by the borrower, the home and the lot on which it is situated, or only the lot on which the mobile home (already owned by the borrower) will be installed.
   • The home must be the principal residence of the borrower.
   • For a lot loan, the mobile home must be placed on the lot and must have been the principal residence within the last 6 months after the date of the loan.
   • If the loan is meant for a home in a mobile home park, then the lease on the home should extend for at least 5 years beyond the loan term.
4. Credit Score:
   Borrowers must have a minimum credit score of 680 and above in order to get an affordable interest rate. However, you can try for loans that are not score driven but even these loans (for example: FHA loans) require you to have a minimum credit score of 580 and you should be able to make a down payment of 3.5% of the home price.


5. Down payment:
   Lenders expect you to put down 5-10% of the purchase price on a newly built home for a loan term of 15-30 years depending upon your credit profile, the price of the home and the type of loan. For a pre-owned home, the down payment is the same but loans are available for 20 years depending upon the factors stated above.

If the loan is a mortgage, secured by the mobile home that is your primary residence, then the Federal government will allow you to deduct the interest and property taxes you pay from your income taxes, provided you have purchased the home before September of the tax year. In addition, some states allow you to deduct your property taxes from your state income taxes, provided the Federal timing requirement has been met.

Some states, like Indiana, may permit you to deduct all or part of the rent you pay for the lot your mobile home rests on. In order to determine whether your state will permit you to deduct the lot rent, you should consult a tax professional in your state.