Mobile Home Loans
The new wave of mobile homes, or manufactured homes as they now call them, is making it possible for more and more people to live the American dream. A mobile or manufactured home is basically a house built entirely at a factory and then transported to the site where it will be inhabited. Manufactured homes are fast becoming a popular and viable alternative to traditional site built homes. The reasons are simple – affordability and speed.
According to statistics on manufactured housing, the cost of construction per square foot for a new manufactured house is between 10% to 35% less than for a similar house built on site (excluding the cost of land). Not only does it cost significantly less, but a brand new house can be set up in as little as 6 to 8 weeks time. And the best part is – with present day technology and manufacturing expertise, you can’t really tell it apart from a conventional site built house.
So what’s the catch?
While manufactured homes are affordable, they are not cheap enough to finance straight out of your own pocket. The cost of such a home can range from $20,000 to well over $100,000 depending on the quality of materials and size. Unfortunately due to the stigma attached to manufactured homes as a modern version of the mobile trailer, lenders have typically viewed them with caution at best. Although manufactured homes of today often look like traditional homes and are built in accordance with safety and quality standards under the US Department of Housing and Urban Development (HUD), they still carry the negative stereotype of being a low quality, cheap form of housing associated with lower income groups. As a result, up until recently, banks have regarded them as high risk collateral and charged significantly higher rates, higher equity and shorter terms than for a conventional mortgage. In other words, taking out a loan for a mobile home was more like taking a personal or car loan and it was close to impossible to obtain a regular home loan to pay for a manufactured house.
Finding the best financing option
The good news is that thanks to new legislations favoring manufactured home owners and heightened quality standards under the HUD code, banks and other lending institutions are now more willing to provide loans for these houses that resemble traditional mortgages. There are a number of alternatives a buyer can opt for to finance his/her home purchase. These include retail installment contracts through dealers and a growing number of banks and lending institutions that offer loans tailored specifically for manufactured homes.
One of the most common forms of financing for a manufactured home is through a retail installment contract offered by most dealers who sell you the house. However, since dealers are only acting as middlemen between you and the lender, they are less likely to get you the best deal. Typically loans through dealers offer rates at least 5% higher than if you were to arrange financing directly, and come with several hidden costs. Dealerships, however, may be a last resort for borrowers whose credit ratings are too low to be entertained by lending institutions.
Banks, Mortgage Companies and Other Lending Institutions
A better option is to negotiate directly with a bank or mortgage company. It must be mentioned, however, that when you talk about a manufactured home loan there are a number of factors to be considered that will have an important bearing on the type and availability of financing. Firstly, you must consider whether you are going to buy or rent the land on which the house will be placed. Secondly, whether or not you will have the house
attached to a permanent foundation. Usually, if a manufactured home is placed on a permanent foundation on its own lot (not in a mobile home park) it will qualify for a conventional mortgage that offers a typical 30 year term, relatively low rate and tax benefits. If you plan to buy the land, you can also save money by combining the loan for the house and the land. Mortgages that cover both the home and land have become popular as they provide banks with better security enabling them to offer lower rates.
While some lending institutions will only finance homes attached to a permanent foundation, there are a number of lenders that are willing to finance manufactured homes on rented land, provided you have a good credit rating. Manufactured homes are also eligible for government insured loans offered by the Federal Housing Administration (FHA), the Veterans Administration (VA) and the Rural Housing Services (RHS), which are options worth looking into.
Where to start
A good place to start for anyone wanting to take out a mobile home loan is to ask people around you – friends, relatives or colleagues, who have successfully obtained financing for their homes. This will give you a fair idea of what’s available in the market and may help you shortlist lenders that are offering good deals. Online loan market places are also becoming increasingly popular and offer a convenient, time-saving and cost-effective way to shop for a loan. An online loan marketplace is basically a website that collects information from potential borrowers and provides it to lenders who, based upon the information you provide, make an initial offer.
Alternatively, you can go to your own bank or local mortgage company and talk to a sales person who specializes in financing mobile homes. Talking to lenders face to face offers you the opportunity to ask questions and obtain advice specific to your situation and locality. Whatever you decide, carefully explore all your options first to avoid landing up in a debt trap. It’s worth taking your time to evaluate what will work best for you in the long run to ensure that you end up happy in your new home.
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