Manufactured Home Financing 101
There are two main ways to finance the purchase of a manufactured home. Conventional mortgages are available to qualified buyers who purchase their manufactured home along with a parcel of land. Chattel loans, or personal property loans, are available for homes located on land the buyer doesn’t own, such as a manufactured home community, or when only the home is being financed and not the land.
Several lenders also offer mortgages and chattel loans for manufactured homes insured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the Rural Housing Services (RHS) under the U.S. Department of Agriculture.
Interest rates for manufactured homes vary from low FHA insured mortgage rates to the higher rates based on the age and size of the home, the amount of the loan, the amount of the down payment, the term of the loan, the site location, and the borrower’s credit.
Even though the interest rate may be higher on a chattel home loan than a conventional mortgage because it is a personal property loan, loan payments are often less than a mortgage for a site-built home loan or than renting a comparable apartment.
When you are ready to buy a manufactured home, the more you have your financial situation in order, the better off you will be. Depending on the type of loan you are eligible for, it is important that you have money saved for the down payment and closing costs. Be sure you understand your credit score, which is a key factor that lending institutions use to determine the terms of your loan.
Before you apply for credit, gather your bank statements, pay stubs, tax returns and other financial records. The more prepared you are, the faster you can get the process under way, know the budget you are working with, and get pre-approved. The best way to determine your budget is to get pre-approved by a lender. This will help you know how much you can afford based on your income and your current financial situation. This also gives you the opportunity to shop around and learn more about the various lending products you may be eligible for — from conventional loans to VA and FHA loans.
Additionally, most banks have a mortgage financing checklist that will likely be applicable to most types of manufactured housing loans to help you through the process.
Write down what you want in a home, in terms of square footage, bedrooms, bathrooms, amenities and location. With your budget in mind, consider what is critical and what is optional for you. Be sure to evaluate all costs of homeownership, including land rent (or purchase), financing charges, insurance, taxes, and maintenance.
