Almost everyone wants to live in a beautiful, spacious home. Unfortunately, with the cost of land and construction expenses being excessive, the dream of buying a home is unattainable to most individuals. The alternative for most people with a limited budget is to invest in a mobile home.
With less than $100,000, you can stay in a mobile home and have the peace of mind and satisfaction of living your dream. Nevertheless, financing a mobile home is more difficult than financing a standard home loan due to the varying terms and conditions.
Although mobile home loans are not as plentiful as mortgages, you can find several institutions offering loans for mobile homes. Financing a mobile home with land is not as difficult as financing a mobile home in a park, but you will still have to review the available options to get the best offer.
Since it is not every bank or lender that will consider giving a loan for a mobile home, we will help you find the best ways to finance a mobile home with land.
Ways That You Should Consider For Financing A Mobile Home With Land
The best way to finance a mobile home with land will depend on several factors including loan terms, loan amount, requirements, and affordability. Different lenders have unique features that make them best for different people while others have restrictive requirements.
You should shop around to find a lender with competitive products and services. The lender should also accommodate your needs. The available loans that you can use to finance a mobile home with land include:
1. Chattel Loans
Chattel loans are a personal type of property loan that lenders offer individuals interested in mobile homes with or without land. It is the best loan if you do not own the land where the mobile home sits on, but you can also apply for it if you have land. Most mobile homes have a personal property title or a chattel, which makes chattel loans the most common form of financing a mobile home with land.
A chattel loan only finances the home and not the land where the manufactured home sits, making it possible for people with and without land to own homes. It is popular with parks and housing communities where you may not own the land.
Although a chattel loan does not include land cost, it functions as a traditional mortgage. You will have to go through the same process of getting a traditional mortgage. The difference is in the loan term. A chattel loan has a shorter term than a mortgage with most lenders offering 23 or 25 years.
The down payment will vary among lenders, but most institutions require a down payment of five percent. The closing process is also quicker and less restrictive than a traditional mortgage. However, chattel loans tend to have higher interest rates than mortgage loans.
2. FHA Loans
The government through the Federal Housing Administration loan program offers financial assistance to individuals looking to invest in a mobile home. You can use the government-backed programs to finance a manufactured home, a lot, or a combination of the two. The FHA loans do not function as traditional loans. The government does not give money for a mobile home.
Instead, it insures the loan, enticing the lenders to offer loans for manufactured homes. FHA loans come in two categories of FHA Title 1 and Title II loans with varying terms. FHA loans are assumable, allowing buyers to take over the payments.
However, the loans have an upfront premium of 1.75 percent and a monthly fee of .85 percent, divided into 12 monthly installments. You will also need to have a minimum credit score of at least 580 to qualify.
FHA Title I
A Title I home loan can help you finance the purchase of a new or used manufactured home. You can also use the money to alter, repair or improve an existing mobile home. The loan is available to individuals with or without land.
However, individuals will need to provide a signed lease for at least three years if they do not own land. The highlights of an FDA Type I loan include:
- $69,678 for a manufactured home with a 20 years term
- $23,226 for a manufactured home lot with 15 years term
- $92,904 for manufactured home and lot with a 25 years term
- $25,000 for home improvement
FHA Title II Loans
Type II loans are meant for individuals who plan to stay in the manufactured home as the primary residence. Those looking to invest in manufactured homes for rent will not qualify for the loan. The terms of the loan will vary among lenders, but the down payment can be as low as 3.5 percent and the repayment term can take as long as 30 years.
However, the home will need a 400 square feet floor area to qualify. The highlights of an FHA Type II loan include:
- A floor area of at least 400 square feet
- Home constructed after June 15, 1976
- The home must be on a permanent chassis
- The loan must cover land and home
3. Freddie Mac
Financing a mobile home with land is possible through a Freddie Mac mortgage program. The loan program targets individuals interested in conventional financing. Applicants of Freddie Mac loan can secure a loan with a small down payment of about 3 percent.
Borrowers can also use grant or gift money to cover the down payment. The loan is available on fixed terms of 15, 20, and 30 years and 10/1 or 7/1 adjustable-rate mortgages.
4. VA loans
People in the military community can take advantage of the loan by the Department of Veterans Affairs to own a manufactured home. The program targets individuals looking to invest in a modular or manufactured home and place it on their land.
You may also use the loan to purchase a home and land or buy a mobile home you want to transport to the land you own. VA loans can offer 100 percent financing, making it ideal for individuals without savings who want to stay in a manufactured home.
Applicants will need an affidavit of affixture that shows the property is attached to the land you own. The home should also meet local and VA requirements. The loan terms for VA loans include:
- 25 years and 32 days for a land and a double-wide manufactured home loan
- 23 years and 32 days for a double-wide manufactured home
- 20 years and 32 days for a manufactured home loan
- 20 years and 32 days for a single-unit manufactured home and lot
- 15 years and 32 days for a land
5. Personal Loans
Mobile homes are not as expensive as traditional mortgages. It is possible to qualify for a personal loan that is adequate to finance a mobile home. Personal loans are flexible, allowing you to use them for anything, including a manufactured home.
They do not require collateral, which means that you will not lose your home if you default on loan payments. The application process is also shorter and requires less paperwork.
Depending on the lender, you may only need to show proof of income and a disposable income to qualify for a personal loan. A personal loan is further cheaper to acquire as you do not need appraisal fees and other charges that apply in a mortgage.
Tips On How To Obtain A Loan To Finance A Mobile Home
Getting a loan to finance a mobile home with land is not a straightforward process. You will need to meet the requirements for a mortgage to get financing on most occasions. You will also need to look for a lender that meets your needs as different institutions have different terms and conditions.
Some institutions do not fund a mobile home without land while others offer financing to mobile homes on parks. Although every company has its requirements, you will likely get a mobile home loan quicker if you do the following:
1. Review your credit scores
Although it is possible to get a loan with bad credit, most lenders will still look at your credit history. Clean, good credit history will increase your chances of getting loan approval.
Before you apply for a loan, always review your rating and look for wrongful entries that might lower your scores. Lenders give priority to individuals with higher credit scores.
Furthermore, you are likely to get better terms and rates from lenders with a higher credit rating due to reduced risk. A lower rate can help you save a lot of money on a long-term loan like a mortgage.
2. Understand your needs
Do you need to live in a park? Do you have land to place the manufactured home? Should you purchase a lot as part of mobile home financing? Answering these questions will help you determine the loan you should apply for, the amount you need, and the lender.
You should apply for a bigger loan if you need to purchase land and a manufactured home. You should also keep in mind that some lenders will only offer you a mobile home loan if you have land or you intend to include land as part of your purchase with the loan.
3. Understand the different types of mobile homes
The type of a manufactured home you choose will determine the amount of loan you can get. A double-wide or triple-wide mobile home will qualify for a bigger loan than a single-wide home. However, you are likely to qualify for a single-wide home loan with unfavorable terms.
Furthermore, since it is cheaper to purchase a single-wide home, you may opt for a personal loan instead of a special loan. You will also need to understand the difference between a mobile home, a manufactured home, and a modular home.
4. Review Financing Options
Although the loan options are fewer than the traditional mortgages, you will still need to review and understand the available loan options. Different types of mobile home loans have unique requirements that make them ideal for specific situations. For example, VA loans are for those individuals in the military community.
The FHA loans come in two types with each option featuring unique terms and conditions. You cannot get FHA Type II loan if you will not be using the home as your primary residence.
It is also worth noting that the different types of loans have a maximum amount they can offer. They also tend to have varying terms and down payment percentages. You should review the available loan options to find the loan with the competitive rates and terms that suit your needs.
5. Apply for a loan
Once you find the ideal type of mobile loan for your needs, you should follow the application guidelines and submit all the paperwork to get approval. Make sure you understand all the requirements to qualify for a loan, including a down payment, land, and credit scores. Once you get the approval, you should review the interest rate, terms, and duration.
Always remember that even a small difference in interest rate can help you save a lot of money over a 20 years repayment plan. It is also worth noting that personal loans can be very expensive over a longer payment period.
Furthermore, make sure that the lender supports your desired mobile home. Some lenders finance new and used homes while others will only finance homes built after a certain date. The lenders may also not finance mobile homes in different locations or parks without social amenities.
Mobile homes are much more affordable than traditional homes, making them ideal for individuals with smaller budgets. You also do not have to own land to live in a mobile home as some lenders finance mobile homes in parks. Nevertheless, financing a mobile home with land is easier as you will have more options than parks.
The loans are available for new and used homes, allowing you to save money by opting for a cheaper option. It also does not matter whether you want a single-wide, double-wide, or triple-wide as you can easily find a lender financing any type of mobile home.