If you are trying to get a mortgage on your mobile home, you will be surprised to know the various financing options available to you. Mortgages for mobile homes usually come from two agencies: Fannie Mae and Freddie Mac; these agencies write the rules and regulations to conform a mortgage.
You also have other avenues such as FHA loans, and financing from VA and USDA. In addition, personal mobile home loans could work as well.
Mobile homes, also known as manufactured homes, are a more economical way to have your own place. Also, today’s mobile homes can usually be as beautiful and spacious as traditionally built houses, but cost a small fraction of the price.
So, how can you get a mortgage for your mobile home? As you can imagine, the process is not quite the same as for traditional homes. Here is what you should know.
If You Own the Land under the Home
To be eligible for a traditional residential mortgage, a mobile home has to be classed or categorized as ‘real property’; it means you need to purchase the home as well as the land the home sits on.
When you purchase it, they will bring the home to you on wheels; however, after that you need to take off the wheels. It should be fixed to your land. Different lenders have different requirements such as age and square footage. So when you initiate your mortgage pre-qualification process, tell your mortgage broker or lender upfront that you are thinking about manufactured or mobile housing. This way, you will not bark up the wrong lending tree, as many lenders won’t or can’t offer loans on mobile homes at all.
If You Are the Owner of the Home But Land Is On Lease
Another useful option for mobile homes is a convenient loan often known as a “chattel mortgage.” This mortgage is useful when you are considering a “space rent,” or a mobile house in complexes where you are the owner of the home but the land is on lease.
Chattel loans are not structured like conventional mortgages. Typically, loan terms are much shorter, and max out at about twenty years. They also do not require a twenty percent down payment. Many lenders or mortgage brokers could offer you a loan with extremely low down payments such as 5% down; however, keep in mind that the interest rate usually rises following the initial five years and climbs higher and higher the longer you have it.
FHA Loan for a Mobile Home
The Federal Housing Administration often insures mortgages on mobile homes, and a lot of lenders are happy to fund mobile homes provided they have been insured by the FHA. Remember that the FHA will not actually offer you a loan; FHA only provides insurance to the lender that you would repay the loan. So, you still need to find your FHA-approved lender and then carefully negotiate the terms of the loan.
Also, keep in mind that you will need to pay two kinds of mortgage insurance (one for your lender and the other for the FHA) during the entire term of your loan. This will amount to around 1.30% of the loan amount, and would make the loan repayments a little higher than normal.
However, do not worry as there is good news. The FHA, under Title 1, insures 3 kinds of loans for mobile homes:
The Land and the Home
In case you are purchasing both the land and the home, you will get the traditional mortgage that we have talked about in the previous section. However, if you have FHA insurance, it will make lenders or mortgage brokers more willing to offer you a loan. For this kind of purchase FHA will cover a maximum of $94,904.
Only the Home, not the Land
In this case, the FHA would cover your nonchattel loan in a situation called space rent, provided you are able to find a willing lender. For this purchase, the maximum amount allowed is $69,687.
Only the Land, not the Home
In case you already have a home and need a permanent place to put or settle it, the FHA would cover as much as $23,226 of the loan.
Other than qualifying for your loan with the lender and satisfying all the specific standards, to comply with the FHA requirements your mobile home must:
- Be your primary or main residence
- Meet all the Model Manufactured Home Installation Standards
- Have a manufacturer’s warranty of one year if your unit is new
- Be properly installed on the home site which meets all the established local requirements and standards for site suitability
- Have adequate sewage disposal and water supply facilities
- In case it is a space rent, then you should have a lease of at least three years that gives a written notice of 180 days if it is to be terminated
Another important and rather unusual thing about securing a mortgage for a mobile home is the mandatory requirement to get an IBTS letter, also known as HUD Certification Label, apart from the appraisal.
The Institute for Building Technology and Safety (IBTS), is an independent body that coordinates with HUD to ensure that your mobile home is habitable and up to code. So, keep in mind that you would require this label or letter for a lot of things in addition to your loan, such as getting the appraisal, homeowners insurance as well as a number of zoning inspections. The good news is that the process to obtain this letter is very straightforward. You only have to contact IBTS with specific serial numbers and specs, and they will provide you a letter.
Nowadays interest rates are quite low, helping more and more renters become homeowners. Mobile homes are an affordable initial step if you are looking to get into the housing market. So, do not wait and get a rate quote for a home loan today.
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