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Mobile Home Financing

Mobile home financing can sometimes be secured partially through federal or state assistance.

Manufactured housing can be located in widely differing locations. [©Jupiter Images, 2010]
©Jupiter Images, 2010
Manufactured housing can be located in widely differing locations.

Mobile Home Financing

Mobile home financing is a unique aspect of the home financing industry. With approximately 19 million people living in mobile homes (also known as manufactured homes) there is a significant need for financing. Mobile home owners generally finance their homes using one of two dominant methods including personal property loans or real property loans. In addition, there are options available through the United States Veterans Administration (VA) and the Federal Housing Administration (FHA). Regardless of which loan a borrower obtains, as with any loan, a main goal is to negotiate a lower interest rate. Fortunately, there are several strategies for obtaining loan interest rates on mobile home financing.

Personal Property Loans

The Manufactured Housing Institute explains that mobile homes are more commonly financed as personal property, while typical site-built homes are financed as real property. Personal property loans cover items that can be taken with the borrower upon moving. Since mobile homes are mobile, they frequently fall into this category. Interest rates on personal property loans tend to run about two to three percent higher than real estate loans. Interest rates vary according to the lenders policies, the borrower's credit and the age of the home. Generally, newer homes are eligible for lower interest rates than older homes.

Real Property Loans

Buyers who own the property on which the mobile home sits will enjoy the option of obtaining a real property loan. Real property loans are for any items that are a part of the land or cannot be removed from the house without damage. These are the types of loans most homebuyers obtain for site-based homes. These loans are accompanied by lower interest rates and lower down payment requirements.

VA Loans

The United States Department of Veterans Affairs guarantees manufactured home loans that are offered to eligible veterans by approved lenders. In order to obtain one of these loans, borrowers must:

  • Provide evidence of a good credit record
  • Have adequate income to make loan payments as well as all other payments and typical expenses
  • Plan to live in the house within a reasonable period of time after closing
  • Be an eligible veteran
  • Be obtaining the loan for an eligible purpose

Veterans seeking to borrow money using this program may borrow up to 95 percent of the purchase price of the home. Loan terms vary from 15 years and 32 days for a lot loan, to 20 years and 32 days for a singlewide unit. Interest rates vary according to market fluctuation. Before applying for this loan, eligible veterans should obtain a Certificate of Eligibility.

FHA Loans

The Federal Housing Administration (FHA), a division of the United States Department of Housing and Urban Development backs financing for manufactured homes under the Title 1 Program. Through this program, borrowers attain loans from approved lenders. While the FHA insures the lender against default by the borrower, the FHA does not finance these loans. All money comes directly from the approved lender. Interest rates on these loans are fixed and are determined by the current market rate. Maximum loan amounts, which vary according to the situation include:

  • $48,600 for a stand-alone manufactured home
  • $16,200 for a manufactured home lot
  • $64,800 for a manufactured home and the lot

Loan terms range from 15 to 25 years. All manufactured homes financed through the Title 1 Program must comply with National Manufactured Home Construction and Safety Standards and must carry a one-year warranty if the home is new. In addition, homes must be placed on a site that meets local standards and has facilities, including water and sewage.

Borrowers seeking a loan through the Title 1 Program must meet certain standards of eligibility. Specifically, they must have enough money to make a five percent down payment and they must provide evidence of an income sufficient to make payments on the home and other expenses. In addition, the home must be used as the person's primary residence. Finally, the prospective borrowers must have identified a suitable site for the home.

Lowering the Interest Rate

Since manufactured home loans are considered personal property loans, they are generally accompanied by higher interest rates. Fortunately, there are a few steps that borrowers can take to lower these rates. First, it is in the borrower's best interest to produce a large down payment. Larger down payments are typically associated with lower interest rates. Borrowers may also want to consider lowering the interest rate by offering land as collateral. Finally, as mentioned earlier, the borrower may be able to obtain a lower the rate by purchasing the manufactured home and land in one transaction, similar to purchasing a site built home.

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