Do You Have To Own Your Land When Buying A Mobile Home
When you purchase a mobile home, it is not necessary to own the land, but it will open up more loan options for you.
Mobile homes are sometimes located in a mobile home park where the park owner holds title to the land and you lease it. In these cases, the homeowner leases a plot of land but owns the mobile home itself. Many lenders will require you to sign a three-year lease minimum for the land before they will lend on the mobile home.
Alternatively, owners of mobile homes can place mobile homes on land they own or land they are buying in conjunction with the mobile home. When you own the land and the home, your loan rates and terms will be better, and youll have more lending options.
Todays Mortgage Rates On Manufactured Mobile And Modular Home Loans Makes Refinancing Very Attractive
Fortunately, you can make a big difference in your monthly payments by doing a mortgage refinance on a modular or manufactured home. Many owners of these types of homes will often do personal property loans or chattel loans when they first buy them. This will have a much higher interest rate. Some manufactured home owners can often refinance their chattel loan into a regular mortgage, which will reduce their monthly costs. In some instances, the rates for mobile home refinancing can be slighter higher than the rates offered on manufactured or modular housing. Did you know that millions of homeowners have refinanced a manufacture home loan over the last decade?
Private Lenders For Mobile Homes
Using a private lender for mobile home mortgages is common due to the many factors in qualifying under the bank rules. Generally Home Equity Mortgages on Mobile Homes will want to consider the following:
- Is the mobile 20 years old or newer or substantially renovated?
- The maximum LTV Loan to Value for mobiles in a park, lease or native lease is 65% meaning you will have to have 35% down.
- Mobiles on their own land can qualify up to 75% loan to value. Some locations can be factors.
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Refinance Your Mobile Home Loan
As a mobile home owner, you pay interest and build equity just as a traditional mortgage borrower does. Even if your mobile home isn’t financed with a mortgage, you can still use a refinance to move closer to your financial goals.
If you own a mobile home and aspire to a greater level of financial wellbeing, a mobile home refinancing loan may be the right vehicle for you. Particularly if you’ve had it for several years, you may find that you can reduce your interest rate and save money, and perhaps pay your loan off a bit faster as well.
Some mobile homes are financed with mortgages, but most are financed by personal property loans, or chattel loans. Relative to mortgages, personal property loans are usually more expensive and have shorter maturities. Mortgages are typically reserved for mobile homes that are permanently attached to the land and where the owner has title to the land as well, rather than leasing the lot. In those cases, both the home and land secure the loan.
Regardless of whether your existing loan is a mortgage or personal property loan, refinancing can be used as a wealth-building strategy. This is because personal property loans and mortgages are both governed by the same general principles:
Options For Refinancing Mobile Homes
We offer a wide variety of mortgage programs that can be used for refinancing mobile homes or to refinance a manufactured home.
- Conventional Fixed Rate Mortgages offer the consistency of monthly payments and long-term financial stability when refinancing mobile homes.
- Adjustable Rate Mortgages offer a low initial monthly rate, after which the interest rate is adjusted on an annual basis as the mortgage markets fluctuate up and down.
- FHA Loans are backed by the Federal Housing Administration and offer low down payment mortgage options as well as low interest rates.
- VA Loans are backed by the Department of Veterans Affairs and provide up to 100% financing for veterans, active duty military personnel and surviving spouses.
- USDA Rural Housing Loans are backed by the US Department of Agriculture and are available for refinancing mobile homes in certain rural areas and under-developed parts of the country.
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Home Equity Loan Options For Mobile Homes
Purchasing a mobile home is one method to enter the housing market in an affordable way. Mobile homes are far less expensive than stand-alone single-family homes, and because they are manufactured to be moved, mobile homes are often treated as personal property instead of real estate.
This designation keeps property taxes relatively low and saves homeowners on insurance over the long term. While the fluidity of a mobile home is appealing to some, it creates a challenge in home financing, even for the most qualified borrowers.
What Is Home Equity
Home equity is the difference between the value of your home and how much you owe on your mortgage.
For example, if your home is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 in home equity.
Your home equity goes up in two ways:
- as you pay down your mortgage
- if the value of your home increases
Be aware that you could lose your home if youre unable to repay a home equity loan.
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What Is A Mortgage Refinance
Refinancing your mortgage means applying for a new mortgage to replace the current mortgage on your property. In many cases, homeowners refinance because they can secure a lower interest rate or lower monthly payments with a new loan. That can end up saving you thousands of dollars over the term of your mortgage or make it easier to balance your finances.
You can also borrow cash at the same time as you refinance your mortgage using a cash-out refinance. With this type of loan, you borrow more than the value of your existing mortgage and keep the extra money as cash. You can use the funds for a home improvement project, to pay off other debt, or for anything else you need money for.
Can A Mobile Home Be Refinanced
Mobiles homes today are more properly called manufactured homes. Regardless of what they’re called, mobile homes can provide a lot of home for relatively little money, with many featuring truly luxurious interiors and good-looking exteriors. Many mobile homes aren’t permanently affixed to a foundation, though, so they’re generally financed as personal property, not real property as with a traditionally-built house. Refinancing one sometimes presents a few issues, but none that are insurmountable.
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How Big A Difference In Interest Rates
In 2012, almost 70% of all manufactured and mobile home purchases were thought to be higher priced loans. Many of these were actually chattel loans, according to the CFPB. Interest rates on these types of personal loans are from 7-12%, so this is a very expensive way to own a home. Most of the loans are for 10 to 20 years. On the other hand, most 30-year mortgage loans as of 2016 can be had for less than 4% interest. Most chattel loans have interest rates that are entirely risk based and are based only on the credit of the borrower. That is why they are much higher an interest rate. Chattel loans are still the ones that are usually used for many of these homes because most mobile homes are not set on a permanent foundation. To refinance a manufactured home you need to meet the requirements outlined by lenders and banks. In most cases mobile home refinancing is available at a competitive interest rate. In 2020, mobile home refinancing is typically more difficult to find, as most lenders and brokers are sticking to manufactured and modular home refinance programs.
Land Lease Communities And Financing
Buyers are often attracted to manufactured homes in land lease communities for a variety of reasons. Indeed, factors like less yard maintenance, more personal space than an apartment, ownership benefits such as decorating choices vs limited options when you rent, location, community amenities, and enhanced security in a gated community can all be attractive and excellent reasons to consider a land lease community.
In terms of finance, some buyers also perceive the lower home price as an easier way to get into the housing market relative to the financing requirements for a traditional home on an owned-lot. This will be true as it relates to the required down payment. However, keep in mind that, in addition to the monthly loan payment on the home, you will also have a monthly lot rent payment to the park management perhaps in the order of $400-$500/month or more. Similar to a condo-fee or a home-owner-association fee, lenders will combine the loan and lot rent payments to calculate what you can afford for a loan approval. So in terms of affordability, a lender will view a $600/mo home loan payment plus a $400 lot rent payment as essentially equivalent to a $1000/mo mortgage payment on a house, as an example, so you might want to compare the two options.
As licensed professional mortgage brokers, we know exactly what it takes to qualify you for a mortgage and we do more than just get you a great mortgage at a great rate, we will show you the way, too.
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Mobile Home Loan Options
Eligible mobile homes can be refinanced with a variety of home mortgage programs.
Assuming the home is permanently affixed to land that you own, and meets property requirements, you may be able to refinance using any of these major loan programs:
Conventional loans
Backed by Fannie Mae and Freddie Mac, conventional loans are best for borrowers with at least a 620 credit score.
Homeowners typically need at 5% equity in the home for a conventional refinance.
Fixedrate mortgages and adjustablerate mortgages are both available, as well as cashout and limited cashout refinancing in some cases. Loan terms may be as long as 30 years.
VA loans
These loans backed by the U.S. Department of Veterans Affairs offer ultralow interest rates for Veterans and service members.
To qualify for a VA manufactured home loan, you typically need a credit score of 620 or higher, and theres a maximum loan term of 25 years.
FHA loans
Manufactured homes that meet HUD guidelines can be refinanced via the FHA loan program.
The Federal Housing Administration, which insures these loans, requires a credit score of 580 or higher and allows loan terms of up to 2025 years for mobile/manufactured homes.
USDA loans
Mobile/manufactured homes may be eligible for financing backed by the U.S. Department of Agriculture. USDA loans are only available in designated rural areas and the home must be less than one year old.
FHA option for mobile homes on rented land
To qualify, you must:
Modular Vs Manufactured: Which Is Right For You
As you can see, the choice between buying a manufactured home and a modular home leaves you with much to consider. While modular homes are almost the exact same as site-built homes, manufactured homes are very different from both. This applies to their construction, mobility, financing, and even the laws that regulate where they can be located.
If youre buying a house, make sure you do your homework to determine whether a modular home, manufactured home or site-built home is best for you.
Already done with your homework? Start the mortgage application process.
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Permanently Affixing A Mobile Home
Permanently affixing a mobile home to a Federal Housing Administration-approved foundation may qualify it for real property classification and an actual mortgage loan. Mortgage loan refinancing for eligible homes is usually several interest rate points lower compared to mobile home refinancing. The cost to permanently affix a mobile or manufactured home to a concrete or other FHA-approved foundation varies. One company, Home Tech Foundation Systems, Inc., quotes a base price of $800 to $2,000 to permanently affix mobile homes to foundations.
References
What Credit Score Is Needed To Finance A Mobile Home
The higher your credit score, the easier it will be to qualify for a mobile home loan with competitive interest rates.
FHA will finance with a 500 to 589 credit score and 10 percent down, Sexton says. Credit scores with 580 or above will only be required to have a deposit of 3.5 percent. The minimum credit score with Freddie Mac or Fannie Mae is 620. Various chattel loan providers will require a credit score of as little as 575 credit score or as high as a 660.
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Borrowing On Leased Land
Under some circumstances, owners of manufactured homes leasing a lot at a mobile home community can get mortgages even if they dont own the land beneath their feet.
The Federal Housing Administration offers a program known as Title I, designed for owners whose mobile homes are on a permanent foundation but are within a manufactured housing community.
Among the requirements for a Title 1 mortgage:
- The mobile home must be the borrowers primary residence.
- The home has to be on a rental site in a manufactured home park that conforms to FHA guidelines.
- The lease agreement must meet FHA standards.
Its not easy to find mobile home communities that meet the FHAs strict guidelines, says Rishel, whose company makes chattel loans in land-lease communities. Not many landlords participate on the Title I program.
Few lenders offer Title I mortgages. One is 21st Mortgage, which is owned by Clayton Homes, one of the nations largest manufacturers of mobile homes.
What Types Of Financing Are Available For Mobile Homes
Manufactured or prefabricated homes are considered either personal or real property the distinction determines what type of loan youre eligible for:
Personal property. If your home is designed for the road or sits on rented land, it may be considered personal property, which means youll need a personal loan or similar financing options to pay for it.
Real property. If your home is designed for a solid foundation or sits on land you own, its likely considered real property, making it eligible for a mortgage.
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Personal Property Loan Refinance Vs Mortgage Refinance
Personal property loans aren’t as heavily regulated as mortgages, so lenders have more leeway to adjust rates, terms and fees. Since programs can vary greatly from lender to lender, comparison shopping is a vital step in the process.
Keep in mind that mobile homes do not hold their value as well as fixed homes do. This affects a lender’s willingness to refinance the mobile home, as well as your ability to build equity.
It may be difficult to refinance an older home, just as it’s difficult to build equity in an asset that’s declining in value. Many lenders will not refinance any mobile home older than a certain age, though it varies from lender to lender – for some, it might be 20 years, for others, it might be 30, 40 or more. You’ll want to shop around.
Lenders often have certain minimum amounts that they’ll refinance, and these vary based on whether you’re refinancing just the unit itself or the unit and the land it’s attached to. So if your loan is mostly paid off, you may have difficulty finding a lender who’ll refinance you.
Also, be aware that just because a lender offers loans to purchase a manufactured home, that doesn’t mean they’ll refinance those loans. Many will only handle purchase loans. But if you’re turned down, that doesn’t mean you can’t refinance, it may just mean you haven’t found the right lender yet. Often, it will be a smaller lender who’ll take on these types of refinances, so don’t fret if the big banks refuse you.
Submit Your Loan Application
Youll want to ensure that your application is as complete and transparent as possible. In addition, many lenders require a down payment, so be prepared to make a payment when you complete your application.
Why its important: Being able to submit a complete application will improve your odds of qualifying and keep the process running smoothly.
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Using A Va Streamline Loan
Some lenders will allow you to use a VA streamline loan on mobile home financing, which can help to lower interest rates with few to no out-of-pocket expenses on your end. The home would need to have a VA loan on it currently, the specifics of which your preferred lender must find acceptable. Check with your lender whether they allow this type of loan, and see our VA streamline refinance page to learn about general qualifications.
Fannie Mae Offering 30
According to the National Mortgage News, Fannie Mae announced a new product offering 30-year mortgage financing for manufactured homes in New Hampshire. If this test goes well, we can expect Fannie to extend the program to the other 49 states as well. Fannie Mae has a long history of backing modular and manufactured home loans with affordable interest rates and terms.
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Where To Get Loans For Manufactured And Modular Houses
There are several options to get loans for manufactured and mobile homes. As with any home loan, it pays to shop around. You should compare features, interest rates, closing costs and fees of every loan you look at. Especially with a mobile home loan, the type of loan you get is important.
The first place to get a loan for a manufactured home is the retailer or builder that built the home. In some situations, your builders relationships could be the best option to get funding when buying one of these homes. But you should still ask your build for several other lenders that could offer you a loan.
Another type is a specialized lender that offers loans for mobile and manufactured homes. Specialized lenders are more knowledgeable with the many aspects of a manufactured home purchase. They may be more willing to take applications for these loans. You will probably need to work with a lender that is concentrated on the manufactured home market exclusively in these situations:
- You do not own the land.
- You are not permanently attaching the home to a foundation.
- You are buying a home that is not new.
- You want to do a refinance of current manufactured home debt.
Another option is a regular mortgage lender, if you are buying a home and the land on which it resides, and the home is on a permanent foundation. Many local credit unions, banks and mortgage brokers can help you with these loans.
