Financing Options for Mobile Home Buyers

manufacturedhousing.org - August 25, 2006
Financing a mobile home requires a slightly different approach than financing a site-built home. It is surprising how many options are available for the purchase of a mobile home. The most common financing is arranged through the retailer from whom you purchase the home. However, potential homebuyers can choose to work with any lending institution to secure a loan for a mobile home purchase.

Mobile homes are usually financed as personal rather than real property when the home is being sold separately form the land. Manufactured housing lenders also provide programs for the homebuyer who will secure the purchase of their home with land, often called land-home financing.

Personal property loans typically have a higher interest rates (usually 2 to 3 percent) than a real estate mortgage loan. These higher rates reflect the mobile home lender's higher cost of providing these loans compared to the mortgage lender's cost of providing real estate loans. Making a higher down payment or offering land as collateral for the loan may help to secure a lower interest rate, depending on the loan programs which vary by lending institution.

It is possible to purchase a mobile home and the land together as a single real estate transaction, similar to the purchase of a site-built home. Purchasing a mobile home and land with a real estate mortgage loan can also lower the interest rate.

Like a real estate mortgage loan on a conventional site-built home, terms for a loan to purchase a mobile home vary from one lending institution to the next. Most lenders require a minimum down payment of 5 to 10 percent and have loan terms ranging from 15 to 30 years. While these are typical loan terms, different programs are offered by various lenders.

Federal Housing Administration-insured and Department of Veterans' Affairs-guaranteed loans, called FHA and VA loans, also may be available to mobile homebuyers, depending on the lending institution. These types of loans may have lower interest rates or lower down-payment requirements. They require more paperwork during the credit application and approval process; consequently, approval of the loan takes longer.

The high quality construction standards of today's mobile homes have opened up new financing options to potential homebuyers. Traditional lenders have increasingly recognized the quality construction standards of mobile homes and are offering mortgage financing to mobile homebuyers.

Potential homebuyers looking to get a real estate mortgage loan for a mobile home should know that the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac, allow their lenders to pool mobile home real estate loans in with other residential real estate loans. Telling a lender about these programs could help to erase any lingering skepticism about financing options for mobile homes.

Additionally, some land-lease manufactured housing communities now offer leasehold estate financing. These loans have special prerequisites and are rather new. The home in these transactions is often purchased at the site of the community.

Conventional wisdom once said that mobile homes were more difficult to finance. In reality, when these homes are manufactured according to the HUD Code and located on permanent foundations, they can be financed with real estate-type 30-year mortgages, as well as chattel mortgages for homes located in land-lease community settings.

Mobile homes are factory built to stringent specifications and buyers seeking financing are likely to find that many bankers are familiar with the home and understand its value. Some mortgage lenders will offer a lower interest rate for mobile homes that have energy saving features.