Applying for a Loan for a Mobile Home
A mobile or manufactured house is an example of a house that is relatively cheaper to buy than other types of homes. Manufactured homes are considerably cheaper than both modular and stick-built homes but offer the size and utility of a stick-built home. The process of obtaining a loan to buy a manufactured home is similar to obtaining a loan to purchase a site-built home, but there are certain nuances that the buyers should be aware of when applying for a mortgage. The following is information concerning the fundamental aspects of obtaining a loan in the purchase of the mobile home.
It is important to know that there are different kinds of loans for mobile homes and below are some of the common ones:
Mobile home loans come in a few main categories:
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Chattel loans – Again, this financing works in the same way as auto financing where the manufactured home is considered as personal property. The home is pledged against the loan but does not have a relationship to the piece of land on which the home is built.
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Real estate loans – These loans regard manufactured houses standing on transportable foundations in the same manner as conventional homes. Buyers are able to obtain better terms the closer they are to a conventional mortgage.
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What is personal property loans – It refers to a type of loan, wherein a mobile home is used as security just like in a car title loan; nonetheless, the interest rate varies according to the buyer’s credit score. Less stringent than chattel or real estate loans are to qualify for.
- Manufactured home and lot financing – A single financial product that finances both the manufactured home and the land it resides on. It is more like a regular mortgage in that it retains most of the features of the original instrument.
Mobile home financing mostly comprise chattel loans. However, real estate and land-home loans often have more favourable rates and conditions if the buyer is able to meet the requirements.
Where to Get Funding
Some of the common sources of finance in manufactured house include banks, credit unions, mortgage lenders, and even some mobile home dealers. It is advisable to compare the different loan dealers in order to be able to secure the most favorable loan deal. Mobile homes are also financed by online lenders and they can also come with good rates. There are also conventional loans, which are offered by the government such as the USDA home loans for rural regions. Lenders and loan types may set different down payment levels; however, with as little as down, buyers can acquire financing for mobile homes. Buyers should also expect to pay a relatively higher interest rate than a standard home loan and insurance charges. However, lower purchase prices for manufactured homes counterbalance most of these additional costs.
Getting Preapproved
Securing an approval from a lender is also something that needs to be done prior to the buying of a home. Preapproval offers buyers an idea of the loan amount and the potential loan terms the lender will offer. Pre-approval letter is therefore essential in the process of buying mobile homes since the buyers can be assured of their offers. Pre-approval involves filling a form that declares income, debts, assets, credit scores, and other credit histories among other information to a potential lender. The lender will often require the following documentation:The lender will often require the following documentation:
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Photocopies of pay stubs for the last months
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W statements for the last years
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Federal tax returns for the previous two years
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The previous months bank statements
- Records of any existing debts or assets
Buyers will sign this paperwork and the lender will use it to determine how much they are able to borrow based on their income and liabilities. They will also request credit reports and credit scores in order to determine their overall credit worthiness. An approval process can take anything from days to a couple of weeks depending on the extent of the lender.
Improving Your Odds
Not everyone who applies will receive approval in financing the purchase of a mobile home. But buyers can take a few steps to boost their chances:But buyers can take a few steps to boost their chances:
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Place at least % down - A down payment of this nature shows that buyers are capable of managing a loan and is less risky to the supplier. Try to get at least down if possible.
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Pay off credit cards and other loans to bring down the debt to income ratio that is used in determining loan eligibility.
- Review credit files – Ensure credit files do not contain any negative entries which could affect scores and chances of loan approval.
Shopping with Strong Scores
The FICO or Vantage credit score remains a deciding factor as to whether or not a financing will be offered. The higher the scores, the better the loan offering will be. According to the data from experian, while buyers with a credit score below obtained % interest rates on approved mobile home loans, only got less than one percent interest rates below %. Nevertheless, more than half of the total buyers with scores above , were eligible for rates below %. It is advisable to check your scores on Experian, Equifax, or TransUnion before applying for a loan. This helps buyers to be able to correct some things that are likely to pull down their scores.
What Lenders Look For
When reviewing loan applications, lenders examine:When reviewing loan applications, lenders examine:
Credit History – Ability to always pay off previous loans such as credit card dues, auto loans and any existing mortgage. These show accountability managing the loan repayments.
Employment and Income Documentation – Bank statements, W-s, pay stubs, tax returns proving the ability to afford new loan payments. Underwriters seek minimum income over and above the proposed mortgage payment.
Down Payment Amounts – At least % down or more helps the buyers to get the approval and better rates.
Debt-to-Income Ratio – The combined amount spent on monthly housing payment and other obligations divided by the gross monthly income. It is a common practice for most lenders not to allow this ration to exceed %, and those below % are regarded as very good.
Existing Site – The probability of approval rises if the buyer already has the land on which they wish to place a manufactured home. This means that the value of the parcels of land is considered in the overall value of their collateral assets.
Submitting documentation that assures lenders on these aspects offer the highest likelihood to secure cheap funding for those who are willing to purchase a mobile or manufactured home.
