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Mobile home loan - How to qualify and what are the options?

If you're a home buyer looking for housing options other than traditional site built houses which cost you more, then mobile/manufactured home may be the right choice for you. Mobile homes are first built in factories and then taken to the site where it may or may not be given a permanent foundation. What are the types of mobile home loans? Mobile home loans are available as mortgage and personal property loans.Mobile home mortgage loan: If the home has a permanent foundation, you may take out a mortgage loan for buying both the land (lot) and home, or either the land or home. The loan covers the cost of your home as well as any repair work done on the lot depending upon whether the appraised value is equal to the selling price of the mobile home. You can approach local banks, lenders, mortgage companies, brokers, and credit unions offering loans for mobile home purchase or refinance. When you apply, the lender will ask for credit report fee, loan application fee, loan doc preparation and origination fees etc. Get a good faith estimate from the lender to get an idea of the costs involved. Know how to qualify and what are the loan options to apply for. Personal Property loan: This is meant for purchase of homes on a rented lot as in mobile home parks. Personal property loan is offered by retailers who sell mobile homes. In order to qualify, you need to put down 10% of purchase price for 10-30 year loans. The interest rate will be 2-3% higher than mortgages, fixed or variable. But you can qualify with higher debt ratio and use the loan funds to cover home plus lot improvements (walkways, garages etc). For improvements on an already owned mobile home, you can go for the Title I loan, but the limit should be within $7500 to be treated as personal property loan. What about tax benefits? Whether the mobile home loan is a mortgage or not, the interest on it is deductible provided it is used to secure your principal residence. If you have a mobile home mortgage and itemize your taxes, you can deduct the interest and property taxes on your Federal income tax return. You can also deduct the interest on a loan for mobile home in a rented lot. But the rent payments are not deductible until you have a 15 year or longer lease with a lot purchase option. How to qualify for mobile home mortgages: You are eligible if the conditions given below are fulfilled. Foundation requirements: Mobiles homes built prior to 1976 hardly qualify for mortgage because lenders are concerned over the life expectancy and quick depreciation of such a home compared to that of traditional site-built houses. The manufactured home must follow the building standards proposed by HUD under the Federal National Manufactured Housing Construction and Safety Standards Act of 1974. The HUD code requirements are as follows: The houses must be built as one, two or three section homes in a protected building center and then transported on a frame to be installed on the site. The wheels and axles must be removed and the mobile home should be fixed to the ground to give it a permanent foundation. As per HCD rules, you need to record form 433(A) which implies that the home is changed from personal to real property due to it's permanent foundation. The homes should comply with the HUD code restrictions for construction, design, durability and strength, fire resistance, energy efficiency, transportability and quality. The property should maintain high standards for heating, plumbing, air conditioning, thermal and thermal systems. The property must pass through strict inspections conducted by third party. Ownership Rights: The borrower must have absolute ownership (free of liens) rights except if the loan is required for a lot which consists of a share in a co-operative association owning and operating the mobile home park. Purpose of the loan: The loan must be taken in order to purchase or refinance only a manufactured home with the lot/land being owned by the borrower, the home and the lot on which it is situated, only the lot on which the mobile home (already owned by the borrower) will be installed. The home must be the principal residence of the borrower. For a lot loan, the mobile home must be placed on the lot and must be the principal residence within 6 months after the date of the loan. If the loan is meant for a home in a mobile home park, then the lease on the home should extend for at least 5 years beyond the loan term. Credit Score: Borrowers must have a minimum credit score of 620 in order to get an affordable rate of interest. However, you may get loans in spite of having poor score but you'll be charged higher interest rates. So, you can try for loans that are not score driven but even such loans require you to have a moderate credit score of 550 and above. Down payment: Lenders expect you to put down 5-10% of the purchase price for newly built homes for a loan term of 15 to 30 years depending upon your credit profile, size of the home and type of loan. For a pre-owned home, the down payment is the same but loans are available for 20 years depending upon the factors stated above. Types of mobile home mortgage loans: Federal programs: FHA approved lenders offer Title I loans for purchase and refinance of manufactured homes for a loan term of 20-25 years at a fixed rate of interest. They also offer Title II mortgage loans on manufactured homes. The maximum loan limit for homes located on land you own is $175,000. Besides, there is the VA guaranteed manufactured home loan offered to veterans by private lenders. With such a loan, you can borrow up to 95% of the purchase price. There is also the USDA Rural Development offering 30 year term loan programs for manufactured home purchase and repair. The programs stated above are specially meant for first time buyers who can put down little cash and look for lower rates of interest. State programs: State Housing Finance Authorities/Housing Agencies offer mobile home loans to first time buyers at rates comparatively lower than that offered by private lenders. For instance, lenders approved by the Maine Housing Authority offer the First Home Program to first time buyers of mobile homes. Then there is also the first time buyer mobile home loan program offered by the Connecticut State Housing Finance Authority. Conventional Loans: Such mortgages are offered by private lenders, banks, etc with conforming as well as jumbo loan packages ranging from 15-30 year Fixed Rate loans, 3-2-1 Buy down loans, to 6 month-1 year ARMs, and Hybrid ARMs (3/1, 5/1 and 7/1 year loans). There are amortized as well as interest-only options available. Know more about popular loan programs. Bad Credit Mobile home loan: These are sub-prime loans offered to those having andquot;Bandquot;, andquot;Candquot; or andquot;Dandquot; credit due to late payments/loan defaults/bankruptcy or foreclosure in the past. Bad credit loans can be FRMs as well as ARMs but the interest rates and costs associated with such loans are usually high. So, if you cannot afford higher payments, wait till your credit improves and then apply for a prime loan. No income/No asset verification loans: If you're self-employed and unable to verify your income and assets, then this is right choice for you. Here again the interest rate and costs are higher on account of higher credit risk involved with this loan. These are also known as NINA loans. Construction loans: You can apply for construction mortgages to build your mobile home and also make improvements on the land. These loans are available at fixed as well as adjustable rates during the construction period after which the loan is converted into a permanent mortgage. Mobile home land loans: You may wish to purchase land and then set up the mobile home or you may be willing to purchase a lot in a mobile home park. For such purpose, make use of land loans. Home improvement loans: Such loans help in financing mobile home improvements. The Title I Home Improvement loan insured by FHA is an example.Apart from the options stated above, there are mobile home refinance and equity loans available with specific lenders. All you need to do is, understand your purpose of taking the loan and then choose the right one depending upon your affordability. Related Forum DiscussionTop 20 Queries on Mobile/Manufactured Home Loan Personal loan using Mobile home as collateral Mobile Home Repossession Mobile Home Reverse Mortgage for seniors Is there any federal tax lien on the mobile home? Are they similar - Mobile, Manufactured or Modular home?Related References: FHA insured Title I loan for home purchase/refinanceTitle I loan for mobile home improvementVA guaranteed manufactured home loanRural Development Manufactured home loans