Despite popular thought, owning a manufactured home doesn’t have to mean higher rates and prepayment penalties. The value and quality of these homes is improving, and so are the financing opportunities. In fact, if you own the land and the manufactured home, the rates and fees are almost identical to a conventional single-family home. Stick to these six tips when financing a manufactured home.
1. Own the land. If you purchased a manufactured home, you are probably financially aware and responsible. Chances are, you wanted to avoid getting in over your head with an expensive home. While purchasing property may be a little pricier up-front, it’s actually the less-expensive route if you factor in the cost to rent and the higher rates offered for home financing. There are land-and-home packages out there and, once you own the land and the home, it’s likely the value of your property will increase.
2. Opt for refinance. Consider this: If you took the builder’s or seller’s preferred financing, you have the option to refinance out of it. This route could help you make this investment more personalized to fit your needs.
Refinancing a manufactured home is quite common in the mortgage industry. One type of refinance transaction is “cash-out,” in which case you can refinance and use that cash to make fancy upgrades (hello new kitchen!). But, in these situations, the rates offered can be higher than a rate-and-term refinance. Reap the benefits of the enhanced kitchen (or similar upgrade) but be informed: If you choose to take cash out, you have to wait six months after buying the home—or, you can take advantage of the rate-and-term refinance the next day and save money over the life of your loan.)
3. Make it a 15-year term. In general, the risk on a 15-year mortgage term is much lower and the rates are more attractive than other available term lengths. People who find themselves three or four years into a 30-year term with a rate of 7–9% are pleased to discover that they can refinance into a 15-year term and their monthly payment may stay around the same amount. In this situation, the borrower may continue to have a similar payment but, instead of paying for another 26 years, they only have 15 years left. Where there are alternatives, there is opportunity.
4. See if you qualify for HARP and streamline loans. If your original loan was FHA or conventional, you could qualify for these special programs. Keep in mind that not all lenders offer these programs. Not sure if you have a HARP Eligible Loan? Find out here and here to see if your home is listed. If your home is listed, you may qualify for a HARP loan. If you currently have an FHA loan, check your monthly statement to see if it’s listed as FHA. If you’re eligible for these programs, you’ll want to take advantage of them and the extra cash they can put in your pocket.
5. Get familiar with your credit score. If possible, try to keep your total credit used below 30% of your credit limit. This relationship (expressed as a percentage) between the amount of outstanding balances on all of your credit cards divided by the sum of each card’s limit is called your credit utilization ratio. Need a deeper explanation? See a great example here of how credit utilization ratios are calculated.
6. Have some money in the bank. Try to keep some money in savings and avoid transferring funds between accounts. Underwriters generally like to see that your savings is stable and doesn’t fluctuate much. A lot of transfer activity may cause an underwriter to ask for a paper trail—proof of the transfers and where the funds originated. Any chance you have to legitimize your money will work in your favor.
Manufactured homes may have a reputation for carrying higher rates and prepayment penalties, but that notion is quickly changing. As the mortgage industry progresses, more opportunities are opening for affordable manufactured home financing.