Manufactured

Home
Financing
We want to make financing your manufactured home as easy as
possible. This e-book will provide all of the information you need to
successfully finance your manufactured home.

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GOALS

To provide you with the guidelines that will help you minimize the docu-
mentation required for a mortgage application.

Finding the best mortgage for your specific circumstances. We will help
you understand how to check your credit and how to select the mort-
gage company that will work with your credit rating.

To provide you with a list of mortgage terms that you can easily under-
stand, and understand their relevance in the mortgage process.

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THE SECTIONS IN THIS BOOK

How you can finance your manufactured home in 10 easy steps 4

Finding the best mortgage 12

The financing process 16

Manufactured home mortgage terms you need to know 18

Recommendations 27

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How You Can Finance Your
Manufactured Home in 10 easy
Steps
A manufactured home can be financed as easily as a home that is constructed on a
lot. Financing a manufactured home does require different steps in the financing
process, and this article will completely identify these steps. The steps that you
should take to prepare for the financing process are also identified.

1) Interview Potential Financing Sources

Interview potential financing sources to be sure that

they finance manufactured homes in the area you want
to have a manufactured home installed. Some financing
sources have identified specific geographical regions
where they do not provide financing. It is a good idea to
ask about their reason. You may learn that you do want
to build in the area. Equally important is identifying lend-
ers who will finance the manufactured home of your
choice. Some manufacturers have lending sources which
will only finance homes built by that manufacturer.

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2) After Identifying A Funding Source
Make Sure The Maximum Loan They Are
Willing To Make Is The Loan You Need

Different lenders will have different qualifying

criteria and although the difference may vary only
slightly, it is a good idea to be aware of it. The
lenders want your business, so they make it as easy
as possible for you to qualify with their company.
Lenders will work with you as much as possible to
help you obtain the loan you need.

3) Consider Actions You Can Take To Obtain The Best Loan - Carefully
Examine Your Finances And Make Sure The Lot You Own is Accept-
able To The Lender

3a. The best loan is available to people who have a large down payment, at least
20%. However, FHA loans require a lower down payment. FHA loans are available
with 3.5% down. Other factors will influence the amount of down payment that a
lender will require. For example, your credit history and your credit score will be im-
portant considerations to a lender when deciding how much money they want for a
down payment. It is helpful if you have a savings account to which you make month-
ly deposits. A 401K account will work as will a bank savings account or a money
market account. The objective is to demonstrate that you are not using all of your

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income for living expenses and that you have income available beyond what you
need for monthly expenses to pay for the added costs involved in owning a home.
The best loan will be available to people who have systematically saved for their
down payment. Of course, lottery winnings are okay, but be wary of gift money.
You should talk with the lender if you plan to usemoney given to you by relatives.

3b. The lot or space you want to use for your manufactured home should be accept-
able to the lender. Lenders have criteria for determining whether a location is a
good investment. They may want to see soil studies and the drainage history. They
want to see that a survey has been conducted. The location should not be next to a
major highway or an active rail line. The lot should have ready access to the water,
sewer, and electrical services. A septic tank will not take you out of running, but
you will need to have a perc test done so the lender can see that the lot is usable
for living.

3c. Check your cred-

it history and your
credit scores that
are compiled by the
three major credit
reporting bureaus.

LexisNexis Risk Solutions is a fourth credit reporting company, and it also includes
your history of filing auto and homeowners claims. This company also records seri-
ous traffic violations. You may find errors that need to be corrected before you

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apply for a loan. You are entitled by federal law to receive one free credit report
each year. Follow the reporting agencies guidelines for filing an error claim. A credit
bureau requires 30 days to verify data that you believe to be wrong. Make sure the
credit bureaus have recorded your correct employment record and address history.
Lenders are skeptical of borrowers that change jobs and move frequently. Prepare
an explanation if you do change jobs frequently. Many people work seasonal em-
ployment or contract assignments which are typical occupations. Self-employed
people can obtain a loan if they can document the work they do, the frequency
with which they do the work, and the compensation received.

3d. Most lenders will ask for two years of income tax returns, so it is important
that your tax returns support your stated income. In addition to asking you for two
years of IRS returns, the lender almost always ask you to sign a release giving the
IRS permission to provide the lender with exact copies of the returns you filed.

4) Do You Have Enough Funds For The

Down Payment?

It is essential to understand the amount of down

payment you will be required to make and where
you can get the funds if you don’t have enough
money. The amount of down payment will depend
largely on the lender and whether the mortgage is
an FHA insured mortgage. Veterans may be eligible
for a VA loan with no money down.

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FHA borrowers will likely be able to put 3.5% down. It is essential to understand
the amount of down payment you will be required to make and where you can get
the funds if you don’t have enough money. The amount of down payment will de-
pend largely on the lender and whether the mortgage is an FHA insured mortgage.
Veterans may be eligible for a VA loan with no money down. FHA borrowers will
likely be able to put 3.5% down. The amount can range up to 20% and higher if you
are a credit risk. Most lenders will only make FHA insured loans because this loan of-
fers the lender protection from loss due to default by the borrower. This means you
may not have much choice but to get an FHA insured loan. FHA will have require-
ments for the location of the lot. Among the requirements is you must own the lot
without any lien against it.

Conventional loan lenders may not require that you own

the lot at the time of applying for a mortgage, but if you
don’t own the lot you must at least have the lot identified
and then the cost of the lot can be included in the loan.
Check with the lender about any timing requirements for
laying the foundation.

If you do have enough money for the down payment, you

might explain your circumstances to the lender and ask
for permission to use borrowed funds. Often a relative
will step up and loan the difference. You cannot be as-
sured that borrowed funds will be acceptable. The best
plan is to talk with lenders before you do anything else
and explain your situation.

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5) Determine The Amount Of Loan You Can Comfortably Pay Back

This involves determining the monthly payment including taxes and property insur-
ance that your budget can handle. Your lender can help you determine this amount
with reasonable accuracy. The taxes and property insurance may be a little more
difficult to determine accurately, but you can get a useful estimate.

6) Calculate Your Debt To Income Ratio

Most lenders use a debt to income ratio to qualify

an applicant. This ratio is intended to identify the
percentage of income after monthly debts are paid.
Acceptable ratios will vary between lenders, but
FHA and VA insured loans almost always require a
31% or better ratio. You can calculate your ratio by
following the formula below:

The Debt To Income Ratio

This ratio is developed by dividing the total monthly debt payments by the amount
of gross monthly income. For example, if your total monthly debt payments are
$600 and your gross monthly income is $3,000, the ratio would be determined by
dividing $600 by $3,000 with the result being 20%. Many lenders look at an accept-
able ratio as being less than 32%. However, each lender has specific criteria, but
FHA and VA-insured loans require the ratio to be 30% or less.

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7) Make Make Sure The Home And The Land Meet All Lender and Lo-
cal Requirements and Codes

It is essential that the manufactured home you want to buy and the land you want
to install it on complies with the universal requirements for a loan. These are:

• The property cannot be in a flood zone.

• The home structure cannot have been previously moved.
• The structure must have been built after 1976.
• The home structure must be permanently set on a lot you own.

8) Make Sure The Manufacturer Meets

The Lender Requirements For Quality And
Code Compliance

Every locality has requirements that must be met

by the manufacturer before the home can be
installed. Every lender will demand quality and
code compliance. The lender can tell you whether
the manufacturer meets their requirements. You
should also check with the local governing body to
make sure the manufacturer is acceptable.

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9) Carefully and Completely Organize Your Records

You may be required to submit six months of bank statements and two months of
paycheck records. You may be asked to obtain a record of payments from your utili-
ty companies.

10) Have Two Years Of

Federal Tax Filings Available

Keep in mind that you will also be

required to sign a release autho-
rizing the lender to obtain income
tax transcripts from the IRS. The
copies of your tax filings will help
start the lending process, but the
lender will also request official
IRS transcripts of your tax filings.
You will find the process to be less
daunting than it may appear. You
will also find lenders very willing
to help you, but you can do a lot
to help yourself too.

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OBTAINING THE BEST MORTGAGE

Manufactured and modular homes are the best home values for people who are
looking for the many benefits of home ownership on property of their choice. Re-
tirees and families alike will find a design that meets their objectives. The technol-
ogy and quality are constantly improving. The affordability factor means that you
can get the same features for far less cost, and the good news is you can finance
manufactured and modular homes just as you can any other home. The major im-
provements in manufactured and modular homes over the past ten years enables
buyers to qualify for financing terms similar to those available for site-built homes.
You will find that more lenders are now working with buyers of manufactured
and modular homes. The range of lending programs is similar to that for site-built
homes. This article includes a discussion about the financial requirements and the
property conditions you will need to meet.

There are s​ ix​types of loan programs available: FHA, VA, and Conventional.
These are discussed below with some of the important qualifying criteria.

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Fna Loans

• Requires less down payment and often 3.5% will meet the down payment re-
quirements.

• Buyers with less than perfect credit are eligible.

• Lower credit score requirements

• Higher debt to income ratios is acceptable.

• 30-year term loans are available.

• The home must be built after June 15, 1976.

• The home must be permanently fixed to a foundation that meets FHA stan-
dards.

VA Loans

• 100 percent of the cost can be financed.

• Zero down payment loans are available.

• Requires a credit score of 620 or higher although buyers with a lower score may
still be eligible.

• Past credit problems are not a deterrent if the buyer can show an ability to repay
the loan.

• The other benefits and requirements of an FHA loan apply to VA loans.

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Conventional Loans

• These loans are available, and the requirements are similar to those for site-built
home mortgages. However, the requirements that the home must meet will be
the same as those for FHA and VA mortgages.

USDA Rural Development Loans

• These loans are structured to help medium income people purchase a home in a
rural communities with a population of less than 20,000 people.

• No money down on these 30 year-fixed mortgages with low interest rates.

• Flexible credit even for people with credit scores below 620.

• You can include your closing costs.

Chatell Loans

• Chatell loans are only available for manufactured homes that are not perma-
nently set. A manufactured home can be installed on your property and not be
permanently set.

• A chatell loan is more likely to be approved when the manufactured home is in-
stalled in a HUD approved mobile home park.

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• A chatell loan may also be approved on the applicant’s property if the property
meets FHA rules which require sufficient water availability and sewage disposal.

• Financing a manufactured home on land owned by the applicant will function

the same way as financing an on site-build.

• Since chattel loans are are viewed as personal loans, the interest rates tend to
be higher.

Some Important FHA and VA Rules Exist for Buying Manufactured

Homes.

• The HUD label must be affixed to each section of the home.

• The minimum size of the home is 400 sq. ft.

• The home must meet the Model Manufactured Home Installation Standards.

• The lot where the home will be permanently set must be approved for the place-
ment of the home.
• Keep in mind that local communities may have more stringent regulations about
where manufactured and modular homes can be permanently set.

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THE FINANCING PROCESS

Our staff will help you find the best financing options for you. While we cannot rec-
ommend a specific financing source, we can guide you in selecting multiple sources
to begin the financing process. Each loan type requires you to demonstrate your
ability to repay the loan. While the FHA and VA loans are available to buyers with
less than a perfect credit history, the reasons for past credit problems should be
documented, and evidence that the problems will not recur is helpful. A history of
steady employment is very helpful, but you work in a field where changing jobs fre-
quently is acceptable, then this should be documented. Construction workers and
employees affected by seasonal layoffs will need to demonstrate a history of get-
ting back to work when the weather improves. Regardless, the yearly income must
support expenses and a mortgage payment.

Review Your Finances

You should your expenses and your recurring debt

payments. These should be added up to get a com-
plete picture of your financial condition. Determining
the income to debt ratio would be helpful. To do this,
divide your total monthly debt payments by your
total income. This exercise will help in understanding
your ability to qualify for a mortgage. You should re-

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view your credit reports to find errors which need to be fixed before applying for
a mortgage. People are often surprised to learn that a debt appears on their credit
report with a negative remark. As an example, a payment that is more than 30 days
late will likely appear on the credit report for a long time. While this may not seem
like a problem to the buyer, it will be an issue for the lender.

Get Pre-Qualified

A pre-qualification is not the same as a pre-approval. A pre-qualification will show

the loan that you might be able to obtain. You should always obtain a pre-qualifica-
tion because it is an indispensable tool in determining how much you can pay for a
home.

Being Prepared Is A Giant Step Toward

Acquiring The Home of Your Dreams

It is much easier to get a manufactured or modular

home loan if you follow the guidelines that we can
help you with as well as the those above.

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18 Manufactured Home
Mortgage Terms you Have to
Know
Many mortgage terms can be difficult to understand. The terms are important, and
it is important that every applicant for a manufactured home mortgage has a work-
ing knowledge of them. The purpose of this article is to provide an explanation of
these terms. While you may be aware of many of them, there are some that you
may need to know more about. This article will describe all of the terms that are
pertinent to manufactured home mortgages.

Amortization

Regular monthly payments on a mortgage will

reduce the principal and interest every time a pay-
ment is made. The reductions can be tracked and
an amortization table, which you can find on the
Internet, will help you see how fast the mortgage
is being paid off. Many people find the amortiza-
tion table to be a handy tool for understanding the
progress they are making in reducing the mortgage
balance.

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Appraisal

An appraisal is required by the lender to help them determine the value of the
property they are investing in. The lender always hires an appraiser who is experi-
enced in appraising manufactured housing. The borrowers may have an appraisal,
but it will only serve to inform the buyer of the property’s value as that apprais-
er sees it. A problem can arise when the lender’s appraiser does not appraise the
property as high as it needs to be to qualify for the mortgage. Every borrower
should take steps to understand the value of the property they are buying before
applying for a mortgage.

Annual Percentage Rate (APR)

The APR is usually higher than the stated mortgage interest rate. The reason is the
APR is based on the amount borrowed including the principal and other fees paid
by the lender and added to the mortgage. The APR is based on all fees paid over
the life of the loan. One example is the Private Mortgage Insurance or PM! which

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some borrowers are required to pay. The APR must be disclosed to applicants for
a mortgage within 3 days of filing the application. Since the APR is the interest
the borrower will be paying on the total that the lender has invested, it is a good
idea to consider this when selecting a mortgage. You are entitled by Federal law
to know what is contributing to the makeup of the APR. It would be a good step
because the APR is usually the most misunderstood term of the mortgage process.
Also, some mortgages include an origination fee for the lender.

Adjustable Rate Mortgage (ARM)

The Adjustable Rate Mortgage (ARM) is a mort-

gage that usually has a low-interest rate in the be-
ginning and the rate increases at stated intervals.
This mortgage can adjust after the first year and
every five years, or at some other time interval.
Many people opt for an ARM for the lower interest
rate in the beginning, but then they find that the
interest rate increases significantly, and sometimes
it increases the monthly payment more than the
borrower can pay. This was a major cause of the
housing meltdown.

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Balloon Payment

The Balloon payment is a lump sum payment on the mortgage usually after five
years. Monthly payments are smaller which makes the property more affordable,
but when the balloon payment is due, the borrower may not have the ability to
pay it. Refinancing may be difficult because the borrower’s credit rating may have
dropped, or the supply of mortgage money may have dried up. It may be more
difficult to get a new mortgage because property values have declined. Selling the
property to pay the balloon payment may not result in enough money if the hous-
ing market has changed.

Closing Checklists

This checklist will help the borrower keep track of

all items that need to be handled before closing. If
the lender does not provide this, then the borrower
should create it. This list should contain everything
the borrower needs to do to get ready for closing.
An example would be obtaining property insurance
and making sure that a title insurance policy has
been ordered by the lender. Also included should
be ensuring that any local government require-
ments that are met. An example of this would be
whether you have to pay for fire protection or
whether it is provided by the local government.

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Closing Statement

This is a complete list of all charges the borrower will be responsible for. Many
charges will be included such as the appraisal fee, property installation inspection
fee, and the cost of the title insurance. Federal law requires that a closing state-
ment itemizing every charge be provided to the borrower at least 3 days before the
closing. This is an important document to review.

Closing Costs

These are the costs

that are finalized by
the time of closing.

They include all of the expenses of providing a mortgage and all of the other ex-
penses such as property insurance and “points,” which are funds paid to the lender
to lower the interest charged to the buyer. It will also include fees associated with
obtaining the mortgage, prorated taxes, the cost of property insurance, and any
item that is required to be paid before the borrower can move into the home.

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Conventional Loan

This is a loan that is not insured by FHA. This loan usually requires a 20% down
payment. It may even require a larger down payment. If the lender does not re-
quire private mortgage insurance (PMI), then the lender assumes all of the risks in
the event of a default by the buyer. The credit profile is likely to be higher than an
FHA loan would require. However, the debt-to-income ratio may be less stringent.
The interest rates and the APR will vary between lenders, but not by a significant
amount. Conventional mortgage loans are available for manufactured homes, and
in fact, some lenders specialize in manufactured homes.

Disclosure

Disclosure documents are required by Federal law

to provide all of the details about the mortgage.
These documents should be complete in disclosing
all information about the mortgage.

Discount Points

These are commonly referred to as points. Points are money paid at closing, and
they are a percentage of the mortgage amount. For example, one point equals one
percent of the mortgage. Points increase the lender’s return on the mortgage.

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Part of deciding which lender to use is determining how many points they charge.
One or two points may be acceptable, but four or five should not be acceptable
unless there is no other source willing to work with the borrower.

Escrow

Escrow is a fund created by the lender to hold

funds provided by the borrower for payment of
expenses such as taxes and property insurance.
The lender is entitled to ask for more money from
the borrower to cover a shortfall in the escrow ac-
count. If the balance of the account does not cover
upcoming expenses, then the lender can request
funds to be deposited in the escrow account. There
are limits on how much money a lender can main-
tain in an escrow account. The limits are set by
state law and Federal law.

Fannie Mae

This is a Federal government agency that buys mortgages from lenders so that the
lenders can reinvest their money in other mortgages.

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Federal Housing Administration (FHA)

FHA is a government run agency that provides mortgage

insurance for FHA-approved mortgages. FHA has in-
creased the availability of affordable housing because it
will guarantee a lender that a mortgage in default will be
paid in full. FHA is funded by insurance fees paid by the
borrower, and no government money is invested in FHA.
FHA does insure FHA approved manufactured housing
mortgages.

Freddie Mac

This is a government agency established for the purpose of buying mortgages from
lenders so that the lender can make loans to more home buyers. Freddie Mac also
stimulates the real estate industry and creates low-cost housing. Freddie Mac is a
key player in supporting the manufactured housing market.

Housing And Urban Development Agency (HUD)

HUD is a Federal Government organization established to increase affordable hous-

ing by implementing policies and procedures that stimulate real estate investment.
Manufactured housing is one of the primary ways chosen by HUD. HUD also

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ensures the safety and quality of manufactured housing. HUD requires all manufac-
tured homes built after 1976 to have a document affixed to each section certifying
that the unit meets HUD requirements.

The Loan-To-Value Ratio

The LTV Ratio is the loan amount compared to the cash value of the property.
Lenders will use this ratio to as a metric to help determine the risk involved in mak-
ing a mortgage loan. Manufactured housing can meet the LTV Ratios required by
lenders. The wise borrowers will discuss the LTV Ratio with their lender before
purchasing a model.

Title Insurance

Title insurance is absolutely necessary because it provides assurance that the land
has no outstanding liens against it. Title insurance will also ensure that the property
boundaries are where they are alleged to be. The lender and the borrower will be cer-
tain that the property has no encumbrances that could result in a dispute over own-
ership of the property. It also ensures that the manufactured home will be finished in
the correct spot.

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Recommendations
The Manufactured Housing Market is growing rapidly year-over-year. Designers and
manufacturers are constantly creating and manufacturing homes that appear to be
conventional built homes. Many features are available to add a feel of luxury but
at an ordinary price. These homes fit into a neighborhood without anyone noticing
any distinction between the other homes. Manufactured homes are ideal for the
outdoorsman who wants the comforts of home while experiencing the beauty of
the wilderness.

The buyer gets more square footage and more amenities for far less money. Stud-
ies by associations of appraisers show that manufactured homes increase in value
just as conventional homes do. These homes are wonderful options for couples
who have limited resources for buying a home, but nonetheless see home owner-
ship as a solid financial beginning.

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 For more question
on How To Finance Your Manufactured Home

call us at
1-800-450-0157
or email us here
info@thehomesdirect.com

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