General Financing Terms and Summary

Modern Manufactured & Modular Homes - Financing Options and FAQs

If we don’t help answer your financing questions, contact us today! We understand that the home buying process can seem pretty intimidating. We get it; we've all been there too! 

We're here to make this journey as smooth as possible for you and your family! Give us a call or reach out through our contact request form. We truly appreciate you allowing us to earn your business.

Types Of Loan Programs

Chattel "Home Only" Option

Chattel loans (rhymes with "cattle loans") are the most common manufactured home loans. It is the loan type used when the land the home sits on is not part of the loan package. If you don't own your home's land, you will likely need a chattel loan. Chattel loans typically have a slightly higher interest rate and a shorter loan period than a mortgage loan, plus there are some advantages. The shorter payback time reduces the actual dollars paid to the bank as interest; plus, it makes your home free and clear sooner than a more extended loan period. You don't need to pay for private mortgage insurance (PMI) with a chattel loan. Finally, you can put your home in a manufactured home community that offers more amenities than you may be able to afford if you placed your home on your own land (such as a giant swimming pool). Since you are spending less upfront, your down payment will be less (often much less) than if you needed to finance a home and the land, not to mention the freshwater, sewer or septic, electric and gas connections. The smaller down payment makes it easier for many people to get into homeownership with a chattel loan than other loan types.

Conventional Mortgage "Land and Home" Option

The lowest interest rates are generally found with a conventional mortgage. This mortgage is going to the bank to finance the manufactured home, the land, and the land improvements. The downside to a conventional mortgage is you usually need a larger down payment to get this type of loan. Plan on a down payment of at least 5% for a conventional mortgage. 

Land in Lieu Down Payments

Do you have a piece of land you own outright? Good news! You can use the value of the land toward your down payment. Your land will need to appraise high enough to meet the down payment threshold the bank wants, but you may not need to come up with additional cash for your down payment.  Please note, in some cases, your land does not need to be paid off to use equity in lieu of your down payment. 

Government Options: USDA, FHA, VA

USDA, FHA, VA Government loans, such as FHA loans and VA loans, are very similar to conventional loans in that they buy the land and the home together. Government loans usually require a much smaller down payment than commercial loans, and with the VA loan, the down payment may even be $0. The downside of a government loan is there are more requirements and restrictions than commercial loans.  VA loans often are held to a stricter appraisal process and have higher lender fees. If you put down less than 20% using an FHA loan, you will also likely have to pay for private mortgage insurance (PMI). 

FHA, USDA and VA loans (unless the home is already placed and ready for move in) will be considered “New Construction” and is subject to new construction fees and interest , which will be put into the loan.  We have seen these fees add several thousands, so you should also be prepared for the appraisal to come in short, requiring more money down to cover the gap the fees cause.  This is particularly the case with VA loans where the buyer wants to pay zero down payment.  While government backed loans normally carry a better rate and lower monthly payment, they can be the most expensive option overall. Finally, be prepared for the approval process to take a few extra months with a government loan.

Choose Your Own Lender

You can utilize your own bank or private lender. Our goal is to make your home buying experience as easy as possible, so we’d love to help you find the manufactured home you desire, whether you use our lenders or your own. 

Generally, your own lender will be your favorite bank or a friend or family member who would like to personally loan you money. The advantage of using your own bank is convenience and that you already have a built-up relationship. The only disadvantage is if your bank does not typically handle loans for manufactured homes, you may find getting approved for the loan harder than with our lenders, higher deposits may be required, and possibly even a higher interest rate may be assigned to your loan. Just watch the details when you go through the borrowing process.

Challenged Credit Options

Yes, we help a lot of families with credit difficulties.  Anyone with any credit score can get financing, BUT it doesn't always make sense to do so because the interest rate and required down payment may be too high. If you have a credit score over 525 and a decent down payment, usually we can find you acceptable financing, but the only way to know for sure is to apply for a loan. 

 If you’re not sure whether or not you should try for a loan, feel free to give us a call and talk to one of our sales team about your specific situation and available options. 

What Do Banks & Lenders Look For?

There are several things the banks will look for when determining if they will offer your financing for your new manufactured home. Each bank has its own unique set of criteria for determining this; however, these are some factors that all banks consider.

Credit Score: Your credit score is a number that gives the banks a snapshot of your financial past. This number factors in payment history, credit utilization, and length of your credit history. The higher the number, the better your credit. There are three credit bureaus that each produce a separate credit score for you. Some banks may only look at one, whereas others will look at the average of all three. 

Current Debts vs Current Income: The banks also look at the ratio between your existing debts and current income. This is commonly referred to as your DTI. (Debt to Income) ratio.  Banks are legally not allowed to lend you money if they determine you do not make enough money to cover your current debts and add a new mortgage payment. Items that show on your credit reports as monthly obligations will factor into your DTI. So will things like child support and loans you co-signed for can impact your pre-approval with a lender. 

Job History: At a minimum, the banks will need to see your two-year work history. This does not mean it must be at the same job. You will need to show W-2s and pay stubs to document your job history, so do not count under the table jobs that cannot be proved with a paper trail. Some banks require you to detail a more extended job history.  Some gaps in employment are acceptable, but will require explanation. 

Down Payment Percentage: The amount you’re willing to put down as the initial investment for your new manufactured home plays a critical role in your bank application. Even the most challenged credit can get approved for a loan with a large enough down payment. In most cases, the minimum allowed by a lender will be 5% and can go as high as 35%, depending on your credit and financial status. 

Did we answer your question? If not, contact us today! We understand that the home buying process can seem pretty intimidating. We get it; we've all been there too! We're here to make this journey as smooth as possible for you and your family! Give us a call or reach out through our contact form. We truly appreciate you allowing us to earn your business.