If you're looking to purchase a manufactured home, or if you already own one and want to refinance, here are some things to keep in mind.
Manufactured homes are not the same thing as modular homes. Manufactured homes are constructed, purchased at a dealer, and then moved to their final destination where they are permanently attached to the earth. If you're looking to purchase a manufactured home, many mortgage lenders will deny you because it is a risky financing vehicle. This is due to the fact that, technically, you could detach the dwelling and move it to another property.
If you are able to secure financing, manufactured home loans often contain higher rates and fees due to the associated risk that comes with this type of property. Some lenders will allow you to secure financing for a manufactured home without the need for mortgage insurance, meaning you can avoid a Federal Housing Administration mortgage, which contains a monthly mortgage insurance payment and can end up costing you more. An FHA mortgage can be an option for you, however, if you have no alternatives.
To get a conventional mortgage without mortgage insurance, you need to have at least 20% as a down payment (or in equity if you're refinancing) and have a credit score of 640 or more. It can be used for purchasing or refinancing without pulling cash out under certain circumstances, but you should consult your mortgage lender about the requirements specific to manufactured homes before assuming the home will qualify for a conventional mortgage.
If you are looking to purchase a manufactured home for the first time, conventional mortgages will allow you to do that type of financing so long as you find a property with the real estate included. In other words, the house is already affixed to the earth and is being sold as real estate. Financing to secure the land and attach the unit is an entirely different animal that typically comes with higher rates and fees. These loans are more difficult to come by. If you are looking to get a manufactured home, get pre-approved to purchase a house with the expectation that the manufactured home is already attached to the real estate and is going to be sold as one property. This will give you the best outcome for success in this particular type of property arena.
Another outlet for this type of financing is FHA. FHA contains two forms of mortgage insurance; an upfront mortgage insurance fee and a monthly mortgage insurance payment that is otherwise avoided when you go with a conventional mortgage. No matter what your financial situation is, look at getting qualified for both types of financing. It is helpful to know that if you can use conventional financing and avoid PMI, you will have an easier time handling the payment. The payment will be lower which can increase your buying power while you remain under the 20% equity margins.
Remember, before you begin the mortgage lending process — or even start your search for a new home — it's a good idea to check your credit scores to see where you stand. Doing so will let you know exactly how much loan you'll qualify for and what terms will be associated with that loan. Also, it's a good time to pull your credit reports to ensure there aren't any mistakes, which could hurt your ability to get the best loan terms. You can get your two free credit scores, updated every 14 days, at Credit.com.