Mortgage Loan and Financing Advice for Manufactured and Modular Homes
By Jennifer Frakes
Are you looking into purchasing or refinancing a modular or manufactured home? Knowledge of the basic definition of each type of home is essential to finding the right loan.
Modular homes are built in sections, or modules, in a factory. The modules are then delivered to the home site on large trucks and assembled by local builders. State, local, and/or regional building codes must be followed while building the home.
Manufactured homes, historically called mobile homes, are built entirely in a factory. They must comply with a federal building code called the Federal Construction Safety Standards Act. This act, instituted in June 1976, requires that manufactured homes be constructed on a non-removable steel chassis. Many areas have restrictions regarding where manufactured homes can be located.
In terms of financing, obtaining a mortgage for a modular home is not much different than for a site-built home. (A site-built home is one that is built from the ground up on the site of the home). In each case, a construction loan is acquired. These are short-term loans for the material and labor costs of constructing the home. After the house has been completed, the construction loan can be turned into a traditional home loan. The biggest difference between site-built and modular home construction loans is the length of time of the loan. For modular homes, it is usually a 3-4 month timeframe, whereas, site-built construction loans average about 6-12 months.
A manufactured home may require more legwork to find the right lender. Lenders take into account square footage, meaning whether the home is single, double or triple wide. Mobility is another factor. If your home is truly mobile and you do not own the land underneath the home, financing may be more difficult to obtain. In addition, manufactured homes built prior to 1976 may not comply with the Federal Construction Safety Standards Act and will, therefore, be very difficult to finance or refinance.
Traditionally, most lenders viewed manufactured homes as personal property, much like a car or RV. These loans tend to have much higher interest rates than home loans. Today, there are lenders out there who will provide manufactured home loans at more affordable interest rates. To find the loan that is right for you, it is important to shop around. Although the community in which you are buying may offer financing, don’t feel that you are obligated to take it.
Jennifer is an author of many home financing related articles: Modular Home Equity Loan Financing & Bad Credit Mortgage Loans, and Manufactured Home Refinance.