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Whether you’re a mobile home investor selling a home or you’re just someone looking to own their own mobile home, financing can be a game-changer. For a seller, mobile home loans allow you to get the maximum value of your home. Meanwhile, a buyer can benefit by only needing to tie up a small amount of their cash. But before you start financing or selling your home on financing, there are a few things you should know. Check out this guide to financing mobile homes and be on your way to a successful transaction.
Who Offers Mobile Home Loans?
There are several major companies that finance mobile homes. However, these companies can be difficult to work with if you don’t have good credit, are self-employed, or have no credit. They also often require appraisals and may not even work with end-buyers. Unless you’re buying a home directly from a mobile home park, you might struggle with the financing of it.
Fortunately, there are many MH lenders out there. Some companies offer mobile home loans for borrowers with bad or no credit, which could be just what you need to get on your feet. With companies like Keyhole Connect, you can finance a home even if you’ve had bad luck with your finances before. For many first-time home buyers, a mobile home is the best option because of the low entry requirements and the reduced cost.
Of course, mobile home investors also benefit from the loans. You can use a loan to buy a cash-flowing mobile home or sell a home you fix up on financing. Instead of seller-financing the home for only a small portion of cash as a down payment, you can use financing to receive the total home price in one lump sum.
Definitions You Should Know
Before you finance a home, you should familiarize yourself with some common terms. Most of these terms are used for other types of loans, including single family and commercial loans.
Debt to Income Ratio (DTI)
A flexible lender might base their approval on your debt-to-income ratio. When determining your debt-to-income ratio, take your monthly debt payments divided by your gross income. The resulting number is your DTI. Typically, conventional lenders require DTIs of a maximum of 45%. More lenient lenders may allow for higher DTIs.
Prepayment Penalty
At times, people seek out mobile home financing because they’re waiting on a large sum of money. They may plan to pay off the whole loan once they receive the funds. If your loan has a prepayment penalty, you could end up paying much more than you anticipated.
Appraisal
If you’re buying an older home and are working with a lender, they may require an appraisal. The appraisal often requires the buyer to pay out-of-pocket to have a qualified individual analyze the home and similar homes in the neighborhood. Oftentimes, if a home appraises too low, the buyer is unable to finance it. Fortunately, there are some lenders that don’t require appraisals.
Interest Rate
The interest rate is a percentage that you must pay every month for the loan. Usually, the rate depends on the current economy. When you sign the loan paperwork, you should be locked in to that interest rate.
Equity
The amount of equity you have in your home is the amount you could sell your home for subtracted by the balance left on your loan. As you make loan payments, your equity increases.
Mobile Home Loan FAQ
If you’re interested in learning more about mobile home loans, here’s a quick FAQ to get you started:
Who Offers Mobile Home Loans in Parks?
Only a few select lenders offer loans on homes in parks. For those companies that do lend on older homes, you can expect between five and ten year loans for anything $15,000 or over. You may need the seller or park owner to guarantee the loan. 21st Mortgage, Park Lane, and Triad also offer financing under certain conditions.
What are the Terms of the Loans?
As with all financing, the terms of your MH loan vary depending on the situation. Typically, terms vary from five years to 25 years. The interest rate and monthly payments also vary and change with the market. Before you decide to move forward with financing, you should make sure you understand the length of the loan, the interest rate, and the fees involved.
Is It Difficult to Finance a Mobile Home?
It’s only difficult to finance a mobile home if you don’t know where to look. If you try to go to a traditional home lender for your needs, you probably will feel discouraged. However, mobile home lenders work exclusively with mobile home buyers.
How Much Money Do I Need as a Down Payment?
Generally speaking, lenient lenders require 10% down for mobile home deals. Some companies may require 20% or more down, while individuals with excellent credit might occasionally qualify for only 5% down payment.
What Documents Do I Need to Be Approved for Financing?
The documents that you need for financing depend on the lender and the situation. Usually, borrowers need a driver’s license or another form of government identification. They also may need the following:
Proof of income (pay stubs, bank statements, or tax returns)
Social security number or TIN
Letter from previous landlord
Letter from current employer
How Do I Find a Good Lender?
In today’s world, you need to be on the lookout for scams. Before committing to work with a lender, you should check out their online presence. Do they have a website and testimonials? Are you able to speak with someone on the phone or via email?
When it comes to a lender, you should seek out someone who communicates well. It’s important to work with someone who can walk you or your buyer through the process. As you shop around for a lender, pay attention to how they communicate.