Step 2 – Financing
Purchasing a new manufactured, modular or mobile home is a substantial financial investment. Fortunately, there are a large number of different financing options available these days as you research the best methods for purchasing your new home.
Dream Home Outlet can definitely help you get pointed in the right direction!
First, some education: Let’s quickly go over a few options and considerations in regards to paying for your new manufactured home:
Option #1: Cash Purchase
Some homebuyers have ample monetary reserves and choose to pay for their new homes, in full and upfront. If this is your situation, there is little-to-no need in considering further financing.
Option #2: Conventional Mortgage
With a conventional mortgage, your new home is financed and purchased as real property. This means that the home and the land are bought and/or financed together. There will be a loan application and credit approval process (usually through a bank, credit union or independent mortgage broker). Once your loan package is finalized with your lender AND we have gotten your new home and land combination in order, you will attend a ‘closing’ where ownership to your new home are handed over to you.
Remember, the conventional mortgage approach is usually taken when your new home and building site land are purchased TOGETHER.
Option #3: Chattel Mortgages
Chattel mortgages are personal property loans. This method is used when ONLY the home is financed. That is, chattel mortgages are utilized when you do not yet own your land – or – already own (or have documented possession of the land) where we will be erecting the new manufactured home.
Unlike a conventional mortgage, using a chattel mortgage you will be provided a Title instead of a Deed. Only when there is land involved will you receive a Deed.
If you are buying a home that will be on leased property, a chattel mortgage may well be the only financing available. This type of ‘leased land’ financing is common in planned communities or manufactured home parks, where the buyer doesn’t actually own the land.
The Closing Costs
These fees are similar across the board for ALL home buyers (regardless of credit history, income level, or other considerations). The really good news is that these closing costs are INCLUDED in the loan amount in over 90% of our transactions. That is, you typically do NOT have to come up with large sums of money to pay closing costs out of pocket.
The Down Payment
Whether you finance with a conventional or a chattel mortgage, you will need some form of down payment AND enough funds to cover closing costs.
Down payments can be as low as 3.5% of the total home cost. Example: A $50,000 home’s down payment would be $1,750.
Finding A Lender
Here is where you have to pay close attention and be VERY cautious!
As you shop for a manufactured, modular and mobile home, do not allow ANYONE (an individual, finance company, bank, credit union, mortgage broker or manufactured home seller) run random credit reports on you!!
Your common credit score means very little when it come to financing a manufactured home. What is important is a FICO score (this is a very specific ranking of your credit for mortgage purposes).
If you allow one or more entities to pull up your credit score prior to your manufactured home purchase, you risk damaging your FICO score. Additionally, some unscrupulous re-sellers of homes will intentionally steer your credit ranking and credit application towards financial institutions they own and/or control (which can lock you into higher than market interest rates).
Dream Home Outlet works with several independent, reasonably priced financial institutions. We actively and tirelessly seek to insure that you get the best possible sales price on your new home as well as the smallest down payment, the lowest competitive interest rate and most affordable monthly payments available based on your financial status and monetary position.
As part of our overal service to you, we will sit down assess your unique financial picture. Together we can establish the best possible loan scenario for you.
Have questions on your finding Affordable Financing for your new home?
We are here to help you. Feel free to contact Moe, our Affordable Financing Expert, at any time.
Once you get your basic financing situation figured out, you’ll be ready for the next step: