Bad Credit Mobile Home Loans

Difference between Mobile and Manufactured Homes

Manufactured homes are single family homes that have been constructed entirely in a factory controlled environment in accordance with the safety standards imposed by the US Department of Housing and Urban Development (HUD). The HUD Code, which regulates the design of the home, the quality and the strength of construction, the ease of transportation of the home, resistance to fire, heating, plumbing, air conditioning, electrical wiring and efficient use of energy in the manufactured home, came into effect on 15th June, 1976. Manufactured homes that were constructed prior to 15th June, 1976, are known as mobile homes.

Mobile Home Loans

The term mobile home and manufactured home are often used interchangeably. However, if the home has been constructed prior to 1976, the chances of being able to obtain a loan for the purpose of buying or remodeling the home are bleak. This is because most lenders expect the home to be constructed in accordance with the HUD code. Financing a mobile home, that was built after 1976 in compliance with the HUD code, involves the following issues.

Manufactured Home Loans

Purpose: The loan must be sought for the purpose of buying a manufactured home, with or without the lot, or for buying only the lot on which the manufactured home would be installed. The manufactured home should be the principal residence of the borrower. In case the borrower is availing a loan for purchasing the lot, the home needs to be installed on the lot within a period of 6 months. If the loan is for the purpose of buying only the manufactured house, which will then be placed in Mobile Home Park, the lease on the home should extend for at least 5 years beyond the term of the loan.

Credit Score, Down Payment and Debt to Income Ratio: A credit score over 620 is desirable. A credit score of less than 600 will force the borrower to seek a bad credit manufactured home loan. A down payment equal to 5 to 10 percent of the purchase price is generally required. The debt to income ratio should not be more than 31 percent. The loan is given for a term of 15 to 30 years depending upon the credit profile, size of the home and type of home loan.

Type of Loan: In case the loan is meant for the purpose of buying a home that would be placed in a rented lot, the borrower should opt for a personal property loan. A mortgage loan, for buying both the land and home or either the land or the home, can be availed if the home has a permanent foundation. A mortgage loan carries a lower rate of interest as compared to a personal property loan that is usually provided by the retailer who sells the house.

Lenders: FHA offers insurance on approved Title 1 and Title 2 loans. Title 1 loan is used to purchase or refinance a manufactured home, purchase a lot on which to place a manufactured home, or purchase a manufactured home and the lot in combination. Title 2 loan is a mortgage loan. VA guaranteed loans are available for eligible veterans. FHA insured loans and VA guaranteed loans are meant for people with fairly decent credit scores. Freddie Mac and Fannie Mae also buy manufactured home mortgages provided the loan conforms to their guidelines. Hence, for availing loans guaranteed or owned by these lenders the borrower needs to have a fairly good credit score. This brings us to the question of bad credit manufactured home loans.

Bad Credit Manufactured Home Loans

For availing bad credit manufactured home loans (or bad credit mobile home loans), the borrower has to pay a high rate of interest on the loan. Even then, lenders may be unwilling to provide the loan. For the purpose of obtaining an equity loan in order to make improvements on the house, a credit score of less than 600 may result in the applicant having to pay 35 to 40 percent of the market price of the home as down payment. Hard money lenders may be willing to provide loans at very high rates of interest. However, it’s best if these bad credit mobile home loans/ bad credit manufactured home loans are avoided.

An aspiring home owner should work towards building a good credit score since a good credit score is a prerequisite for a number of loans that a person may require in future.