Getting a Mortgage Loan for Manufactured Homes – It’s Easier Than You Think!

Getting a Mortgage Loan for Manufactured Homes-It's Easier Than You Think- 150x150Manufactured homes are a good alternative to conventional homes, but still follow a similar home buying process. A manufactured home, also referred to as a mobile home, is a type of home that is factory built, with a steel frame, and that can be transported anywhere on its own wheels. This can also mean homes that are prefabricated, meaning that they look very similar to traditional houses, but are built as modules that are then transported and assembled on a normal house foundation.

These types of homes are usually cheaper than traditional homes, but most people will still probably have to take out a mortgage loan in order to purchase a manufactured home. Unfortunately, getting a home loan for a manufactured home can be more difficult than taking out a mortgage for a traditional home. Not only that, but you will most likely have to pay a higher interest rate on a manufactured home. Two or three percent more on your interest rate can mean thousands over time. Here are a few options if you are considering buying a manufactured home with a mortgage loan.

FHA or VA Loans

The Federal Housing Administration (FHA) and the United States Department of Veterans Affairs (VA) have designed mortgage loans that can help home buyers with lower incomes as well as for military active and retired personnel.

Because the minimum square footage is required to be 400 feet for an FHA loan to be approved for purchasing a manufactured home, single-wide homes cannot be bought using this type of government insured mortgage loan. Also, the home owner must pay the same property taxes as he or she would pay on a traditional home. In most areas the owners are required to strap the manufactured home to the ground using anchors or concrete pylons. The home’s wheels may have to be taken down, depending on that area’s regulations. The amount that you can borrow to purchase a manufactured home is much lower than the amount that you can borrow for a traditional home, when taking out an FHA mortgage loan, and it is based on whether you take out a mortgage for the lot, the home, or both.

The United States Department of Veterans Affairs requires that you use the home as your primary residence in order to qualify for a VA loan. Your credit score must be good and your debt shouldn’t be more than 41 percent of your income. You are able to borrow up to 95 percent of the home’s value with a VA mortgage loan.

Lot Owners Are At An Advantage

If you own the lot on which the manufactured home will be placed, and if it will be placed on a house foundation, you will receive better interest rates and loan terms from lenders. If the home will be your residence, you will be able to deduct your interest payments. However, this won’t be the case if you rent the property.

Normally, financing for manufactured homes is done through the company that sells the home. Other lenders will, most likely, require that you own the lot on which the house will be, or your mortgage loan application will risk being denied.

Manufactured homes are cheaper than traditional homes and is a great alternative when you don’t have enough money available to buy a home. Before buying a home with a mortgage loan, do a little research in order to avoid being denied the loan for something that could have been prevented.

How to Refinance a VA Loan

Refinance VA Loan- 150-x150Since 1944, the U.S. Department of Veterans Affairs (VA) has helped more than 18 million American veterans become home owners. The loan, issued by a lender, is insured against default by the VA. They also dictate the requirements for those who can qualify and the terms of the mortgage. A VA loan offers benefits to active-duty military members, veterans, and surviving spouses. VA loans are generally used for a few purposes, such as buying or building a new home, refinancing a mortgage loan, or home improvements.

Benefits of a VA Loan

VA loans feature a number of benefits compared to conventional loans. If you are an eligible veteran or active duty personnel, then you should seriously take into consideration the VA loan as the most important option for mortgage financing. Benefits that make a VA loan better than the alternative are:

  • No down payment. Apart for a couple of options that have strict requirements, it is impossible to find a lending option that will finance 100 percent of the loan. There is also no prepayment penalty on VA loans, unlike conventional loans.
  • Lesser requirements. Your credit score will not matter as much as it would if you were to apply for a conventional loan. In fact, it is estimated that close to 80 percent of the people who choose a VA loan would not qualify for a conventional loan.
  • No mortgage insurance. Compared to conventional and FHA loans that require you to pay a small percent of the total loan amount as mortgage insurance, VA loans do not have this requirement.
  • Easier to refinance. You can easily qualify for a lower interest rate when refinancing within the VA program through their streamline refinancing option.

Types of VA Refinancing

Also known as the streamline refinance, the Interest Rate Reduction Refinance Loan (IRRRL) is the best choice if you already have a VA loan and want to refinance in order to reduce your monthly mortgage payments. Because you are refinancing from one VA program to another, this type of refinance will be completed quickly. Unless the lender specifically requests it, you won’t have to have your home reappraised. Also, closing costs can be rolled into the balance of the loan, meaning that you will have to pay little or nothing out of pocket.

Your other option when refinancing a VA loan is the cash-out refinance loan. This program will give you the opportunity to refinance your VA loan while taking cash out of your home’s equity for home repairs and improvements, or in order to pay off debts. Normally, you can refinance up to 90 percent of your home’s value with VA’s cash-out loan. You qualify for this type of refinancing based on your income and credit score. Same as with the IRRRL, the closing costs can be rolled into the entire loan amount.

Steps of VA Loan Refinancing

Refinancing a VA loan is a good choice if you wish to reduce the cost of your mortgage. However, you should be aware that refinancing can get pretty expensive. Refinancing fees, such as the origination fee and the VA funding fee, appraisals and closing costs, can make this whole process cost a few good thousands of dollars. If you have decided that refinancing is the right path for you, here are the steps that you should follow:

  • Contact a few mortgage refinance lenders until you find the best rates. The interest rate on your new loan will have to be lower than the one on the original loan, as this is a requirement of the VA Interest Rate Reduction Refinancing Loan program.
  • Your lender will ask you to provide documents that will prove your monthly income and expenses. Documents that you will have to show are your last two paychecks, your last two income tax returns, bank statements, and statements from other loans and credit cards.
  • Even if the VA doesn’t require this, it is up to each lender’s requirements, so you might be asked for permission to have your credit report checked.
  • The VA doesn’t require an appraisal for refinancing, but some lenders may require one, so they will hire a real estate appraiser to determine the value of your home. Unfortunately, you will have to pay for this appraisal.
  • After you receive the new loan terms and interest rate, you will need to sign a contract and start making the new monthly payments.

Refinancing a loan that is backed by the U.S. Department of Veterans Affairs is not a difficult process and the requirements are very lenient. While refinancing is typically a good choice and will improve your financial situation, you need to do your homework and look beyond interest rates when deciding if it’s the right choice for you.