10 Tips for Manufactured Home Financing in 2019

The pathway to securing manufactured home financing continues to differ from site-built structures, but interest rates are highly competitive. It stands to reason that financial institutions would have a wider variety of lending options available for site-built houses. That’s because they comprise a larger share of the housing market.

But manufactured home financing options are trending due to the industry gaining upwards of 9 percent of the homes market. According to the Manufactured Housing Institute, over 96,000 manufactured homes were sold in 2018 with nearly 4,000 homes in CA. What’s even more telling is that number has nearly doubled since 2009. For every dream home sold, a buyer was able to secure a loan. Although the manufactured home financing process can be slightly different, these 10 tips may prove helpful in getting the keys to your dream home.

1:  Know Your DTI Ratio

Plenty of advice columns will tell you that the primary concern for securing manufactured home financing is having a good credit score or a 20 percent down payment. The reality of obtaining a loan is that your debt-to-income ratio remains ground zero. That’s because a lender’s first concern is your ability to pay back the loan. People with debt-to-income ratios above 43-to-57 percent are considered poor risks. According to the Consumer Finance Protection Bureau,  “43 percent” tends to be the cutoff point for most credible lending outfits. The first step to stop renting and start owning a manufactured home is to calculate your DTI.

2:  You Don’t Need Perfect Credit for Manufactured Home Financing

If loans were only offered to people with perfect credit scores, the housing industry would probably not be growing. Like mortgages for site-built structures, manufactured home financing is generally available for people with less-than-perfect credit. Traditional loan products usually require an average credit score of 620 or higher. However, there is competitive financing available for qualifying people with scores as low as 580 as well.

3: Manufactured Home Financing with Bad Credit

Just because you have suffered a few credit history blemishes does not necessarily mean every lender will reject your application. There are certainly reasonable explanations for so-called “bad credit” and ways to compensate. For example, delinquent bill payments while you were serving overseas in the military or a setback from illness or injury may be mitigating factors. Beyond these credit hiccups, there are ways to potentially overcome a low credit score, such as the following.

• Large Down Payment
• High Income
• Substantial Cash Reserves
• Currently Paying Higher Rent
• Low or No Debt

Keep in mind, credit scores are one factor among others when applying for manufactured home financing.

4: Consider Working with Industry Resources

Because manufactured home financing is something of a niche market, manufacturers and others in the industry have streamlined the process. It’s not uncommon for a company to either offer direct financing or have a go-to relationship with a credible lender. When you look at manufactured homes, ask about financing.

5: Consider Applying to Specialized Lenders

It may be worth thinking about the home loan industry like the legal profession. Lawyers often work in niche areas such as family or personal injury law. They put a laser focus on a specific type of practice. The lending industry also has companies that specialize. A company that has a significant manufactured home financing focus may improve your chances.

6: Consider Applying for a Chattel Loan

Not every buyer owns the land the manufactured home will be located. Manufactured home communities are emerging all over the country and specialized chattel loans are specifically designed for this scenario.

7: Think About Your Long-Term Financial Goals

In too many cases, home buyers opt for 30-year mortgages because they generally offer the lowest monthly premiums. That’s certainly one way of managing your financial health. But if you have the resources, consider shorter loans that would eliminate the monthly mortgage sooner. Imagine what you could do with no mortgage in only 15 years.

8: Make a Long-Term Home Ownership Plan

The excitement of purchasing your first manufactured home can seem like a dream. Enjoying a home of your own can become the singular goal. Take a step back and consider the initial purchase as one step in your life’s journey. Perhaps you plan to have the home delivered to a manufactured home community to save money on a land buy. In that scenario, it may be prudent to map out how you get from community living to a spacious private property of your own. One of the great things about manufactured homes is that they can be moved.

9: Plan for Your Family’s Future

When securing manufactured home financing, it may be in your best interest to know the highest amount a lender will offer. The point is not to use all of your financial bandwidth. The point is to take that figure and compare it to the type and size of your future manufactured home. Newlyweds may want to discuss how many children you are planning. Established families may just want an extra bedroom for friends and relatives who visit. Manufactured homes are tremendously cost-effective. Consider how much space you may need down the road.

10: Work with a Credible Manufactured Home Maker

At the end of the day, perhaps the best tip is to only work with a manufactured home organization that has established a reputation for quality construction and service. There may be marketing strategies that tout “cheap homes.” Don’t buy into those claims. Working with a company that builds cost-effective living spaces that you will be proud to own will make all the difference.

For more information about how to negotiate the manufactured home financing process, check out this guide.