Most lenders require a minimum credit score of 580 to 620 to buy a mobile home. However, you can still get financing with a lower score. You may have to provide a larger down payment and pay a higher interest rate, though. Remember, banks want to lend money! So, even if your credit is less than perfect, more than likely there’s a loan program out there for you. Finding the loan that’s right for you will depend on your unique credit profile. This not only includes your credit score, but also your income, assets, debt levels, and payment history.
How do I qualify for a mobile home loan?
Qualifying for a manufactured home loan is a relatively straightforward process.
- Visit an Oak Creek Homes Center and meet with a housing consultant. Your housing consultant will ask about the type of home you want to purchase. They might also ask where whether you’ll be placing it on land, in a community, or along the coast, etc.
- Your housing consultant will then help you determine your budget. This involves looking at your gross monthly income and current debt obligations to determine your debt-to-income ratio.
- Next, your housing consultant will show you homes that fit within your payment range. This greatly increases your chances for loan approval once you pick out a home.
- From there, your housing consultant can help you with your loan application. They can help to choose the mobile home mortgage that best fits your needs.
Let’s look at some of the types of mobile home financing available.
Mobile Home Financing
Your financing options will be determined by your unique credit profile and whether you own your land, are purchasing land along with the home, or are purchasing the home only. There are many types of loans to choose from, even if you don’t have great credit. A government agency or a private enterprise can back a mobile home mortgage. A private enterprise usually has more flexibility to determine its own risks. This can provide you with more financing options.
A chattel mortgage is a home-only transaction. The home can be placed on your own land, a family member’s land, or land you are renting from someone else. This includes manufactured home communities. A manufactured home community is a great option if you aren’t ready to purchase your own land or don’t have a place to put the home. Banks provide chattel mortgages. They are not generally backed by a government agency. This type of loan will typically be for a shorter term of 10, 15, or 20 years. Chattel mortgages will have a higher rate than FHA or VA. Closing costs are much lower. A chattel loan can close in a shorter amount of time than other types of loans. Down payments for this type of loan can range from 5% to 20%, or higher if your credit is marginal or poor.
Land and Home Private Mortgage
Many of the same private companies that offer chattel mortgages also offer land and home financing. These loans will have the same types of terms as chattel mortgages but can be for longer than 20 years. These banks each have their own scoring systems and loan programs vary slightly from lender to lender. Overall, these types of loans have much lower closing costs and fees than government-backed loans.
The Federal Housing Administration provides banks with a guarantee to ensure the loan against losses but does not make loans directly. FHA loans are available for primary residences only, so secondary or vacation homes won’t qualify. FHA Title II loans are real estate transactions, so if you own your property it will be part of the collateral to secure the loan. Rates for FHA loans are quite competitive and are some of the lowest available. However, closing costs can be higher than other types of loans and generally include interim construction loan fees as well. Loan terms can be anywhere from 15 to 30 years. The down payment required can be as low as 3.5%.
Veterans Administration (VA) loans are another way to buy a manufactured home. To qualify you must be a service member or veteran. This type of loan is for manufactured homes attached to a permanent foundation on land owned by the borrower. If you’re buying the home and land together it must be your primary residence. Being a service member or veteran will not guarantee that you qualify. Your employment history, credit history, assets, and income will be taken into consideration and evaluated. The minimum down payment is 5% and rates are comparable to FHA loans.
The USDA Loan is a mortgage option available to some rural homebuyers. USDA Home Loans are guaranteed by the United States Department of Agriculture. USDA Home Loans are particularly favorable to those living in rural or low-income areas. The downside to a USDA loan is that a Guarantee Fee of 2% is added to the loan’s total amount. Plus, an annual fee of .5% is added to your monthly payment. The minimum credit score to qualify is higher than other types of mortgages. Unlike traditional mortgages, you can be disqualified for making too much money. The maximum limit is 115% of the median income for the county or area you want to live in.
Buying a Mobile Home
Just because you have had some bumps on your credit doesn’t mean you can’t become the owner of a great manufactured home. In fact, buying a manufactured home can be a smart way to start building credit. Since manufactured homes are less costly than site-built homes, they are an attractive option to first-time homebuyers and others looking to start gaining equity.
Buying a Mobile Home with Bad Credit – Getting Approved with a Low Credit Score
We receive questions about credit scores all the time from potential homebuyers who are concerned that their poor credit will prevent them from owning a new home. The fact is that there is a loan program out there for almost every buyer. You may have to meet other conditions and pay a higher rate than you prefer, but options are out there. Having a good credit score will make it easier to obtain more favorable terms to your liking.
There is More to Getting a Home Loan than Your Credit Score
Your credit score alone does not determine your eligibility for a loan. Your income, assets, current debt load, and your loan history all contribute to the approval process. In addition, the amount of the payments compared to your monthly income plays a key factor in determining your loan approval. This is called your housing ratio. Banks usually want to see you spend no more than 31% of your monthly income on your home payment. Your home payment is the principal, interest, taxes, and insurance you pay each month. Certainly, a higher credit score might make the process a little easier and give you a loan with more favorable “terms”. However, a low credit score doesn’t automatically disqualify you from getting approved for a home loan.
Applying for a mortgage on a home that will give you a home payment that is well under 31% of your monthly income will increase your chances of approval.
So, how important is a credit score in determining your ability to get a loan? Let’s look at what goes into determining your credit score.
What Does a Credit Score Represent?
Let’s take a look at how most credit scores are calculated. Your payment history generally makes up 40% of your score, while credit utilization is 20%. The length of your credit history contributes 21%. The total amount of recently reported balances,11%. Finally, new credit accounts are responsible for 5% while your available credit makes up 3%. All of these values factor into a credit score. A credit score typically ranges between 300 and 850. The higher the number the better.
Check your credit score regularly with a monitoring service, but don’t let minor fluctuations stress you out. Your credit score is just a snapshot of how you’re managing your credit at a particular moment in time. Paying your bills on time, maintaining low balances, and not taking on too much debt can help to rehabilitate your credit profile, resulting in a higher score. Download your FREE Guide to Credit and see TIPS to improve your credit score.
Come and see us, we can help!
Starting with a visit to Oak Creek Homes is a great way to find out just how you can qualify for a mobile home mortgage. Your housing consultant can help in determining which home is right for you by understanding your housing needs and your budget. Oak Creek Home’s friendly support staff will assist you through the process and answer any questions you have along the way.
The only real way to find out the answer to the question “Can I qualify for a manufactured home loan?” is to come in and apply. Once you have received your answer from the banks, you can decide whether the terms of the mobile home mortgage offer are right for you. Then it’s up to you whether to proceed or pursue other options.
Contact us today to schedule a visit
Let us help you in your journey towards homeownership. We can not only help with financing but finding land too. Land and home packages are available.
For a full list of Mortgage Lenders that Oak Creek Homes works often with – CLICK HERE.
Other Educational Resources
Just starting the manufactured home buying journey? Download these handy checklists. They’ll start you off on the right path.
Manufactured home builder Oak Creek Homes has been building manufactured houses and modular homes for over 50 years. We deliver to Texas, Oklahoma, Louisiana, and parts of New Mexico.
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