Home buyers unable to afford a traditional site built home or unwilling to spend more on housing consider mobile home as a suitable housing alternative.
A mobile or manufactured home is a housing unit built in factories and then taken to the site where they are fixed to the ground. Such a house is often placed on a rented lot and left there permanently. But one can move it to a different location, as is the requirement in certain areas. The term andquot;mobile homeandquot; was widely used to describe factory-built homes before the 1976 HUD code was enacted.
Manufactured homes can be financed by taking a mortgage loan for buying both the land (lot) and the home or by purchasing either the land or the home. Generally, borrowers seeking loans for mobile home purchase are required to make a down payment of 5-10%. The loan term in most cases varies from 15 to 30 years. There are fixed rate as well as variable rate loans along with the option to buy down the interest rate.
When is a borrower eligible for mobile home loan?
The eligibility criteria for a mobile home mortgage loan are somewhat different from that of traditional home loan. Borrowers become eligible for the loan only when they satisfy the following criteria:
Foundation requirements:The mobile homes must follow the building standards proposed by HUD under the Federal National Manufactured Housing Construction and Safety Standards Act of 1974. The HUD code requirements are as follows:These homes must be built as one, two or three section home in a protected building center and then transported on a frame to be installed on the site. The wheels and axles must be removed and the house should be fixed to the ground.The homes should comply with the HUD code restrictions for construction, design, durability and strength, fire resistance, energy efficiency, transportability and quality.The property should maintain high standards for heating, plumbing, air conditioning, thermal and thermal systems.The property must pass through strict inspections conducted by third party.Ownership Rights: The borrower must have fee simple form of ownership except if the loan is required for a lot which consists of a share in a co-operative association owning and operating the mobile home park.Purpose of the loan: The loan must be taken in order to purchase or refinance only a manufactured home with the land being owned by the borrower, the home and the land on which it is situated, only the land on which the mobile home (already owned by the borrower) will be installed.
The home must be the principal residence of the borrower. For a lot loan, the mobile home must be placed on the lot and must be the principal residence within 6 months after the date of the loan. However, if the loan is taken for a mobile home placed on a mobile home park, then the lease on the home should extend for at least 5 years beyond the loan term.Credit Score: Borrowers must have an average credit score of 620 in order to qualify for a mobile home mortgage loan at an affordable rate of interest. However, lenders may offer loans to borrowers having lower credit score but he may have to pay higher interest rates. However, one can lower the rate by making higher down payment.
Manufactured homes on land owned by the borrower are considered as real estate but those on rental sites are regarded as personal property. However, personal property loans have different eligibility criteria as compared to a mobile home mortgage loan.
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