Although millions of home buyers are opting for residential real estate properties such as fully-detached homes, condos, townhouses and more, there are also an increasing amount of buyers who are showing some strong interest in manufactured and modular homes. Although there are some notable similarities between the two types of homes, some major differences exist that are worth noting. Major advantages exist with both types of homes over traditionally built homes that include lower cost and improved quality, thanks to advances in technology.
Manufactured homes are homes that have been entirely built in advance before they are transported and are fixed onto a designated piece of public land (they can eventually be moved to another location). These types of homes also have federal HUD (Housing and Urban Development) tags to signify that they are manufactured, unlike traditional homes. As such, they are built upon a permanent steel chassis.
Modular homes, on the other hand, are transported to the building site as parts that have already been assembled in advance, and then are built by contractors (where they are permanently fixed, unlike manufacture homes). Thus, the buyer has greater options for customization before the home is actually built. They are equally as sturdy and stable as homes built on-site, while being treated the same as normal homes with respect to financing plans.
Instead of being subject to HUD codes, they are subjected to IBC (International Building) codes that are relative to where it will be placed. Additionally, modular homes are subject to the same building codes as regular homes (local, state and regional). Inspectors undergo strict approval processes to ensure that a modular home will meet all of the necessary structural requirements. Unlike manufactured homes, its value generally increases over time due to its sturdiness but they do tend to be more expensive than manufactured homes. Plus, the home-buyer must own the land where the modular home is going to be placed.
Here are some of the options that you have as a home buyer for getting a loan on a manufactured or modular home:
FHA (Federal Housing Administration) Loans
With only 3.5% of the home purchase price required as an initial down payment these FHA-insured loans are suitable for first-time home buyers who are looking for something different from a traditional home. Other benefits include low credit score requirements (some lenders will accept scores as low as 520), low interest rates, greater leniency for debt-to-income ratios, and long fixed-rate terms. However, unlike traditional homes, manufactured homes have an extra set of requirements. In addition to the home having a permanent foundation on a piece of the land that meets FHA standards, manufactured homes must be built after June 15, 1976 in order to qualify. It is also worth mentioning that the home must be used as the owner’s primary residence.
VA (Veteran’s Affairs)
Anybody who has served in the military and is looked for a modular or manufactured home would be better off opting for this mortgage loan, regardless of whether they are first-time home buyers or not. It is known for being one of the few zero down payment loans (i.e. you can finance 100% of the home purchase price) that is welcoming towards people with bad credit history and lower credit scores.
It is worth noting that, much like a FHA loan, it is generally easier to get a VA loan on a manufactured or modular home, than a Conventional loan. On top of that, the requirements for getting a VA loan approved on a manufactured home are virtually identical to getting a FHA loan. And while a funding fee is required for most VA-backed manufactured and modular homes, the fee can be financed into the transaction and there is no monthly mortgage insurance.
USDA (US Department Of Agriculture)
Just like the VA loan, the USDA loan is a zero down payment option for home buyers who are financially challenged and need a mortgage option that suits their circumstances. The caveat is that the home must be located within a geographical area designated by the USDA, which tend to be rural and suburban in nature. With long fixed rates (30 years), lower interest rates and flexible credit requirements (620 and higher), they are a viable alternative for people interested in manufactured and modular homes. However, the homes cannot be used manufactured or on-frame modular homes.
Conventional
These loans require at least 5% down payment on the total home price, and have stricter requirements for credit scores, debt-to-income ratios, and bankruptcy/foreclosure history than any of the loans mentioned so far. They are best suited for people who are in a financially stable situation for the foreseeable future, with perks involving a lack of mortgage insurance and lower interest rates. For both manufactured and modular homes, the standards for FHA and VA mortgages need to be met.
WHICH LOAN IS BEST FOR ME?
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