South Carolina has a high percentage of manufactured homes in its housing mix, and mortgage programs for these homes have often been difficult to obtain. Mark Wells at Preferred Financial Services discusses financing options for these homes and answers common questions from purchasers.
The dealership I have been talking to has ‘modular homes’ for sale. Are these the same thing as mobile homes? Although dealerships sometimes use these terms interchangeably, they are two entirely different types of homes, covered under completely different mortgage programs. Determining which you have is simple: All mobile homes are originally titled as vehicles (since they can be moved down the road from once place to another). If the home you are looking at has, or has had, a vehicle title, then it is a mobile home.
The dealership is offering me financing, but it seems like a high rate. They said I did not have to tie my land to the home, and that I could finance just the home itself. Should I do this? Since a mobile home is technically a ‘vehicle,’ financing the home by itself, without the land, is a loan secured by a vehicle, and is not always on the best terms. For you to get fixed-rate, 30-year terms for a mobile home, you will have to own the land that the home is put on, and you will have to modify the title of the home from a vehicle to Real Property.
What do you mean by modifying the title? When you close a fixed-rate, residential loan on a mobile home, an attorney will retire the vehicle title (literally turn it back into the DMV), and re-title the home as Real Property. From then on, the house will be tied to the land it is on, and cannot be removed as long as the permanent loan is in place.
Is it worth doing this? You should compare the two loan options. Right now, FHA loans are available for manufactured housing on 30-year, fixed-rate terms, in the 4.0 to 4.5 percent range, depending on credit scores. FHA 15-year, fixed-rate loans are under 4 percent. Loans for just the home itself can run in the 6–12 percent range so usually the FHA loan is best.
Are there other requirements to get an FHA loan? When the home is placed on the land, the tongue and axles must be removed from the home, and the home must be put on a permanent foundation, with concrete footings and a brick or block curtain wall around the foundation. An inspection is required by a certified contractor once the house is set up.
That sounds expensive. Can I include the cost of the foundation in my loan? Yes; it generally adds about $25–$30 per month to your payment. However, it is good to look at your home as an investment, as well as affordable housing. Once the home is permanently attached to the land and is on a permanent foundation, your resale value is much, much higher than a mobile home by itself.
If I already own the land, can I use the land as my down payment? Yes, the value of the land can be counted as your down payment, and is often more than enough to meet FHA guidelines. Any loan on the land will be paid off by the FHA financing, so you are left with a single house payment each month.
Mark has been providing Upstate clients with manufactured-housing financing for over 25 years. He is happy to discuss your situation in more detail, and can be reached at 864-235-9596 or Mark@TheGreatestRates.com.
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