Mobile Home Loans / Financing

Learn about loans with or without land, loans with bad credit, and more!

Land/Home Loan Financing

With so much beautiful land to build on here in Texas, land and home packages are a popular choice for buying a new mobile home.

Land and home financing for mobile homes can really be broken down into two main categories: Conventional Loans and Government backed loans like FHA, VA, and USDA mortgages.

With conventional land and home loans, the banks are using their own money to offer financing on your new mobile home so they get to make the rules as to the requirements for your loan. FHA, USDA, and VA home loans offer a great path to financing a new mobile home with little to no down payment, but they generally set more stringent rules.

Land/Home Loan Financing – VA & FHA Loans

Veterans in the United States have access to various programs aimed at helping them become homeowners. In Texas, the Texas Veterans Land Board offers specialized financing programs with reduced rates for land and homes. However, it’s crucial to note that they do not offer construction loans. On the federal level, the VA loan program stands out for its flexibility and benefits. Unlike state programs, VA loans can be used for purchasing existing homes or for construction loans, depending on the veteran’s needs.

Requirements and Benefits

The VA loan is facilitated by a licensed and approved lender, even though the funds come from the Veterans Administration. Veterans must provide documentation to prove their status, and the homes purchased must meet specific construction requirements. For instance, the home must be attached to a permanent concrete foundation, much like FHA or USDA loans. Utilities must also be connected by a licensed contractor.

One of the most significant advantages of opting for a VA loan is the possibility of purchasing a new home with zero down payment. However, potential homeowners should be aware that other costs, such as closing costs and initial tax and insurance payments, may still apply.

Chattel Loan Financing

Once you’ve found that perfect manufactured home and know exactly where you’d like to build it – one of the next things you and your family will need to figure out is what loan options make the most since for you.

One of the most common options used when purchasing a mobile home is what is referred to as chattel. This means you are obtaining a loan for the home only. The land you are placing the home on will be purchased separately, or, if you are placing in a mobile home community, not purchased at all.

There are quite a few benefits from obtaining a chattel loan. First, the loan will be for just the cost of the home, which means a smaller loan. Second, the land is free and clear if your loan is defaulted and the home is repossessed—certainly not a pleasant thought, but a practical one. Third, the home is taxed separately from the land, meaning smaller monthly payments on what is called escrow (the part of your payment made toward tax and insurance).

Buying chattel also means processing the home purchase and installation more quickly than some of the loans we will discuss below.

Of course, it wouldn’t be right to tell you all the benefits without giving you some of the negative sides as well.

With a chattel loan, because only the home is being purchased, it is a loan the bank considers “high risk.” This means that banks will typically require at least 5%-10% down payment and charge a higher interest rate—between 6.99% and 12.99% dependent of course on credit score and total down payment.

For more information on this type of mobile home loan, check out our blog on chattel loans.

Land In Lieu Financing

One of the most appealing aspects of this financing option is that it allows you to use the equity in your land as a down payment. This means you and your family can move into a new home with little to no cash out of pocket. Banks will send an appraiser to assess the fair market value of your property, determining how much credit they can offer you toward your down payment.

Other Requirements: Accessibility and Acreage

Another crucial requirement for using land-in-lieu financing is that the property must be adjacent to a publicly accessible road. Only a small portion needs to meet this requirement if you own a large piece of acreage. You can request a surveyor to segment out the specific piece of property you plan to use as collateral with the bank.

Payments and Considerations: Weighing the Pros and Cons

While the land-in-lieu option eliminates the need for a cash down payment, it’s essential to note that your monthly payments may be higher. This is because you’re not putting any money down to offset the home’s cost. 

Buying with Bad Credit

When buying a mobile home, bad credit isn’t necessarily a deal-breaker. Credit is just one of several factors that banks consider when approving a home loan. Surprisingly, many applicants find that their down payment requirements are much lower than initially thought. Therefore, if you’re concerned about your credit score, it’s still worth applying for a loan to explore your financing options. Some lenders even offer specialized programs that accommodate various credit scores, as long as other financial aspects like budget and down payment are in order.

Alternative Options: Credit Repair and Counseling

Braustin Mobile Homes collaborates with the Next Step Network, a national nonprofit organization that provides credit repair and counseling services. This partnership ensures that very few families are left without options for improving their financial standing and moving closer to owning a home.

The Appraisal Process

Whether you’re using your land as collateral or buying a home with land, the bank will want an appraisal to determine the value of the property you purchase or use as collateral. An appraiser will visit your property and research comparable sales in your area from the last 12 to 18 months to establish its value. If you’re buying a complete home package, the appraiser will also evaluate the home and any site work planned within your loan. Finalizing the exact options and costs before the appraisal starts is crucial, as changes can’t be made once the process begins.

Title Search and Survey: Legal and Physical Boundaries

Most loans involving land will also require a title search. A title company will delve into the property’s history, going back 50 to 100 years, to ensure it has legally changed hands and is free from liens or judgments. Some lenders also require a property survey, which outlines the exact boundaries of your land. This is essential for determining setbacks or fence boundaries.

Costs and Timeframe: What to Expect

Nearly every lender will require a non-refundable deposit before or during the appraisal, survey, and title search. The deposit can range from $300 to $800, depending on the lender and the scope of work. The timeframe for this part of the process can vary between two to six weeks, depending on your location and the extent of the work needed.

Mobile Home Trade-Ins

Income Verification

Income verification in the loan process is about protecting you. Yet it remains a frustrating piece of the loan process, usually because families don’t know what to expect. In this video, Alberto breaks down each and every step of what to expect in the process.

Budgeting for a mobile home

Budgeting is more than just a financial tool; it’s a roadmap to achieving your dream of homeownership. Here are eight quick reasons why you should budget when planning to buy a home:

• Motivation: A budget provides a realistic timeline, keeping you motivated towards homeownership.
• Credit Score Boost: Timely payments and debt management, facilitated by a budget, can improve your credit score, leading to lower loan interest rates.
• Larger Down Payments: Extra cash can be allocated towards a larger down payment, reducing monthly mortgage costs.
• Family Financial Goals: Budgeting helps align and communicate family financial goals, whether it’s buying a home or planning for retirement.
• Spending Prioritization: A budget helps you focus your spending on what truly matters, bringing you closer to your dream home.
• Self-Esteem Boost: Achieving small financial goals through budgeting boosts your confidence.
• Emergency Preparedness: A good budget includes a contingency fund for unexpected expenses, preventing further debt.
• Financial Freedom: Far from being restrictive, budgeting empowers you to make informed financial choices.

In summary, budgeting is an empowering tool that not only helps you navigate the financial complexities of buying a home but also aligns with your broader life goals. Start budgeting now; it’s a decision you won’t regret.

Saving for a Down Payment

Owning a mobile home is an attractive option for many, but the hurdle of saving for a down payment can seem daunting, especially on a tight budget. However, with strategic planning and disciplined saving, you can make your dream a reality.

The Importance of a Down Payment

A down payment is your initial investment in a home loan and is one of the key factors that banks consider when approving a mortgage. The amount varies, typically ranging from 5% to 35%, depending on your credit profile and the perceived risk of the loan. If you don’t have this amount saved up, it may seem impossible, but there are ways to make it achievable.

Steps to Save Effectively

• Create a Budget: The first step is to create a budget with your family. This will help you understand your income versus expenses and identify areas where you can cut back.
• Set Monthly Goals: After identifying potential savings, set a realistic monthly goal. Whether it’s $50 or $500, consistency is key. Stick to your goal to gradually build up your down payment.
• Utilize Tax Returns: Tax season can be an excellent opportunity to boost your savings. Plan how much of your tax refund can go directly into your down payment savings account.
• Seek Extra Income: If possible, ask for extra hours or overtime at work, dedicating this additional income solely to your down payment.

By following these steps, you can systematically save for your down payment, turning the seemingly impossible into a reachable goal.

Paying Off Your Mortgage Early

Paying off your mobile home mortgage early can save you a significant amount in interest payments. Most mortgages are structured so that the initial years primarily cover the interest, making it an ideal time to pay extra towards the principal.

How to Do It

• Annual Lump Sum: Use your tax return or a yearly bonus to make one large payment towards the principal.
• Extra Monthly Payments: Add a little extra to your regular monthly payments. Even one additional payment per year can cut up to seven years off your mortgage.
• Refinance: If interest rates drop, consider refinancing to pay off your mortgage in one go.

Adopting these strategies lets you become debt-free sooner and enjoy full ownership of your mobile home.

What’s an Owner Financed Loan?

An owner-financed loan is an alternative to traditional bank financing, where the property owner acts as the lender. This option is often considered when a buyer has difficulty securing a regular loan and can benefit both parties.

Pros and Cons

Pros

• Flexibility: The buyer can negotiate terms directly with the seller, often securing a loan even with a low down payment or high credit risk.
• Speed: The property can be sold more quickly.
• Interest Rates: Sellers can offer lower rates, especially in family transactions where interest-free loans are possible.

Cons

• Risk: The seller must be willing to handle the risk of the buyer defaulting.
• Higher Costs: These loans often have higher interest rates and down payment requirements compared to traditional loans.
• Short-term: Owner-financed loans are generally short-term solutions, with the expectation that the buyer will refinance eventually.

Precautions

It’s crucial to involve a title company or attorney to ensure the transaction’s legality and the property deed’s cleanliness. Be aware of potential balloon payments and the risk of default, which could result in property loss.

Owner-financed loans can be a viable option but come with their own set of risks and benefits. Make sure to weigh these carefully to make the best decision for your financial situation.