What do the banks look for?
There are a number of things the banks will look for when determining if they will offer your financing for your new manufactured home. Each bank has its own unique set of criteria for determining this however, these are some factors that all banks consider:
Your credit score is a number that gives the banks a snap shot of your financial past. This number factors in things such as payment history, credit utilization and length of your credit history. The higher the number, the better your credit. There are three credit bureaus that each produce a separate credit score for you. Some banks may only look at one, where others will look at the middle of all three. It is important that you as a new home-buyer know where your stand with regards to your credit score so that you are aware of the financing options available to you.
Current Debts Vs Current Income
The banks also look at the ratio between your current debts and current income. This is commonly referred to as your DTI. Your credit score is important; however, a low credit score can be offset with a higher down payment. Banks are legally not allowed to lend you money if they determine you do not make enough money to cover your current debts and the addition of a new mortgage payment. Items that show on your credit reports as monthly obligations will factor into your DTI. So will things like child support and loans you co-signed for.
When figuring your debt to income ratio, the bank looks at all the expenses associated with your home purchase. This includes items like lot rent, land costs, taxes and homeowner’s insurance. If a family member is allowing you to place your home on their property at no costs, make sure you disclose that to the banks up front.
At a minimum, the banks will need to see a two-year work history. This does not mean it must be at the same job. You will need to show W-2’s and paystubs to document your job history so make sure not to count under the table jobs that cannot be proved with a paper trail. Some banks require you to detail a longer job history.
Down Payment Percentage
The amount your willing to put down as the initial investment for your new manufactured home plays a critical role in your bank application. Even the most challenged credit can get approved for a loan with a large enough down payment. I most cases, the minimum allowed by a bank will be 5% and can go as high as 40% depending on the factors above.
Chattel loans cover the cost of the home only. In this case the ownership of the home is held separate from the land it is placed on. These loans have a maximum price at which a bank will finance a home for determined by the invoice cost of the home. With chattel loans, the banks do not allow for much in the way of financed improvements since the home itself is the only asset they would be able to seize in the event of a foreclosure.
These types of loans typically have higher interest rates ranging anywhere from 6 – 14 percent. In some cases however, these types of loans may prove have a lower cost over the life of the loan since the closing costs are much lower than some government loans and there is no private mortgage insurance involved with chattel loans.
If you purchase a new manufacture home with a chattel loan, your home will be titled and taxed as personal property.
Land Home Options
If you are looking to combine the purchase of your new manufactured home with the purchase of a new piece of land in the San Antonio area, then there are several land and home financing options available to you.
There are several loan programs out there for new manufactured homes backed by the federal government. These include programs like the FHA, VA and USDA. These are great programs for first time home buyers looking to keep their initial investment low. Make sure you plan ahead if you choose to go this route as these loans take a considerable amount of time. Since government funds are used to back these loans, there is additional site work require to be in compliance such as a permanent concrete foundation. These loan programs do offer some of the lowest interest rates and down payment packages available. Keep in mind that you as the consumer are charged for this in the form of private mortgage insurance. This is an amount billed monthly as part of your escrows that protects the lender in the event of a foreclosure. Below is a list of links to three of the most popular government back loan programs currently available:
This type of loan program is backed with private money instead of the government. These types of loans do not typically require the same list of items required under the government loans for the construction of your land and home package. You as the consumer can avoid paying private mortgage insurance if you put enough money down. The tradeoff here can be higher interest rates and larger down payments.
Owner financed land
Another financing option for putting together a land and home package for your new mobile home is the combination of a chattel loan for the home and the purchase of owner financed land. This means the owner of the land is willing to sell you the land and collect monthly payments instead of the full cash price up front. If you choose to go down this road, it is important that you still have a title search done on the property to make sure the person you are contracting with has the right to sell you the land. If you are not familiar with the industry, it may even make since to hire an attorney to review the documents before you sign.
Using Land As a Down Payment
Just about any bank that offers financing on new manufactured homes gives homebuyers the option to use land equity to offset the initial down payment of your new home. Most banks require that the land be larger than a quarter acre and have access to a public paved road. Using land as collateral for a chattel purchase allows you the include needed site work such as utilities and skirting. In order for land to be considered as collateral for your home purchase, there cannot be any liens on the property. The bank will run a title search to make sure, often using your money to do so.