Financing a Modular Home: What You Need To Know

Financing a modular home in Las Cruces, NM, is not necessarily difficult, but it is different. In many cases, you can finance a manufactured home with traditional home loans from Fannie Mae, the VA, Freddie Mac and other agencies. However, your eligibility for financing really comes down your eligibility as a borrower, the age and type of structure you wish to purchase and whether the structure is considered real or personal property. If you wish to finance a manufactured home in New Mexico, here’s what you need to know.

Real Vs. Personal Property

First and foremost, you need to determine if your prospective home is real or personal property. If your home is personal property, which is the case if the building is on wheels or you pay fees to the DMV, then it does not qualify for a home loan. However, if the home is at least 400 square feet, situated on an approved foundation and taxed as real property, it may qualify as real property and therefore be eligible for a government-backed mortgage loan.

If your home does not qualify for a home loan, don’t fret. You may still be able to apply for a personal loan. In fact, applying for a personal loan is easier than applying for a mortgage, and the approval times are much quicker.

Mobile, Manufactured or Modular

Though consumers use the three terms interchangeable, lenders don’t. In fact, how you categorize a home can make or break your eligibility for financing. For instance, mobile homes, which are factory-built homes, were constructed prior to the development and implementation of housing regulations. Because of this, many do not meet critical safety standards, and most lenders are reluctant to finance them.

Manufactured homes, like mobile homes, are moveable. However, their construction was dictated by the National Manufactured Housing Construction and Safety Standards Act of 1974, meaning they meet most of today’s safety standards. That said, their movability makes some lenders hesitant to finance them, though not all.

Lenders are most willing to finance modular homes, which are factory-built homes assembled on-site and that adhere to all the same local building codes as site-built homes. These homes are more permanent in nature than manufactured homes, as they’re generally built on concrete foundations. For all these reasons, you’re more likely to obtain financing if you wish to buy a modular home.

Types of Loans Available

Now that you know what factors lenders consider when deciding whether or not to finance a manufactured or modular home, it’s time to discuss loans. Below are a few types of loans that may be worth looking into:

  • Chattel Loans: When it comes to financing a manufactured home in Las Cruces, a chattel loan is your best bet. This type of loan is for the home only, as opposed to loans for both the home and the land. Because a chattel loan is technically a personal property loan, loan amounts are generally smaller. However, even though you’re borrowing less with a chattel loan, your monthly interest rates may be higher than if you were to pull out an actual mortgage. The terms on chattel loans are shorter as well, with repayment terms of just 15 to 20 years.
  • FHA Loans: There are two types of FHA loans you can use for modular homes: FHA Title I and FHA Title II loans. A Title I loan is a personal property loan while a Title II acts more like a mortgage. To qualify for either loan, the structure must have been built after June 15, 1976, and comply with local building codes and the HUD code. You must also have a fairly decent credit score.
  • Government-Backed Loans: Aside from a chattel loan, a government backed loan may be your best option for borrowing. If you qualify, you can receive backing from a lender who has a repayment guarantee from the U.S. government. Per this guarantee, if you default on the loan, the government will step in and pay the lender.
  • VA Loan: If you served in the U.S. military, you may be able to go through the VA for financing. However, to finance a modular home through the VA, your home must be permanently attached to a foundation, be your primary home and meet the HUD code. You must also purchase the land your home sits on as well as the home’s title.

If you don’t qualify for any of the above types of loans, you’re not completely out of options. Many mobile home manufacturers and retailers offer financing directly through them. This makes it easier for customers to buy. Lenders that specialize strictly in mobile and manufactured homes may also be willing to help, as they’re more familiar with modular homes and the purchase process.

When you purchase a home from Fiesta Homes, we can guide you toward the best form of financing for your current situation and budget. Contact us today to learn more about financing options and how we can help you find the home of your dreams.