How do you find a lender when you’re purchasing a manufactured home? Learn more with our guide on everything from helping you figure out what loan types may fit your needs to steps for choosing a lender.
The home buying process can be intimidating for anyone, especially first-time home buyers. Part of having a good home buying experience is choosing the right lender for you. Are you considering purchasing a manufactured home but dont know how to find a lender? Check out our tips to help make your search a little less stressful, from what to know before reaching out to a potential lender to what questions to ask lenders when narrowing down your choice.
Buying a new home is an exciting time! But it can also be stressful trying to figure out the best financing options. Many homebuyers wonder if manufactured home retailers like Clayton Homes accept FHA loans. Let’s take an in-depth look at what FHA loans are, their benefits, and if you can use them to buy a Clayton Home.
What is an FHA Loan?
FHA stands for Federal Housing Administration This government agency insures loans made by FHA-approved lenders across the United States. FHA loans must meet certain requirements set by the FHA to qualify for insurance
Some key things to know about FHA loans:
- They are offered by private FHA-approved lenders. The FHA does not directly loan money.
- They allow for lower credit scores and down payments compared to conventional loans.
- They require mortgage insurance premiums to be paid along with the monthly loan payment.
- Maximum loan limits apply based on location.
- Specific underwriting guidelines must be followed.
- Homes must pass an FHA inspection.
In a nutshell, FHA loans help make homeownership more accessible and affordable for buyers. The FHA provides protections for lenders, allowing them to loosen some lending standards.
FHA Loan Benefits
There are several advantages FHA loans offer compared to conventional mortgages:
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Lower Credit Scores You may qualify with a credit score as low as 500, though scores of 580 or higher are ideal. Many conventional loans require scores of 620+ or higher
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Lower Down Payments: FHA allows down payments as low as 3.5% of the purchase price. Many conventional loans require 10-20% down.
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Flexible Guidelines: FHA is more flexible on debt-to-income ratios and down payment sources. Gift funds can be used for the down payment.
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Mortgage Insurance: FHA loans require mortgage insurance premiums to protect the lender. But rates are competitive with conventional loans that also require private mortgage insurance (PMI) at less than 20% down.
For buyers with less-than-perfect credit or limited funds for a down payment, FHA loans can make financing a home purchase possible.
Using an FHA Loan to Buy a Clayton Home
Now onto the main question – can you use an FHA loan to buy a manufactured home from Clayton? The answer is yes! Many lenders offer FHA-insured financing for Clayton Homes purchases.
There are a few things to keep in mind when using FHA for a manufactured home:
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Land: The home must be attached to a permanent foundation on land owned by you. FHA does not finance manufactured homes in parks.
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Inspection: An FHA inspector will examine the home to ensure it meets HUD construction standards. New Clayton Homes meet these code requirements.
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Lenders: Not all lenders offer FHA loans on manufactured homes. Shop around for one familiar with these deals.
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Mortgage Insurance: Rates may be higher than site-built homes. Expect to pay an upfront fee of 1.75% of the loan amount plus an annual premium around 0.85% – 1.05% of the loan balance.
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Loan Limits: Vary by county, typically around $300,000. Higher limits exist in certain high-cost areas.
As long as you have the home installed on land you own and find an approved lender, FHA financing can be a great option for purchasing a Clayton manufactured home.
Pros of Using FHA Financing with Clayton
Beyond the general FHA loan benefits, there are some specific advantages when using it to buy a Clayton Home:
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Affordability: FHA loans enhance affordability for buyers on a tight budget. Clayton Homes are already very competitively priced.
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Flexibility: Customize your Clayton Home then use gift funds or sweat equity for your down payment. FHA allows this.
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Loan Options: FHA 203(k) rehab loans can finance purchase plus repairs/upgrades for existing Clayton Homes.
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Prepurchase Inspections: As a HUD code manufacturer, Clayton Homes can have their factories FHA-approved for prepurchase inspections.
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One-Stop Shop: Clayton handles home setup, can assist with land purchase, and has lenders right on site to streamline the entire FHA loan process.
Cons to Weigh when Using FHA
FHA loans have many benefits, but there are a few potential drawbacks to consider as well:
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Mortgage Insurance: You’ll pay this for the life of the loan unless you refinance. Monthly premiums can add to costs.
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Interest Rates: May be slightly higher than conventional loans, but often very close. Get multiple quotes.
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Upfront Costs: In addition to your down payment, expect to pay the 1.75% upfront mortgage insurance premium and closing costs.
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Ongoing Expenses: Mortgage insurance, property taxes, homeowners insurance, and maintenance costs add to long-term spending.
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Strict Guidelines: FHA loans come with plenty of rules. If you don’t qualify, more options exist.
While very advantageous for many buyers, FHA home loans aren’t right for everyone. But they can be a great match for purchasing an affordable Clayton manufactured home.
Alternatives to FHA Loans
Some other Clayton Home financing options beyond FHA include:
- Conventional loans with 5-20% down payments
- VA loans for qualifying military buyers
- USDA home loans for properties in rural areas
- Affordable in-house financing programs offered through Clayton’s lenders
- State and local housing agency loans and down payment assistance programs
Discuss all of your loan choices with Clayton Homes and multiple outside lenders to get the full picture. There are many paths to finance a Clayton home purchase.
Work with a Clayton Homes Lending Expert
My best advice is to talk to a Clayton Homes sales representative at your local store. Ask them these key questions:
- Do you have lenders who offer FHA financing?
- What are the requirements and mortgage insurance costs?
- Are there any limits or restrictions to be aware of?
- What are all my loan options for purchasing a Clayton Home?
Their knowledgeable lending experts will explain everything in detail and help you pick the optimal loan product. With competitive pricing and financing, Clayton makes it possible to buy a quality new manufactured home regardless of your budget or credit situation.
The Bottom Line
FHA loans are commonly used to purchase Clayton manufactured homes. They offer flexible underwriting and low down payments to help buyers achieve affordable homeownership. While FHA financing provides many perks, also examine alternate loan options before deciding what works best for your needs. If you’re financially ready, team up with the pros at Clayton Homes to turn your dream into reality!
Am I ready to apply for a home loan?
Before choosing a lender, you’ll want to prepare by knowing what type of loans you’re looking for. To help feel ready to apply for a loan consider these steps:
Decide on Your Budget
Being aware of your finances first will help you know what homes are in your price range. Go over your income and expenses with yourself, and your partner or family to see what type of monthly mortgage payment you can reasonably afford.
Also take into account other loan and home-related costs. These can vary depending on your situation and needs, but remember to include the additional costs in your budget. Costs can include things like a down payment, closing costs, homeowners insurance, property taxes and lot rent (if you are placing your home in a community or on someone else’s land). If you are a first-time home buyer, you should also research if you are eligible for down payment assistance programs.
Know Your Credit Score
Along with income and debt, credit scores are part of what lenders consider with a home loan application. Knowing your credit score will help you narrow down what loans to apply for when you look at their credit requirements. If your score is lower than you want, you can also take some time to improve your credit score before you apply for a loan.
Have Your Documents Ready
It’s a good idea to go ahead and collect information and documents that may be needed. Having commonly-asked-for documentation readily available is also one way to make the underwriting process smoother and faster, instead of sending in documentation piece by piece. Information you may want to have on hand can include:
- Driver’s license or ID
- Social security number
- Recent pay stubs
- Tax returns and W2s/1099s
- Address for residential history for the past 2 years
- Recent bank statements
Having this information available not only makes it easier for the loan process but also for you to initially fill out an application.
What type of home loan option is best for me?
Research Loan Types
Before looking for a home lender, we suggest you learn about the different types of home loans available, like conventional, FHA, VA and USDA home loans. As you explore loan choices, you can find out the benefits and general requirements for each one so you have an idea of what loans you may qualify for and want to consider.
You may also want to look at the pros and cons of different loan terms (how long you pay the mortgage), such as a 30-year loan vs. a 15-year loan and everything in between.
Find Manufactured Home Lenders
Now that you are familiar with types of loans, you will need to know which lenders offer financing for manufactured housing. If you have a local bank in mind, you can inquire with them, but another great way to learn about lenders is at the home center where you’re buying your home. Many lenders advertise available loan programs at the home centers, but of course the choice of lender is always up to you!
You can also research ranked lists of lenders. Once you look at several options, you can make a list of lenders you want to talk to in your area.
FHA Mobile Home Requirements
FAQ
What does your credit score have to be for Clayton Homes?
Why would a homeowner not accept an FHA loan?
Do most sellers accept FHA loans?
Why would a home not qualify for an FHA loan?
What credit score do you need to buy a Clayton Home?
The credit score requirement will depend on the loan type. For conventional loans, you need a higher credit score of 680 or higher. FHA loans, on the other hand, are available to buyers with a lower credit score of 580. All of this of course will depend on your exact situation, so contact us today for more financing options on Clayton Homes.
Why should I buy a new Clayton built® home?
One of the benefits of purchasing a new Clayton Built® home is that all of our manufactured homes are built to these national construction and safety standards. The FHA home inspection will also look at the setup of the home at the home site to make sure it meets the HUD FHA foundation requirement.
What types of homes are available at Clayton Homes?
Clayton Homes offer a wide variety of home types, including Clayton manufactured homes. These homes range from small houses to duplexes and more. With multiple customizable features available and a significant focus on green building practices, these homes can help you achieve your dream home within your budget.
Is Clayton Homes a good company?
Over the years, Clayton Homes has absorbed several manufactured home companies, including Chafin Communities in 2015 and River Birch in 2016. Clayton Homes has benefitted many homeowners looking to minimize their carbon footprint or energy bills actively. The company has come to the rescue of many people in times of calamity, building homes fast.