Buying or building a new manufactured home is an exciting prospect. A manufactured home can provide an affordable way to own a quality home customized to your needs and preferences. However, financing the purchase and setup can be a challenge. A construction loan for a manufactured home makes the process smooth and convenient.
What is a Construction Loan for a Manufactured Home?
A construction loan for a manufactured home combines the financing to purchase the home along with the funds to prepare the site and install the home. It provides all the necessary financing in one loan with one closing. This avoids the hassle and expense of obtaining separate loans for the manufactured home purchase and then for site development.
Construction loans for manufactured homes typically have a one-year term to allow time to complete the project. The borrower makes interest-only payments during the construction period. Once the home is installed, the loan converts to a traditional mortgage with principle and interest payments amortized over the loan term, usually 15 or 30 years.
Benefits of a Construction Loan
A construction loan for manufactured housing provides several advantages compared to conventional financing
- One loan – Only one set of loan fees and closing costs instead of multiple loans
- Interest-only payments – Lowers payment amount during construction
- Fixed interest rate – Rate locked in so no surprises
- No requalification – Loan converts to permanent financing without reapplication
- One closing – Closes once instead of separate purchases and loans
- Customizable – Can be tailored to specific construction plans
With a construction loan, buyers can choose their ideal home model floorplan, features, and site location. The entire project is covered under one loan package.
Eligibility and Requirements
In order to qualify for a construction loan on a manufactured home borrowers must meet certain requirements
- Credit score – Minimum score typically 640
- **Down payment ** – May be as low as 3.5% with FHA financing
- Debt-to-income ratio – Typically maximum 50%
- Loan-to-value ratio – Up to 96.5% LTV may be possible
- Location – Must be an approved site with utilities
- Plans – Requires detailed plans for home model and site work
- Builder – Must use licensed contractor if not doing own work
Construction loans for manufactured housing are available through various lenders including banks, credit unions, and specialized lenders. Government-backed loans such as FHA, VA, and USDA may be available depending on borrower eligibility.
The Construction Loan Process
Here is a general overview of the typical construction loan process:
- Choose home and site – Select manufactured home model, create floorplan, and find location
- Submit plans – Provide home specifications, site drawings, and cost estimates
- Apply for loan pre-approval – Confirm amount qualified for based on income, debts, and assets
- Select lender and apply – Choose construction lender and complete full application
- Obtain appraisal – Appraiser will estimate home value when completed
- Loan approval and closing – Final underwriting and closing on construction loan
- Site preparation – Grade site, install utilities, pour foundation
- Manufactured home delivery – Home transported and installed on site
- Draw inspections – Inspections done before each construction draw is released
- Completion and conversion – Final inspection and loan converts to permanent financing
The lender will work with borrowers through each stage of the construction project. Draws are released to the contractor upon passing inspections to ensure work is completed according to the approved plans.
Finding the Best Construction Loan
It pays to shop around for the best construction loan for your manufactured home. Here are some tips:
- Compare interest rates and fees for construction loans
- Ask about one-time versus two-time close options
- Inquire if lender handles inspections and draw disbursements
- See if project can be customized within loan guidelines
- Find out timeline for completion of process
- Review options for loan term lengths and fixed versus adjustable interest rates
- Check if lender offers FHA, VA and USDA financing
Working with a lender experienced in manufactured home construction loans can make the process go smoothly and efficiently. They can guide buyers through each stage and offer flexible options to fit your budget and goals.
Start Building Your Dream Home
A construction loan simplifies the process and reduces the cost of financing a manufactured home. If you want to build your perfect custom factory-built home, a construction loan for a manufactured home can make that dream a reality. Compare your options and find the lender that best fits your needs. Then you can start building your ideal home with convenience and savings using a manufactured home construction loan.
Builders and contractors can take advantage of this product.
Countryplace offers construction loans for as little as 3.5% down. Additionally, if you own your lot already, you can use the equity in the property for down payment. The permanent loan can be either an FHA or conventional loan. All of our construction loans are one time close loans. We offer construction financing for Manufactured, Modular, or site built homes. The interest rate on your permanent loan is locked at the time you close your construction loan, so you do not have to worry about interest rates increasing while your home is being built.
Manufactured Home: One-Time-Close Construction Loan
FAQ
Why is it harder to get a loan for a manufactured home?
Is a home construction loan the same as a mortgage?
What is the oldest mobile home that can be financed?
What does construction-to-permanent loan mean?