Getting Loans for Mobile Homes When You Have Bad Credit

Getting financing for a mobile home can be challenging, especially if you have bad credit. However there are still options available if you have less-than-perfect credit and need to finance the purchase of a mobile or manufactured home. In this comprehensive guide we’ll walk through everything you need to know about getting loans for mobile homes when you have bad credit.

Why Mobile Home Loans Can Be Hard to Get with Bad Credit

Mobile and manufactured homes are considered riskier investments by most lenders. That’s because they depreciate in value over time, unlike traditional site-built homes which usually appreciate. They can also incur higher maintenance costs as they age.

That means if a borrower defaults on a mobile home loan, the lender may not be able to recoup the full loan amount by repossessing and reselling the home. So most conventional lenders are hesitant to provide financing to borrowers with subprime credit applying for mobile home loans.

What Credit Score is Considered Bad Credit?

In general, a credit score below 620 is considered bad or poor credit by most lenders. The higher your score, the better your chances of getting approved for a mobile home loan and securing a lower interest rate.

Here’s a quick breakdown of credit score tiers:

• 800-850 – Exceptional
• 740-799 – Very Good
• 670-739 – Good
• 580-669 – Fair
• 500-579 – Poor
• Below 500 – Very Poor

So if your credit score falls in the fair, poor or very poor ranges, you will likely face challenges getting approved for a traditional mobile home loan. But there are still financing options available which we’ll cover next.

Loan Options for Mobile Homes with Bad Credit

If your credit score is below 620, here are some potential loan programs to consider for financing a mobile or manufactured home:

FHA Title I Loans

FHA Title I loans are government-backed loans specifically designed for financing manufactured homes These loans are available through FHA-approved lenders

• Minimum credit score requirement: 500
• Down payment required: 10%
• Max loan amount: $69,678 for single-wide; $92,904 for multi-wide

Pros

• Low minimum credit score requirement
• Low down payment option

Cons:

• Loan amount limits may not cover full cost
• Requires upfront mortgage insurance premium

VA Loans

If you’re a veteran or active military, VA loans can be used to purchase a manufactured home. These loans are backed by the Department of Veterans Affairs.

• Minimum credit score requirement: Usually 620, but some lenders may go lower
• Down payment not required but can lower rates/costs
• No max loan amount

Pros:

• No minimum credit score requirement
• No down payment required
• Competitive interest rates

Cons:

• Must be eligible veteran to qualify

USDA Loans

USDA home loans are subisidized government loans for low-income borrowers in rural areas. They can be used to purchase manufactured housing.

• Minimum credit score: 640
• Down payment not required but can lower rates/costs
• No max loan amount

Pros:

• 100% financing available
• Subsidized low rates

Cons:

• Property must be in eligible rural area
• Debt-to-income ratio must be low
• Paperwork/process can be lengthy

Chattel Loans

Chattel loans are a special type of financing used specifically for manufactured homes. Rates tend to be higher but they’re easier to qualify for.

• Minimum credit score: 550
• Down payment typically 10-20%
• Loan amounts up to $100k

Pros:

• Easier to qualify with bad credit
• Lower down payments than conventional loans

Cons:

• Higher interest rates
• Shorter repayment terms

Personal Loans

Personal loans from online lenders can also be an option for financing a mobile home purchase.

• Minimum credit score: Varies by lender, as low as 550
• No down payment required
• Loan amounts up to $100k

Pros:

• Fast funding
• No collateral required
• Fixed payments

Cons:

• Higher rates than traditional mortgages
• Shorter repayment terms

As you can see, FHA loans, VA loans, chattel loans and personal loans tend to be the most accessible financing options for borrowers with poor credit scores below 620. Government-backed loans like FHA and VA products offer the most competitive rates and terms. But online personal loans can also be quick and easy to qualify for.

Tips for Getting Approved with Bad Credit

If your credit score falls in the subprime range, follow these tips to improve your chances of getting approved for a mobile home loan:

• Shop around – Apply with multiple lenders to find the best rates/terms you qualify for. Online lenders tend to be more lenient.

• Increase your down payment – Larger down payments can help offset credit risk. Save up to put down 20% if possible.

• Bring on a co-signer – Adding a co-signer with better credit can improve your chances of approval.

• Explain past credit issues – Be ready to provide documentation explaining any past defaults, collections or bankruptcies.

• Pay down existing debts – Reducing credit card balances and other debts before applying can help.

• Check your credit reports – Make sure there are no errors negatively impacting your scores.

Taking these proactive steps beforehand improves your chances of securing financing for a mobile home, even with less-than-stellar credit.

What Interest Rates Can You Expect?

Here are the average interest rate ranges you can expect with bad credit based on your specific credit score tier:

Rates are mainly based on credit scores and history. The higher your score within a range, the lower your rate will likely be. Additional factors like down payment, income, and debt levels also impact rates.

Government-backed loans like FHA and VA loans typically have the most competitive rates. Online personal loans and chattel loans tend to be more expensive.

Alternative Financing Options

If you’re unable to secure a loan from a traditional lender, here are some alternative financing options to consider:

• Seller financing – Some sellers offer their own in-house financing for buyers who can’t get traditional loans.

• Hard money loans – Hard money lenders offer short-term loans at higher rates, backed by the property as collateral.

• Lease-to-own agreements – These allow you to lease the home while working towards ownership.

• Crowdfunded loans – Borrow from a pool of investors through peer-to-peer lending platforms.

• Community lenders – Non-profit organizations or local economic development groups sometimes provide affordable financing.

• Loan guarantees – Getting a friend/relative with good credit to guarantee the loan can help secure approval.

• Grants – Check if you qualify for any special grant programs assisting manufactured home buyers in your area.

While costlier, these alternative options can help fill gaps if you’re unable to get traditional financing for a mobile home due to bad credit.

Improving Your Credit to Better Your Chances

The very best way to increase your chances of getting approved for the lowest rates is to spend time improving your credit before applying. Here are some tips:

• Pay all your bills on time going forward
• Pay down credit card and loan balances
• Dispute and remove any errors on your credit reports
• Avoid new credit inquiries before applying
• Become an authorized user on someone else’s account
• Sign up for credit monitoring to stay on top of your score

Bringing up your credit score even just 100 points can significantly expand your financing options. Be patient and take steps to demonstrate you’re committed to improving your credit.

Choosing the Right Mobile Home Lender

Make sure to shop around with both local banks/credit unions and online lenders when seeking financing for a mobile home with bad credit. Compare multiple pre-approvals to find the best loan you qualify for.

Look for lenders that advertise financing for bad credit borrowers. Review each company’s credit score and down payment requirements. Ask about any flexible underwriting programs they offer.

Online lenders like Lightstream, Upstart, and LendingClub can provide faster approvals with minimal documentation. But your local community bank may give you personalized service and the ability to explain your situation in person.

Whichever route you choose, make sure to get quotes from multiple lenders before committing to improve your chances of securing a competitive mobile home loan despite having poor credit.

Final Tips