Yes, you can still obtain a home equity loan with bad credit — but you will need more income, more home equity and less total debt than someone with good credit. Your loan will also have a higher interest rate, though it may be worth it if you need to pay off high-interest debt or make home improvements to boost your home’s value.
We’ll go over the requirements and give you a list of lenders to consider if you’re searching for a home equity loan with bad credit.
Owning a mobile or manufactured home can be an affordable way to buy real estate. However, these types of homes often don’t appreciate in value like traditional site-built homes. That makes it hard to build home equity. So what can you do if you have bad credit but need to tap into your mobile home’s equity? Here are some tips and options to consider.
Why Mobile Home Equity Loans Are Difficult with Bad Credit
Mobile and manufactured homes are usually classified as personal property, not real estate. That means they depreciate in value over time, similar to a car. As the home ages, it may end up being worth less than what you owe on your mortgage.
Banks see mobile homes as riskier collateral compared to traditional homes. So they are reluctant to offer home equity loans or lines of credit, especially for borrowers with less-than-perfect credit.
Lenders want to see that you have enough equity built up in your mobile home. Typically they require at least 20% equity before considering a loan With bad credit, you may need as much as 40% equity
Tips to Improve Your Chances
If your credit score is under 640, you’ll have a very difficult time qualifying for a home equity loan. But here are some tips that may help your chances:
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Pay down your mortgage balance – The more equity you have, the better. Shoot for at least 30-40% if possible
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Add value to your home – Remodeling or adding high-end features like granite counters can help boost your home’s appraised value.
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Own the land – Lenders prefer when you own the land your home sits on rather than renting a lot.
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Have substantial income – Lenders will want to see you have enough steady income to repay the loan.
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Get a cosigner – Adding a cosigner with better credit may help you qualify and get a lower interest rate.
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Improve your credit – Pay down debts and dispute any errors to boost your score before applying.
Bad Credit Loan Options for Mobile Home Equity
If you have a credit score below 600, a home equity loan will be very difficult to get approved for. But here are some possible alternatives to tap your equity:
Mortgage Refinancing
One option is to refinance your existing home loan. This allows you to extend the repayment term to lower your monthly payments. You can also typically cash-out up to 80% of your home’s value in many cases.
While refinancing, be sure to shop around for the lowest interest rate possible. Online lenders that specialize in manufactured home loans, like LoanDepot or Upperrv.com, may offer better rates than local banks.
FHA Title I Loans
The Federal Housing Administration (FHA) offers Title I loans that can be used for home repairs or renovations. These loans are available for manufactured homes and can be easier to qualify for than conventional loans.
Title I loans allow for loan-to-value ratios up to 85% of the home’s value. This program requires only a 580 minimum credit score.
Personal Loans
Personal loans from online lenders like LendingClub or Avant can provide fixed-rate financing from $1,000 up to $40,000 or more. These unsecured loans don’t use your home as collateral but allow you to tap equity and pay off the loan over several years.
While APRs are higher than a home equity loan, personal loans can still be an option for those with credit scores as low as 600.
401(k) or Life Insurance Loans
Borrowing against your 401(k) or taking a loan from your life insurance policy are other potential options. These let you access your own savings and pay yourself back over time with interest.
401(k) loans typically offer low fixed interest rates and no credit check. Just beware of the risks, like potentially higher taxes and penalties if you leave your job.
Top Mobile Home Equity Lenders for Bad Credit
While it can be challenging, there are some lenders that may approve a home equity loan with bad credit:
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21st Mortgage – Approves manufactured home equity loans for borrowers with credit scores as low as 600.
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LoanDepot – National lender that offers mobile home equity loans and refinancing with credit scores starting at 580.
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Silver Hill Financial – Specializes in equity loans for manufactured home owners with bad credit.
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Fairway Independent Mortgage – Works with borrowers with credit scores as low as 500 for manufactured home equity loans.
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Financial Freedom – FHA Title I lender offering home equity loans starting at 575 FICO.
Be sure to compare interest rates from multiple lenders. Also pay close attention to origination fees, which can be high with some bad credit lenders.
What If I’m Denied for a Loan?
If you have very poor credit (below 580 FICO) and get denied for a home equity loan, you still have a few options:
- Ask the lender if you can add a cosigner with better credit to reapply.
- Work on improving your credit score and wait 6-12 months before reapplying.
- Consider alternative financing like a personal loan, 401(k) loan, or borrowing against your life insurance policy.
- As a last resort, you may need to consider selling your mobile home and downsizing to reduce expenses.
The most important thing is to not give up easily. Be patient and keep looking for lenders that work with bad credit until you find one that will approve you. With some persistence and help improving your credit, home equity financing is possible even with poor credit scores.
Write letters of explanation for your bad credit in advance
If you’ve had some tough financial times, write a letter to explain to lenders what happened and how you’ll be able to repay a home equity loan. Be prepared to provide documentation — such as bankruptcy papers or divorce decrees — that helps explain your financial situation.
What counts as bad credit?
“Bad” isn’t a term used by the credit bureaus that track your credit score. However, for the purposes of getting a home equity loan, a credit score below 680 is considered “nonprime” or “subprime” and may make it difficult to get approved.
If getting a home equity loan with your current credit score and finances isn’t in the cards, you may have to put things on hold and take some time to rebuild your credit.
What if you have lots of equity but bad credit?
FAQ
Can I get a home equity loan with a 500 credit score?
What is the minimum credit score for a home equity loan?
What disqualifies you from getting a home equity loan?
Can you use a mobile home as equity?
Can a mobile home be financed with a good credit score?
Most lenders specializing in mobile home equity loans or lines of credit are able to offer affordable lending to well-qualified borrowers with good credit scores if the mobile home meets the minimum permanency requirements dictated by each state.
What are the requirements for a mobile home equity loan?
To get approved for a mobile home equity loan or line of credit, the following requirements must be met: There must be equity in the home, meaning the first mortgage is no more than 80-90% of the home’s market value. The home must be double-wide or larger (in some cases, at least 600 square feet).
Can I get a mobile home loan with bad credit?
Acorn Finance can help you secure a mobile home loan or financing solution even with bad or average credit, up to $100,000 for a brand new manufactured home. No matter what your reason is, let Acorn Finance assist you with zero hassle.
Can I get a mobile home loan if my credit score is 719?
You ideally need a decent credit score of 719 or higher to get a home equity loan for a mobile home. However, you can still apply if your number is lower. Your chances of qualifying go down, and your interest fees are most likely going to go up. In addition, you need to legally own your mobile home, and your current lender must offer home equity loans.