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Loan Options for Manufactured, Mobile and Modular Homes

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According to the Manufactured Housing Institute, about 22 million people in the United States live in manufactured homes. With numbers like that, it doesn’t make sense that these homes are still so misunderstood.

For example, many people think that manufactured homes, mobile homes and modular homes are one and the same, but that’s not true at all. There are key differences that set the three apart and affect financing options.

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Read on to learn what these differences are so that you can find the right loan for you.

Manufactured, mobile and modular: What are the differences?

Manufactured homes

Manufactured homes are built in manufacturing plants and then taken to their plot of land via a permanent chassis that’s attached to the bottom of the home. They also are built in accordance to Manufactured Home Construction and Safety Standards, a safety code set by the Department of Housing and Urban Development, or HUD.

Mobile homes

“Mobile homes are manufactured homes, but the term is outdated,” said Alberto Pina, the co-founder of Braustin Mobile Homes in San Antonio, Texas.

“In 1976, the government decided to get involved in the regulation of mobile homes for people’s safety. That’s when the HUD Code — the National Mobile Home Construction and Safety Act — became effective. It’s also when mobile homes started being called manufactured homes.”

Modular homes

Like manufactured homes, modular homes are also partially constructed in a factory. However, they’re transported to the plot of land in pieces and then they’re put together on-site. Modular homes also have permanent foundations and, rather than conforming to a single HUD Code, they also have to meet he same local, state and regional building codes as traditional houses.

Financing a manufactured home

Retail installment contracts

Retail installment contracts are commonly used for manufactured homes and are slightly different from a traditional loan. In this case, rather than going to a bank or lender to get a loan for funding to buy your home, you would contract directly with the dealership from which you’re purchasing your home.

The retail installment contract is the official agreement stating that you agree to pay the dealer back over time, plus interest. However, afterward, the dealer is free to sell the contract to another lender or third party.

Title 1 loans provided by FHA-approved lenders

Title 1 loans are the Federal Housing Administration’s answer to manufactured homes. With this program, the FHA encourages approved lenders to lend to consumers by insuring the loan in case of default.

It’s used for used for the purchase (or refinancing) of a manufactured home, of a lot on which the manufactured home will be placed or a manufactured home and lot in combination, as long as the home is being used as a primary residence.

Depending on which option you choose, there will be different limits on your loan amount and loan term. They are as follows:
Maximum loan amount

  • Manufactured home only: $69,678
  • Manufactured home lot: $23,226
  • Manufactured home and lot: $92,904

Maximum loan term

  • 20 years for a loan on a manufactured home or on a single-section, or single-wide (the newer term for single-section) manufactured home and lot
  • 15 years for a manufactured home-lot loan
  • 25 years for a loan on a multi-section manufactured home and lot

Interestingly, Title 1 loans can also be used to buy a home that will be placed on a leased plot of land, provided that the initial lease term is at least three years and that the lease states that the homeowner will be given at least 180 days’ notice before the lease ends.

However, because the home is manufactured, it must meet certain requirements in addition to FHA’s normal qualifying standards. They are:

  • The home must be built after June 15, 1976
  • The red HUD label must be affixed to each section
  • Minimum size to be financed is 400 square feet
  • The home must be permanently affixed to a foundation that meets FHA standards
  • The home must meet the Model Manufactured Home Installation Standards
  • The lot where the manufactured home will be set must be designated or approved

“Buyers like this type of loan because it allows them to get a low interest rate and low down payment, as well as some of some of the sitework done, such as the base pad, skirting, decking and utilities and sewer system,” Pina said.

VA loans

If you’ve served in the military, you’re eligible for a loan through the Department of Veterans Affairs and, fortunately, you can use that benefit to buy a manufactured home. Qualifying for a VA loan for a manufactured home is much the same as using a VA loan to buy a conventional home. You’ll need to provide proof of your financials, as well as a Certificate of Eligibility, which verifies that you served.

However, some of the loan terms are different. For example, you cannot finance more than 95% of a manufactured home, even though you can finance up to 100% of a traditional home.

The term lengths that are offered for these loans are also different. They are as follows:

  • 15 years and 32 days for a lot purchase if you already own the home
  • 20 years and 32 days for a single-family manufactured home and lot
  • 23 years and 32 days for a double-wide manufactured home
  • 25 years and 32 days for a double-wide manufactured home and lot

Fannie Mae MH Advantage mortgage

The Fannie Mae MH Advantage program offers flexible underwriting standards and reduced pricing for manufactured homes that meet certain construction requirements. It’s a 30-year loan that allows borrowers to finance up to 97% of their loan-to-value (LTV) ratio.

As far as what requirements need to be met in order to qualify for the loan:

  • The home must be 12 feet wide and have at least 600 square feet
  • It must be built on a permanent chassis and be installed on a foundation
  • It must be titled as real estate
  • After being appraised, it must receive an “MH Advantage Sticker” that signifies that it has certain features similar to traditional homes

Single-wides, today more commonly referred to as single-section homes, are not accepted in the Fannie Mae MH Advantage program. If you were planning on buying one, or have a manufactured home that doesn’t otherwise meet the MH Advantage qualifying requirements, you can look into their standard manufactured housing program.

Chattel loans

Chattel loans are a common way to finance manufactured homes that sit on a leased lot. Because the land is leased, the home cannot be affixed to the ground, which makes it much harder to qualify for a traditional mortgage.

With a chattel loan, the manufactured home itself is treated as collateral for the loan. Initially, the lender will take ownership of the home. Then, once you finish paying it off in full, ownership is transferred to you.

Financing a mobile home

It would be difficult to get financing on a true mobile home, Pina warned.

Remember, the term “mobile home” refers to manufactured homes that were built before 1976, when the National Mobile Home Construction and Safety Act was released. The difficulty comes from the fact that the construction of these older homes was totally unregulated.

In order to receive financing, many lenders require that the mobile or manufactured home meets HUD’s standards. However, even if you make improvements to an older mobile home, HUD will not issue you a sticker signifying compliance.

“Fortunately,” Pina said, “you’re not buying one of these for more than $5,000 or $10,000, so the need to finance the purchase is rare.“

Financing a modular home

“Modular homes have the same loan options as what folks would call a traditional home,” Pina said. With that in mind, below are some of the most common options:

Construction-to-permanent loans

“Construction-to-permanent loans can be used In either manufactured or modular housing transactions,” Pina said.

Construction-to-permanent loans are unique in that they provide funds for the construction of the home upfront, but after construction on the home is completed, the balance is converted into a permanent loan, or traditional mortgage.

Traditional FHA loans

Because modular homes are secured to a concrete foundation, they’re eligible for a traditional FHA loan. This means that all the usual borrower requirements apply:

  • You must have a debt-to-income (DTI) ratio of less than or equal to 43%
  • If you have a credit score of 580 or higher, you can put as little as 3.5% down
  • If you have a credit score between 500 and 579, you must put at least 10% down
  • The home must be your primary residence
  • You must carry FHA mortgage insurance, or MIP
  • You must be able to provide proof of employment

Where to find a lender

Not all lenders work with manufactured or modular homes. But, luckily, there are many great tools at your disposal that can help you find the right lender. In particular:

  • HUD has a search tool that allows you to filter approved lenders by your area.
  • The Manufactured Housing Institute can provide you with a list of lenders and manufacturers in your state.
  • Fannie Mae also provides a list of suggested manufactured housing lenders.

Though the loan options for manufactured, mobile and modular housing are a bit different than they might be in a traditional housing scenario, qualifying for one is a small price to pay for the affordable living that these homes can provide.

If you’re interested in one of these homes, do your research. Look into some of the loan options above, talk to lenders that specialize in manufactured housing and get a few loan estimates. It won’t be long before you find the loan program that’s right for you.

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Mortgage

How to Recover From Missed Mortgage Payments

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understanding good faith estimate vs loan estimate
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Can you bounce back from a missed mortgage payment or two? The answer is yes, but there’s work involved. After all, your payment history has the greatest impact in determining your credit score.

Falling behind on your mortgage payments can affect your credit and finances, and you could lose your home to foreclosure. It’s critical to be proactive and not wait until it’s too late to get help.

How missed mortgage payments affect your credit

In most cases, mortgage lenders give you a 15-day grace period before charging a fee — often around 5% of the principal and interest portion of your monthly payment — for late payments. But your credit history typically isn’t impacted until you’re at least 30 days behind on a mortgage payment. At this point, your mortgage servicer may report your late mortgage payment to the three major credit reporting bureaus: Equifax, Experian and TransUnion.

Your credit score could drop by 60 to 110 points after a late mortgage payment, depending on where your score started, according to FICO research. Being 90 days late on your loan could lower your score by another 20 points or more.

It can take up to three years to fully recover from a credit score drop after being a month behind on your mortgage, FICO’s research found. Once you’re three months behind on your mortgage, that time can increase to seven years.

Recovering from missed mortgage payments

Falling behind on your mortgage can be a frustrating and scary experience, particularly if you’re facing the threat of foreclosure. Here are some options to help you get back on track after missed mortgage payments:

  • Repayment plan. Your loan servicer agrees to let you spread out your late mortgage payments over the next several months to bring your loan current. When your upcoming payments are due, you’d also pay a portion of the past-due amount until you catch up.
  • Forbearance. Your servicer temporarily reduces or suspends your monthly mortgage payments for a set amount of time. Once the mortgage forbearance period ends, you’ll repay what’s owed by one of three ways: in a lump sum, a repayment plan or by modifying your loan.
  • Modification. A loan modification changes your loan’s original terms by extending your repayment term, lowering your mortgage interest rate or switching you from an adjustable-rate to a fixed-rate mortgage. The goal is to reduce your monthly payment to a more affordable amount.

Be proactive about getting back on track and reaching out to your lender for help instead of waiting until you get late payment notices. If you think you’ll be behind soon or are already a few days behind, make contact now and review your options.

Extra help for homeowners affected by COVID-19

If you’re behind on mortgage payments because of a financial hardship due to the coronavirus pandemic, you may qualify for a mortgage relief program through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Homeowners who have federally backed mortgages, and conventional loans owned by Fannie Mae or Freddie Mac, can request mortgage forbearance for up to 180 days. They can also request an extension for up to an additional 180 days.

Federally backed mortgages include loans insured by the:

  • Federal Housing Administration (FHA)
  • U.S. Department of Agriculture (USDA)
  • U.S. Department of Veterans Affairs (VA)

Reach out to your mortgage servicer to request forbearance. Even if your loan isn’t backed by a federal government entity, Fannie Mae or Freddie Mac, your servicer may offer payment relief options. You can find your servicer’s contact information on your most recent mortgage statement.

How many mortgage payments can you miss before foreclosure?

Your lender can begin the foreclosure process as soon as you’re two months behind on your mortgage, though it typically won’t start until you’re at least 120 days late, according to the Consumer Financial Protection Bureau. Still, it’s best to check your local foreclosure laws since they vary by state.

Here’s a timeline of how missed mortgage payments can lead to foreclosure.

30 days late

Your lender or servicer reports a late mortgage payment to the credit bureaus once you’re 30 days behind. Your servicer will also directly contact you no later than 36 days after you’re behind to discuss getting current.

45 days late

You’ll receive a notice of default that gives you a deadline — which must be at least 30 days after the notice date — to pay the past-due amount. If you miss that deadline, your servicer can demand that you repay your outstanding mortgage balance, plus interest, in full.

Your mortgage servicer will also assign a team member to work with you on foreclosure prevention options. This information will be communicated to you in writing.

60 days late

Once you’re 60 days late, expect more mortgage late fees, as you’ve missed two payments. Your servicer will send you another notice by the 36th day after the second missed payment. This same process applies for every month you’re behind.

90 days late

At 90 days late, your servicer may send you a letter telling you to bring your mortgage current within 30 days, or face foreclosure. You’ll likely be charged a third late fee.

120 days late

The foreclosure process typically begins after the 120th day you’re behind. If you live in a state with judicial foreclosures, your loan servicer’s attorney will file a foreclosure lawsuit with your county court to resell the home and recoup the money you owe. The process may speed up in nonjudicial foreclosure states, because your lender doesn’t have to sue to repossess your home.

You’re notified in writing about the sale and given a move-out deadline. There’s still a chance you can keep your home if you pay the amount owed, along with any applicable legal fees, before the foreclosure sale date.

Can you get late mortgage payment forgiveness?

If you’ve otherwise had a good payment history but now have one missed mortgage payment, you could try writing a goodwill adjustment letter to request that your servicer erase the late payment information from your credit reports.

Your letter should include:

  • Your name
  • Your account number
  • Your contact information
  • A callout of your good payment history prior to missing a payment
  • An explanation of what led to the late mortgage payment
  • The steps you’re taking to prevent late payments in the future

End the letter by requesting that your servicer remove the late payment from your credit reports, and thank your servicer for their consideration. Print, sign and mail your letter to your servicer’s address.

The letter is simply a request; your servicer isn’t required to grant late mortgage payment forgiveness. If your servicer agrees to remove the late payment info from your credit reports, your credit scores may eventually increase — so long as you continue to make on-time payments.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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Mortgage

What Is the Minimum Credit Score for a Home Loan?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you’re hoping to become a homeowner, your credit score may hold the keys to realizing that dream. Knowing the minimum credit score needed for a home loan gives you a baseline to help decide if it’s time to apply for a mortgage, or take some steps to boost your credit first.

It’s possible to get a mortgage with a score as low as 500 if you can come up with a 10% down payment. Keep reading to learn the minimum credit score requirements for the most common loan programs.

What are the minimum credit scores for home loans?

Your credit score plays a big role in determining whether you qualify for a mortgage and what your interest rate offers will be. A higher credit score means you’ll likely get a lower rate and a lower monthly mortgage payment.

There are four main types of mortgages: conventional loans, and government-backed loans insured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA). Conventional loans, which are the most common loan type with guidelines set by Fannie Mae and Freddie Mac, have a credit score minimum of 620. Although some loan programs don’t specify a minimum credit score needed to qualify, the approved lenders who offer them may set their own minimum requirements.

The table below features the minimum credit scores for these home loans, along with minimum down payment amounts and for whom each of the loans is best.

Loan type

Minimum credit score

Minimum down payment

Who it’s best for

Conventional6203%Borrowers with good credit
FHA500-579 with 10% down payment
580 with 3.5% down payment
10% with a score of 500-579
3.5% with a minimum score of 580
Borrowers who have bad credit and are purchasing a home at or below their area FHA loan limits
VANo credit minimum, but 620 recommendedNo down payment requiredActive-duty service members, veterans and eligible spouses with VA entitlement
USDA640No down payment requiredBorrowers in USDA-eligible rural areas with low- to moderate-incomes

What is a good credit score to buy a house?

Meeting the minimum score requirement for a home loan will limit your mortgage options, while higher credit scores will open the doors to more attractive rates and loan terms. A good credit score can also provide you with more choices for home loan financing.

  • 740 credit score. You’ll typically get your best interest rates for a conventional mortgage with a 740 (or higher) credit score. If you make less than a 20% down payment, you’ll pay for private mortgage insurance (PMI). PMI protects the lender in case you default on your home loan.
  • 640 credit score. Rural homebuyers need to pay attention to this benchmark for USDA financing. Exceptions may be possible with proof that the new payment is lower than what you’re paying for rent now.
  • 620 credit score. The bare minimum credit score for conventional financing comes with the largest mark-ups for interest rates and PMI.
  • 580 credit score. This is the bottom line to be considered for an FHA loan with a 3.5% down payment.
  • 500 credit score. This is the lowest credit score you can have to qualify for an FHA loan, but you must put 10% down to qualify.

Annual percentage rates by credit score

Your mortgage rate is a reflection of the risk lenders take when they offer you a loan. Lenders provide lower rates to borrowers who are the most likely to repay a mortgage.

Here’s a glimpse of the annual percentage rates (APRs) and monthly payments lenders may offer to borrowers at different credit score tiers on a $300,000, 30-year fixed loan. APR measures the total cost of borrowing, including the loan’s interest rate and fees.

FICO Score

APR

Monthly Payment

760-8503.011%$1,267
700-7593.233%$1,303
680-6993.410%$1,332
660-6793.624%$1,368
640-6594.054%$1,442
620-6394.6%$1,538
*Based on national average rate data from myFICO.com for a $300,000, 30-year, fixed-rate loan as of May 4, 2020.

As the credit score ranges fall, the interest rates are higher. Borrowers with a score of 760 to 850, the highest range, saw an average monthly payment of $1,267. Borrowers in the lowest credit score tier of 620 to 639 saw their monthly payment jump to $1,538. The extra $271 in monthly payments adds up to an additional $97,560 in interest charges over the life of the loan.

Steps for improving your credit score

Now that you have an idea of the extra cost of getting a minimum credit score mortgage, follow some of these tips that may help boost your score.

  • Make payments on time. It may seem obvious, but recent late payments on credit accounts hit your scores the hardest. Set your bills on autopay if possible to avoid forgetting to pay one.
  • Pay off balances monthly. Try to pay your entire balance off each month to show you can manage debt responsibly.
  • Keep your credit card balances low. If you do carry a credit card balance, charge 30% or less of the available credit limit on each account.
  • Have a mix of different credit types. Mortgage lenders want to see you can handle longer-term debt as well as credit cards. A car loan or personal loan will help demonstrate your ability to budget for installment debt payments over time.
  • Avoid applying for new accounts. A credit inquiry tells your lender you applied for credit. Even if you were applying to get your best deal on a credit card or car loan, multiple inquiries could drop your scores, and give a lender the impression you’re racking up debt.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.