If you're looking to buy a first home or a new homes with bad credit, consider buying a manufactured home. With the increased cost of real estate, a manufactured home provides a good, low-cost housing option even for buyers with bad credit. However, getting loans for manufactured homes is trickier than a standard single-family home even with good credit. Here are some tips for financing a manufactured home with bad credit.
Determine If The Home Qualifies
To qualify for a mortgage loan, the manufactured home must be built after July 1,1976, and sit on a permanent foundation like concrete. On July 1, 1976, the National Manufactured Housing Construction and Safety Standards passed, which set standards for manufactured homes. Any factory-built home built before that date classifies as a mobile home.
The home may not qualify for a loan if it doesn't sit on a permanent foundation, or if it was dissembled, moved, and rebuilt. Some lenders may apply stricter age requirements on manufactured homes, such as ones built before 1994, when the U.S. Department of Housing and Urban Development (HUD) passed more standards to provide greater safety in hurricanes.
Consider Loan Options
Banks commonly do not like to offer loans on manufactured homes regardless of credit since they depreciate. Loans can be obtained through specialty lenders, but the down payment will be higher for buyers with bad credit. If you choose this option, add a cosigner with good credit to increase chances of approval.
The Federal Housing Administration (FHA), which is part of HUD, provides loans to buyers who don't meet qualifications for a prime mortgage. The FHA sets caps on loans for the home only at $69,678, and the home and land at $92,904. To qualify for an FHA manufactured home loan, the home must:
- be intended for the primary residence
- classify and be taxed as real estate in the same municipality as purchase
- have working utilities
- include a 400 sq. ft. floor area
- sit on a permanent structure that meets FHA guidelines
Make a Higher Down Payment and Offer Collateral
Lenders prefer getting a higher down payment on manufactured homes in particular from buyers with bad credit. Plan to place a down payment of 20-30% of the loan to increase you chances of getting approved. If you own the land you will set the home on, offer it as collateral, but make an effort to not miss payments.
Review your credit report prior to applying for financing, and correct errors. It isn't impossible to get financing for manufactured homes with bad credit if you do your homework.