Where do you start when you want to buy a mobile home on bad credit? Options are available if you want to put in the time. The application processes can be long and involved, but there are a few strategies to help you get ready to make the purchase, and places to turn for a loan.
There are three primary options:
- Plan on a large down payment, 20 percent or better of transaction value
- Search out seller/owner financing
- Obtain a personal loan from a friend or relative
Where to Turn When You Need to Buy A Mobile Home on Bad Credit?
You can finance through the dealer where you buy the home, or approach a credit union, which typically are more open to lending for mobile homes than other financial institutions. Many communities today offer owner/seller financing options for existing homes.
A Federal Housing Administration loan may work with a 500 or better credit score. The loan can be obtained whether your home is, or will be, on land owned or not. In other words, you may be able to get an FHA loan if your home will sit on a leased land in a manufactured home community.
FHA loan also have loan amount limits to consider. As of 2017, the limit for a manufactured home is $69,678. If you only want to buy the lot, the limit is $23.226. The limit is $92,904 for both the manufactured home and the property.
However, whether the home is on leased or owned land, you need to verify that the home will be your primary residence in order to qualify.
Veterans Assistance Loans
VA loans are available to buyers who have served in the Armed Forces and surviving spouses of those who have. Buyers can obtain a VA loan if they qualify. Recipients need to complete a Certificate of Eligibility, which looks at service history, work history and income.
Once the CEOE is complete, buyers can apply for a VA loan online, through the lender (or bank), or by mail.
Chattel Loan for a Mobile Home on Bad Credit
Chattel is personal property, and some lenders will provide a chattel loan, or personal property loan, for the home. This loan is typically shorter term, carries a higher interest rate and therefore results in higher monthly payments.
Debt to Income Ratio
This is a primary determining factor whether you will be able to secure a loan, what type of loan you may be able to get, and on what kind of terms. Debt to income ratio refers to how much you owe versus how much you make. For buyers with credit problems, one of the most pain free avenue toward improving the situation is to pay down existing debt and putting restraints on spending. Most people cannot raise their credit score with a stroke of a pen, no more so than you’re readily able to dramatically increase income. But, with the “stroke of a pen”, you may be able to pay off debt and reduce monthly spending. Budget, budget, budget.
What does last year look like on paper for you? That’s what the lender will look at. It’s not so much about your income historically.
And it’s not so much about income during the year you’re looking to purchase a home. Let’s think of previous year income as “absolute income”; if the earnings on your previous year tax return is high enough, lenders will spend less time scrutinizing credit scores, ratios and down payment options.
Also, rental history goes a long way toward indicating to the lender how reliable you are. If you were a good tenant, you’re more likely to be viewed as a good loan recipient.
Down Payment for a Mobile Home on Bad Credit
Typically you want the down payment on a home, any home, to be between 10 and 20 percent. Depending on debt-to-income ratio, the degree to which your credit has suffered and the glance at your annual income, your lender may have an exact percentage in mind. It may be more than 20, but, trust us, it won’t be less than 10 percent.
Down Payment Assistance
In many markets throughout the U.S., homebuyers can get a grant from a local government to raise funds for the down payment. HUD has a list of opportunities for homebuyers on its website.
ALL manufactured home loans will require a down payment of some type. Some buyers qualify for a “land in lieu” loan, which means the loan issuer writes a lien against equity the buyer has in their land and uses its value as the down payment. The obvious concern for the homeowner, is, if they’re to default for any reason, the lender will own the land your home is on, and the home too.