Monday, November 8, 2010

Modular Home Loans

If you are building a modular home on your land you will probably need to take out a modular home loan (unless you are lucky enough to be able to pay for your house in cash). In this case a modular home loan is different from a typical mortgage. Most likely you are working with a builder who is working with a modular home manufacturer. Your modular home loan will basically be like a construction loan you would get if you were building a custom stick built home on your land. There will be a schedule of payments agreed upon by the bank in which money will be made available to the builder after certain milestones have been met in the completion of the house. The builder will receive his final payment after the house has been completed and inspected. Once the house is completed, the loan can be converted into a traditional mortgage for the buyer. A term you will see used for these loans is "Construction to Mortgage" .

When looking for a lender for a modular home loan it is advisable to find an agent that has some experience in modular home loans. For one thing, there are still some lenders that are unclear on the difference between a modular home, manufactured home, or mobile home. I spend hours on the internet reading about modular homes and am always amazed at the number of people in the mortgage or real estate profession that use the terms modular, manufactured, and trailer interchangeably. I will say that overall, many more agents have become aware of the difference and even point out to their peers that they have worked with modular homes and have found many to be superior to stick built homes. So even if you do run across a lender that is not familiar with modular homes or modular home loans you should not be discouraged. There are plenty of qualified lenders that are very knowledgeable and would love to have your business.

One unique thing about modular home loans which makes it important to have a lender that has experience in this type of loan is that the payment schedule must include a payment to the manufacturer for the total amount of the home at the time it is delivered to the home site. This is only a portion of your total cost, but generally the manufacturer will not release the house to be set on the foundation until it is paid for in full. As long as the bank is aware of this and has provided for it in the payment schedule this should not pose any problems. As I said, there are many banks that have extensive experience dealing with modular home loans. Each one may be slightly different in the way they handle the draw schedule for the builder. Some seem to favor the builder more, some the home buyer. Ideally, the loan should allow payments to the builder in a timely manner so he has the money he needs to complete each step of the process, but still leave the builder with the proper incentive to finish the job on your timetable.

1 comment:

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