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.
Showing posts with label modular home mortgage. Show all posts
Showing posts with label modular home mortgage. Show all posts
Monday, November 8, 2010
Tuesday, August 17, 2010
Financing a Modular Home
One question that mortgage lenders (and modular home builders) are asked with increasing regularity is "Is it harder to get a loan for a modular home than a "regular house?" . The short answer is "Sometimes". But it really shouldn't be. The problem lies in the amount of knowledge the homebuyer or mortgage lender has on the subject of modular homes. Sometimes the consumer is the one that is uneducated about the difference between a modular home and a mobile home so they are asking whether a loan for a trailer, which will go down in value is different than getting a loan for a permanent home, which will (hopefully) go up in value. Other times the lender is not familiar with the difference between a modular home and a mobile trailer and assume that the loan will be more difficult to obtain. If you run into a lender like this, you can either find a different lender or ask your modular home builder to educate the lender on how the loans work. So here is a very short explanation of how a loan generally works for a modular home:
First a quick refresher-A modular home is a home that conforms to all of the state and local building codes for its location and is placed on a permanent foundation. A mobile trailer is a home that conforms to HUD building codes and can be placed on a foudation but is on a frame so that it can be moved. Now back to the question of a modular home loan. When you build a new modular home on your land you will usually have a construction loan which can become a conventional mortgage once the home is completed. The loan is similar to a construction loan you would get if you were building a custom site built home except that the payouts from the bank to the builder and manufacturer are a little different. The lender will set up a draw schedule that pays the builder in increments depending on which part or what percentage of the project has been completed. One payment on the schedule is at the time the house is delivered from the factory to the land it will be placed on, the factory is generally given a payment in full for the amount that the builder is paying for the house. From that point on, the payments are made to the builder at increments agreed upon as he finishes the house. One thing to note about these loans is that depending on how the draws are set up the loan can sometimes be more beneficial to the builder than others. Although you may feel that it is better to have a loan schedule that is stricter on the release of money to the builder in my experience the best possible situation for everyone is to have a builder that you have researched and know you can trust and to have the loan set up somewhat favorable to the builder so he/she is not held up on any part of the home due to cash flow problems. (of course I am looking at it from the builder's point of view so take that for what it is worth--hey, at least I tell it like it is)
First a quick refresher-A modular home is a home that conforms to all of the state and local building codes for its location and is placed on a permanent foundation. A mobile trailer is a home that conforms to HUD building codes and can be placed on a foudation but is on a frame so that it can be moved. Now back to the question of a modular home loan. When you build a new modular home on your land you will usually have a construction loan which can become a conventional mortgage once the home is completed. The loan is similar to a construction loan you would get if you were building a custom site built home except that the payouts from the bank to the builder and manufacturer are a little different. The lender will set up a draw schedule that pays the builder in increments depending on which part or what percentage of the project has been completed. One payment on the schedule is at the time the house is delivered from the factory to the land it will be placed on, the factory is generally given a payment in full for the amount that the builder is paying for the house. From that point on, the payments are made to the builder at increments agreed upon as he finishes the house. One thing to note about these loans is that depending on how the draws are set up the loan can sometimes be more beneficial to the builder than others. Although you may feel that it is better to have a loan schedule that is stricter on the release of money to the builder in my experience the best possible situation for everyone is to have a builder that you have researched and know you can trust and to have the loan set up somewhat favorable to the builder so he/she is not held up on any part of the home due to cash flow problems. (of course I am looking at it from the builder's point of view so take that for what it is worth--hey, at least I tell it like it is)
Thursday, June 3, 2010
Where to live while your dream modular home is being built
One of the biggest advantages of building a modular home is the fact that it is a faster process than building a site built home. The majority of a modular home is constructed in a factory environment which is quicker since there are no delays due to weather. Even though modular construction is quicker than site built construction the process will still take a few months to complete from start to finish, so moving from your current residence to your new modular home requires a little timing. Also, since many people who purchase modular homes like to save money by either doing some of the finishing work themselves, or managing the sub contractors who will finish the home, it is beneficial to live as close to the new home project as possible.
Here are a couple ways I've seen people deal with this issue while waiting for their modular home to be completed.
First, I must mention that if your home is being completed by a builder, because of liability reasons it is not possible to have the builder finish one part of the house so you can live in it while the rest of the house is completed. A builder is required to have the house pass inspection before anyone occupies the house. So here is one option. Many people will put a mobile home or Park Model home on the property and live in it while the modular home is being built. Park Model homes have become increasingly popular in the last few years because they can be made with the same color siding that will go on the house and once the modular home is completed the Park Model can stay on the property as a guest house or mother in law cottage. Park Models are small cottages that are built to RV specifications, but can be put on a permanent foundation and some of the newer ones look really great. Because they are considered RV's they cannot be built over 400 square feet. www.tinygreenhouses.com is a website that focuses on Green Building and building small houses in order to simplify our lives but these Park Models work great for people finishing off their modular home and they have a section that lets you search for park model home dealers by state.
There are all kinds of creative options out there for how to best transition from your current home to your new modular home so you should keep your eyes open for potential ideas on places like Craigslist, ebay, etc. For example, there is currently an interesting deal being featured on the Missouri land page of www.modularresource.com (I know, this is a shameless promotion of the site I write for, but it is a good example). The Missouri listing features 40 acres of land in the beautiful Ozark Mountains for jsut $106,000. The interesting part is that the owner offers to options to the buyer. The first option is to buy the land on an owner-finance basis with no credit check and only 10% down. This is a good deal, but the second option is the one that makes sense for someone building a modular home. In Option 2, the buyer must pay for the land in cash, but in return, the current owner will include a bonus a double wide home worth about $35,000. The home is currently being lived in so it has all lthe well, elictric, utilities, etc. hooked up. It even has a satellite dish. So for example, say you have just got an offer on your current home and are ready to build your dream modular home in Missouri. Provided you receive at least $106,000 in equity from the sale of your current home, you could then buy the 40 acres in cash and move into the double wide home while you plan and build your new modular home. With at least decent credit, you should have no problem getting a loan for the construction of the new modular home by using the land as a down payment. This could save you a great deal of money that you may have had to spend on rent as you complete construction on your new house. Then when your dream modular home is complete, since the double wide is a mobile home, you could sell it to someone else, who could hitch it up and drive away with it. Or you could always keep it on your property for when friends or relatives come to visit.
Here are a couple ways I've seen people deal with this issue while waiting for their modular home to be completed.
First, I must mention that if your home is being completed by a builder, because of liability reasons it is not possible to have the builder finish one part of the house so you can live in it while the rest of the house is completed. A builder is required to have the house pass inspection before anyone occupies the house. So here is one option. Many people will put a mobile home or Park Model home on the property and live in it while the modular home is being built. Park Model homes have become increasingly popular in the last few years because they can be made with the same color siding that will go on the house and once the modular home is completed the Park Model can stay on the property as a guest house or mother in law cottage. Park Models are small cottages that are built to RV specifications, but can be put on a permanent foundation and some of the newer ones look really great. Because they are considered RV's they cannot be built over 400 square feet. www.tinygreenhouses.com is a website that focuses on Green Building and building small houses in order to simplify our lives but these Park Models work great for people finishing off their modular home and they have a section that lets you search for park model home dealers by state.
There are all kinds of creative options out there for how to best transition from your current home to your new modular home so you should keep your eyes open for potential ideas on places like Craigslist, ebay, etc. For example, there is currently an interesting deal being featured on the Missouri land page of www.modularresource.com (I know, this is a shameless promotion of the site I write for, but it is a good example). The Missouri listing features 40 acres of land in the beautiful Ozark Mountains for jsut $106,000. The interesting part is that the owner offers to options to the buyer. The first option is to buy the land on an owner-finance basis with no credit check and only 10% down. This is a good deal, but the second option is the one that makes sense for someone building a modular home. In Option 2, the buyer must pay for the land in cash, but in return, the current owner will include a bonus a double wide home worth about $35,000. The home is currently being lived in so it has all lthe well, elictric, utilities, etc. hooked up. It even has a satellite dish. So for example, say you have just got an offer on your current home and are ready to build your dream modular home in Missouri. Provided you receive at least $106,000 in equity from the sale of your current home, you could then buy the 40 acres in cash and move into the double wide home while you plan and build your new modular home. With at least decent credit, you should have no problem getting a loan for the construction of the new modular home by using the land as a down payment. This could save you a great deal of money that you may have had to spend on rent as you complete construction on your new house. Then when your dream modular home is complete, since the double wide is a mobile home, you could sell it to someone else, who could hitch it up and drive away with it. Or you could always keep it on your property for when friends or relatives come to visit.
Subscribe to:
Posts (Atom)