For many Minnesotans, the dream of owning a home may seem out of reach due to financial barriers and the complexities of the housing market. However, manufactured homes offer an affordable and practical solution for those seeking homeownership without breaking the bank. Understanding manufactured home loans and how to finance them could be the key to opening the door to your new home.

Know the Basics of Manufactured Home Loans

Manufactured homes, including mobile and modular homes, offer a cost-effective alternative to traditional stick-built houses. Built in a factory and then transported to your chosen site, these homes meet rigorous federal standards for quality and safety. They provide not just affordability but also flexibility and efficiency in construction and design.

Loan Options for Buying a Manufactured Home

For potential homeowners in Minnesota, several manufactured home financing options are available, including chattel loans, conventional mortgages, FHA loans, and personal loans for mobile homes. Here is a quick breakdown of each type of loan and how they work.

Manufactured Home Loan (Chattel Loans)

Chattel loans are a type of personal property loan used to finance mobile homes and manufactured homes that are not permanently affixed to the land they sit on. In this case, the manufactured home itself is used as collateral for the loan, but not the land the home is located on. These loans typically have similar interest rates, but are shorter loan terms, when compared to mortgages for traditional real estate. This is the type of manufactured home loan you'll use when the home your purchasing is located in a manufactured home park. 

Conventional Mortgages

Conventional mortgages can be used to purchase a manufactured home when the home is affixed to a permanent foundation and is classified as real property. Meaning that the property is a parcel of personally owned land and the structures on it are permanently attached to the land. Conventional mortgages can offer you access to competitive interest rates, especially if you have a strong credit score. Typically this type of financing for a manufactured home will require a higher down payment between 5 - 20%. However, you can also access longer-term financing with loan terms up to 30 years in some cases. 

FHA Loans

FHA loans are insured by the Federal Housing Administration and designed to help lower-income borrowers access home financing. These loans allow for lower down payments (as low as 3.5%) and lower credit score requirements than conventional loans. FHA loans are available for manufactured homes, provided they meet FHA guidelines (e.g., affixed to a permanent foundation), including both the purchase of the land and the home, similar to conventional mortgages. 

Personal Loans for Mobile Homes

Personal loans are unsecured loans that can be used for various purposes, including the purchase of a manufactured home in some cases. Because they are unsecured, interest rates can be higher compared to secured loan options. These loans do not require the home to be affixed to a permanent foundation. They offer flexibility in terms of the use of funds but usually come with shorter repayment terms than conventional mortgages or chattel loans. This is typically only an option if the manufactured home you are looking to purchase does not meet the lending guidelines required by other finances options, such as age of the home.

Need help deciding the best option for financing your manufactured home? Let's talk.

Navigating the Loan Application Process

When applying for manufactured home loans in Minnesota, it is important to understand the steps involved in the loan application process.

One of the first steps is to know the correct loan type that best suits your financial situation and homeownership goals. If you're looking to buy a home in a manufactured home park, you'll want to apply for a traditional manufactured home loan (also known as a chattel loan). On the other hand, if you're considering placing a manufactured home on land you own permanently, you can opt for a conventional mortgage. If you meet the qualifications for an FHA or personal loan to finance your home, your lender will guide you through your options.

Once you know the type of loan you need to apply for, you will want to gather the necessary documentation to support your loan application. When applying for a manufactured home loan, lenders typically review the following information:

• Proof of income, such as pay stubs or tax returns, to assess an affordable payment. 
• Proof of identity, such as social security number or ITIN 
• They will review your credit history to determine the interest rate you qualify for.
• Details about the home, including its location, condition, and value. 

After you've completed your application and submitted all required documents, your lender will guide you through understanding the loan terms, interest rates, and other details you qualify for. Once your loan is approved, your lender will walk you through the next steps in finalizing the purchase of your new home.

Apply for an Affordable Manufactured Home Loan today!

Key Questions & Short Answers

• Why is it harder to get a loan for a manufactured home? Many lenders do not offer manufactured home loans due to the perceived higher risk associated with factors such as depreciation and the non-permanent nature of certain manufactured homes. Lenders who do provide loans for a mobile home generally have manageable requirements for loan qualification.

• What is the lowest down payment for a mobile home?  Most manufactured home loan lenders will require a minimum of 5% for your down payment. In Minnesota, some programs offer down payments options as low as 3%, however these typically require the home to be permanently affixed to the property. 

• What is a good credit score to buy a mobile home? While it varies by lender, a credit score of 640 or above can generally increase your chances of loan approval and access to better interest rates. If you're score is lower than 640, you may need to work on improving your credit score before buying your manufactured home. 

Additional Resources to Help You

For Minnesotans dreaming of homeownership, manufactured homes offer a practical and affordable path. With a variety of financing options for your manufactured home ownership goals and the expert lenders at First Alliance Credit Union, you can achieve the dream of owning a home that is both affordable and cherished. Your dream of homeownership is within reach, and now is the time to take those first steps towards making it come true.