Tuesday, May 1, 2012

Modular Home Financing 101

Modular homes are fairly cost-effective to build, however, most of us are going to need financing to realize our dream home!

Compared with traditional home construction loans, there is no difference in the interest rate or term in a modular home construction loan (assuming the home is built to code).   Today’s home buyers have many options when it comes to financing a modular home project.  However, in this post I’m assuming that you will need a construction loan.

Many modular home dealers/builders will be more than happy to assist you in securing a loan, so please let that be your first phone call.

Next you have to choose a lending establishment, and ask about the requirements they have for their construction loans.  By getting pre-qualified you will know exactly what you qualify for before you continue modifying your modular home. Your current income and debt and credit history are taken into account to approve you and determine an amount for which you qualify. If you can meet the lender requirements you are on your way.  However, if you have a few problems with your credit and meeting the requirements, please speak to the loan department about ways of getting your loan application approved. Assuming you are pre-qualified, you can secure your property, select a home, and get all your estimates in writing, and can continue processing your loan.

As soon as you qualify and are approved for the amount you can afford, the construction process will begin. Much like a standard mortgage a modular home construction loan will require the home buyer to put down approximately 20% as a down payment.  Funds are then released in “draws” as the modular home is constructed. You, the home buyer, will make interest only payments on the funds as they are distributed.  Once the home is nearly finished and the builder is close to making the final draw, the lender will convert your loan into permanent loan and you will begin to make permanent mortgage payments.

(There are a number of ways to boost your credit rating and make yourself more attractive to lending institutions.  Do you have any tips for boosting your credit score, please comment below!)