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Senior Resources » Modular Home Communities » Financing Prefabricated Homes: 5 Loan Types To Know For Buying Manufactured, Mobile, & Modular

Financing Prefabricated Homes: 5 Loan Types to Know for Buying Manufactured, Mobile, or Modular

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Over 22 million people in the US live in manufactured, mobile, or modular homes. It’s really no wonder that prefab popularity continues to grow! The average cost is anywhere from $80,000 to $180,000, versus a brand-new single-family home, which can cost up to $400,000. Prefabs are clearly a cost-effective alternative to traditional housing. Not to mention, they’re kind of perfect if you’re looking to downsize.

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I’ve decided to buy. Now, where do I start?

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First, let’s talk basics.

A manufactured home (formerly known as mobile, pre-1976) is entirely factory-built and then transported to its permanent location. A modular home is partially built in a factory, then assembled on-site. Your prefab preference is completely a personal choice. There are, of course, plenty of factors that will play a part in your decision – desired size, location, customization, cost of land, utilities…to name just a few.

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Once you’ve nailed down some specifics and decided on an ideal price range, it’s time to start exploring some options for financing. A great credit score, as well as having some cash for a down payment, will help along the loan qualification process. And, while shopping for a lender can be intimidating, it doesn’t have to be if you already know what type of financing you’re looking for.

So, what are my financing options?

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A conventional loan is any type of loan that is not backed by a government organization. Instead, the loan is offered by a private lender; banks, credit unions, or mortgage companies are common. Conventional loans feature fixed interest rates and some strict qualification requirements. Lenders usually require a credit score of 620 or above. If your downpayment is less than 20%, you’ll likely need to attain private mortgage insurance.

Important: not all lenders of conventional loans will finance a prefabricated home.

A chattel loan is typically used for the purchase of movable property: cars, boats, farm equipment, RVs, and yes – manufactured and modular homes. Sometimes referred to as a security agreement, this type of loan is for a shorter term. It’s often for smaller amounts. However, interest rates tend to be a bit higher.

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An FHA loan is a government-backed, fixed-rate loan. It will usually feature a shorter term as well as fewer qualification requirements. A Title I loan can be used for a prefab home but not land, whereas a Title II loan can purchase both.

A personal loan can be borrowed from banks, private lenders, or credit unions. For this type of loan, keep in mind that you may need to put up collateral, and repayment terms will vary. Most personal loans also have higher interest rates. This is can definitely be a financing option for manufactured or modular homes – but, it may not be the best option for everyone. Be sure to check out your alternatives first.

A VA loan is another type of government-backed loan. It’s insured by the Department of Veterans Affairs. If you’re a veteran, this may be a great mortgage option. For your prefab home to qualify, it must be on a permanent foundation and located on land that you own.

Ready to finance your manufactured, mobile, or modular home?

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Whether you’re moving closer to family or just looking to downsize, a prefabricated home might be for you! To find more info on manufactured and modular homes, check out these helpful resources:

6 Facts For Seniors To Consider Before Buying a Manufactured Home

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HUD Office of Manufactured Housing Programs Homepage

ManufacturesHomes.com

Need financial advice? Then, visit these sites:

Bob Carlson’s Retirement Watch

FHA.com

Click here to find manufactured housing near you.

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Originally published September 18, 2023

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