You have questions about financing a manufactured home and we have answers.
Let's start out with a little basic information regarding credit scores, down payments and debt to income ratios.
The credit score required for financing manufactured homes varies from lender to lender. As a general rule, financing is available for credit scores above 640(+), but is subject to change and is lender specific.
How do you find out what your credit score is without having to join a monthly credit service? We recommend that you go to www.annualcreditreport.com where you can get a copy of your credit report for free. You will have to pay a small fee to get your credit score, but your score will not drop if you pull your own credit. Your score WILL drop, for example, if your credit is pulled by X, Y & Z Company. You also have the option of going to www.creditchecktotal.com to check all 3 of your credit bureaus.
www.myfico.com also has good information for understanding your credit score.
It is a good idea to review your credit report and make sure that the information on it is accurate. Any ‘unpaids’ hurt your credit score and lenders do not like to see them, they also do NOT want to see late pays.
If you happen to find out that any of the information is not accurate on your credit report, dispute it. If it cannot be proven that the debt belongs to you, it will have to be removed.
What if I need help disputing a credit issue?
We would recommend that you go to www.equifax.com. Equifax is the credit reporting agency for the West Coast and they are who most lenders are going to contact regarding your credit if you live on the west coast. Equifax can help you with disputing any credit issue. You can also obtain your credit report from them or join their credit monitoring service if you choose.
Down payment requirements vary from lender to lender, but a minimum, 5% (+) down payment is required by all lenders. So, if you wanted to purchase a $40,000.00 home, for example, the minimum down payment would be $2,000.00. (.05 x 40,000 = $2,000.00)
This amount can vary from lender to lender and it is dependent upon credit worthiness, debt to income ratio, etc. So, in the best case scenario, if you did not have a minimum of $2,000.00 to put down, you would not qualify for the home.
Debt to Income Ratio…..
What is debt to income ratio and how is it calculated?
Debt to income ratio, simplified is, the amount of debt you have in proportion to the amount of income you make.
Most lenders want to see your debt to income ratio at 45% or under. Meaning all of your debt only equals 45% of your gross income per month(see Countable Gross Income below).
Debt would include: the house payment, park rent, credit card payments, student loan payments*, car payments and any other kind of personal loan payment you may have.
*Student loan payments are generally counted even if the loan is in deferral, because a lender figures eventually you will be required to pay it back.
So, let’s say that you make $2,500.00 gross wages per month. Your total debt per month could not be greater than $1,125.00 for house payment, park rent, car payment, credit cards, etc. (2,500 X .45 = $1,125.00)
What happens if your debt was $1,200.00 per month? Then the amount of your down payment would need to be increased so that the amount of your house payment would be decreased, or some small debts could be paid off, etc., your lender will advise you on the best course of action for you.
Countable Gross Income…..
What counts as allowable gross income?
Verifiable wages you receive from your employer. (check stubs and W2's will be asked for - note, if you can't verify the income, a lender will NOT count the income). Social Security payments, payments from pensions, retirement payments and child support payments can also be counted.***
What happens if you do not have a minimum 640 credit score, or you have recently filed bankruptcy?
As far as bankruptcies are concerned, most lenders want the bankruptcy to be discharged for a minimum of 5 years. They want a proven track record of payments made since, with absolutely no late pays.
However, some lenders will choose to offset poor credit, or bankruptcy by asking for more of a down payment, which can be up to 40% down in some cases, but it does mean that financing with a bankruptcy or poor credit is not necessarily out of the question.*
How much will I qualify for?
Only the finance company can tell you how much you truly qualify for, but there is a way to make a pretty good estimate of how much you can afford. Most finance companies want to see your housing costs be within 33% of your total gross income. So for example, if you make $3,000.00 per month, the finance company would want to see your housing expense to be at $1,000.00 or under. $3000 x .33 = $990 per month. Total housing includes park rent and house payment. So if park rent is $750.00 per month, $990.00-$750.00=$240 for a house payment. How much house can $240.00 per month finance? That is dependent upon your credit score and how much down payment you are putting down and the interest rate you receive.
In this example if we amortize $25,000 for 20 years at 10% interest, payment would be $241.26. However, if the interest rate is lower, at say 6.25% for the same 20 years, a payment on $34,000.00 would be $248.52. Everything, with financing is based on your credit score and your down payment and your debt to income ratio.
But I was on a website that said this house would only cost me $XXX.XX per month?
Most websites that have loan calculators for how much something will cost a potential buyer, are basing their numbers on the assumption that it is real property. Manufactured homes in parks are considered personal property, because you do not own the land the home sits on, it is rented. Also, most manufactured home loans are not for 30 years and most real property loans are for 30 years and interest rates for personal property are generally higher than they are for real property.
Do you have other options?
Yes, you do. If you belong to a Credit Union, they can be a great source of loans for used manufactured homes in parks.
Loan Brokers can also help you find a lender for your specific requirements.
You also have the option, if your credit is good enough, to take out a personal line of credit with your bank and pay for the home that way.
What if you want to purchase on Land?
If you have questions regarding financing a manufactured home on land, feel free to give us a call and we will refer you to lenders who specialize in this area. You also have the option of talking with your financial institution, as this would not be a chattel loan (home only).
What about refinancing?
There are lenders who offer refinancing.
We offer this information as a general overview to financing a manufactured home in a park. Requirements vary from lender to lender and change periodically. What you qualify for is always based on your credit worthiness. This information is deemed accurate, but is in no way guaranteed accurate and is given as general information only. If you have any further questions, feel free to call our office at 503-794-1100.
*Lender will make the determination on the exact down payment amount required and if an applicant can be accepted with a credit score below 640.
**on approved credit, must meet lender requirements and qualifications.
***Lender to make determination on whether income is countable and what documentation will be required.