Many buyers will need a loan to purchase their factory-built home. Traditional real estate loans and preapprovals aren’t the same as manufactured home lending, so watch out for these pitfalls.
Skimping on the Down Payment.
When buying a manufactured home, start with as much down payment as you can afford. Not only will you build up equity in your home faster, but your monthly payments will also be lower.
Long Term Loans.
Shorter term loans save a TON of money in interest.
For example: save over $3000 in interest by financing a $39,000 loan at 9.99% for 7 years instead of 10 years. But the monthly payment isn’t that different: $544.12 for 7 years versus $406.28 for 10 years.
And you’ll own your home outright three years sooner!
Teaser Rates, Variable Rates, or Balloon Payments.
They may look tempting at first, but the shock you get when as your payment increases will make you cringe.
Not Shopping for Rates.
The bank or credit union where you have your checking account and auto loan may give you favorable terms on a mobile home loan, too. Be sure to ask.
Automatically Purchasing Credit Life Insurance.
Don’t let a lender tell you “credit life” - the insurance that pays off your loan if die or become disabled -is required. It’s not required, and you may already have enough life and short-term disability to cover an emergency.
Not Considering Taxes and Insurance.
This is called “escrow” and is above the principal and interest you pay. When a lender quotes you a monthly payment for a manufactured home for sale ask if these costs are included.
Letting Insurance Lapse.
Speaking of homeowners insurance, never let it expire. Having no insurance puts both the lender and borrower at risk. Plus, it costs hundreds of dollars to reinstate the policy, if that’s even possible, and you’ll likely pay a higher premium.
Making Late Payments.
This sounds simple but paying on-time will improve your credit score and give you more options when you’re ready to upgrade to a larger, newer manufactured home.
Best advice: work with a reputable manufactured home dealer like Hames Homes. Contact us online, call us at (319) 377-4863, or visit us at 5410 Wabash St. SW in Cedar Rapids. We’ll walk you through the entire purchasing process including financing options through our in-house loan company Circle Finance LLC (NMLS#366020) or other banks.