Mobile Home Mortgage Rates

Home: Mobile Home Financing: Rates, Terms, and Fees

Mobile Home Mortgage Rates, Terms, and Fees
A complete explanation

Mobile Home Mortgage Rates, Terms and Fees can vary quite a bit. Depending on what lender you use, what type of Mobile Home you live in, and what type of credit and qualifying you will have.

Terms

The "term" of a loan means the length of time that the loan goes on for.

Normal terms for personal property loans like these are 5 years, 7 years, 10 years, and 15 years.

In some cases you can find terms as long as 20, 25, and even 30 years - but these are more the exception than the rule.

There are three ways a loan can be set up:

First, there is interest only.

This is where there is a time limit on the loan, let's say, 5 years, but the payment only pays the interest each month.

Well, with just the interest being paid, then balance never goes down. So, by the end of the 5 years the same balance is now due and payable - normally a refinance would be done unless the property was sold before then.

Second, there is fully amortized.

This is where the balance is paid in full over the course of the loan period.

Let's say 5 years again, but the payment each month pays all of the interest and enough principal to get the balance paid off by the end.

Third, there is a balloon payment.

This is where the term is set at a shorter period compared to the payment period.

Let's take the 5 years again. In this case you would have 5 years until the loan was over, but the payment is set on a longer term, like 30 years. So, you pay a payment each month which includes all of the interest accrued and enough principal to pay the loan off in 30 years - this is just like a normal 30 year loan. The difference is that at the end of 5 years the remaining balance is due. Normally you would just refinance the loan into another loan.

One example where this makes sense is on a typical 30 due in 10 year loan where the payment is set on the 30 year schedule, but the balance is paid off at the end of 10 years.

A person would choose this due to the lower Mobile Home mortgage rate, and the fact that 10 years is actually a long time to make payments for. The assumption is that the balance would be refinanced into another 30 due in 10 year loan, for the next 10 years, or maybe a fully amortized 20 year loan, completing the full 30 years.

Rates

Mobile Home mortgage rates can vary quite a bit from lender to lender, and from area to area. The lowest we have seen is 6.75%, and the highest is approaching 20%. Typical rates are in the 7% to 9% range, and if you are quoted higher then ask why and keep shopping around.

Why is there such a difference in the high and low rates? And what are the factors that determine the rate?

First, you must realize that rate is a gauge of risk - the higher the risk of default (non-payment), the higher the rate.

Second, rates charged are also based on the cost of money at any one time in the nation.

So, Mobile Home mortgage rates will reflect the risk in any one area, with also reflecting the over-all cost of money.

Mobile home mortgage rates are based on risk of default by these factors:

Good vs. bad credit
loan amount compared to the value (loan-to-value)
income vs. debts monthly
Age and size of the unit (we address this factor separately below)

These should be obvious, but lower rates are available to people who have: Better credit, more equity, low debts each month.

Off setting factors are considered when determining a Mobile Home mortgage rate, such as:

Additional reserve assets (lots of money in the bank and/or additional equity in other properties), very stable employment, other income not used to qualify.

Here is an example:

A retired couple have just enough money saved for the down payment and closing costs. Their income is about twice as much as their house payment, space rent, and credit card payments each month. Their credit is ok, but there are a few late payments on their credit report in the past year.

Versus

A retired couple who are putting down 50% of the purchase price, they have enough money in the bank to pay off the remainging balance if needed, and they have perfect credit.

There is more risk with the first couple so their Mobile Home mortgage rate will be higher. Consider your current income vs. debts each month, consider what you equity position will be, and consider how you have paid your debts in the past (especially the last two years - this period matters the most).

Age and Size factors for determining rate:

This too should be obvious, but the newer and larger the unit, the more desirable it is to most people. A lender will look at the risk as if it were to foreclose on the property in the case of default and need to sell the property on the open market. They require a property appraisal for this reason. An older single wide is harder to sell than a new double wide - therefore the risk is higher on the smaller, older units - which means a higher rate.

Typical cut off for a lot of lenders is 1976 for the year of manufacture. This is due to the HUD building requirements established at that time. However, this is not a hard and fast rule - just the norm. Our recommended lender in California will finance all years, with the rate only going up on 1969 and older units.

Fees

For most people with good credit, a down payment of some sort, and good income (also being able to prove their income) should not pay more than 2 points origination fee and normal closing costs. One point is one percent of the loan amount.

Why are points charged?

In Mobile Home financing, there is no "market" for the loans to be bought and sold on between lenders and investors. So, all the loans that are made must be held by the institutions that made them (in some cases the loans are sold, but this is rare). What this means for you is that there is no possibility for "no points". Any lender is in the business to make money, that is it. They will not give away the loans, they are in the business of selling the money.

Yes, there is a lot of money made in the interest rate, but a lender will divide up the proceeds as up front profit and over-time profit. They cannot "count" on the over-time part because there is a chance that the loan will pay off early or not pay at all. So a lender MUST charge up front fees to stay in business (all those people working on your loan need to eat).

Mobile Home mortgage rates, terms, and fees will be worst if you have bad credit or stated income.

Additional closing costs to consider:

In addition to the lender fees, there will be escrow, title, appraisal, and notary fcosts to pay. For a purchase, you will also have insurance, taxes, inspection, and termite costs. Buying and financing a Mobile Home is very expensive.