Manufactured Homes: Mortgage Financing Options

Blog-Date-1Feb 12, 2020

Manufactured homes, pre-fab homes, modular homes, self-build homes – there are many names with slightly different definitions for what are ultimately just homes. That means that buyers of these types of home still require mortgage financing.

Compared with building a fully customized new home, however, manufactured homes offer two key advantages: cost and time. The process of securing mortgage financing for these types of homes is not much different from the purchase of a traditional home.

Read on to learn what’s involved in securing mortgage financing for manufactured homes and special considerations mortgage brokers should keep in mind.

Benefits of manufactured homes

To keep things simple, we use the term ‘manufactured homes’ to refer to any home that is based on an existing design and constructed using building materials that are either preassembled or delivered to the building site as a kit.

This covers a variety of scenarios, including:

  • Homes constructed fully on-site using a package of materials delivered to the owner’s property
  • Homes mostly built in a factory, delivered to the owner’s property and completed on-site by a contractor
  • Homes fully built in a factory, taken apart and reassembled on the owner’s property

Manufactured homes are often cost effective as the companies that supply them are able to achieve significant economies of scale compared with custom building.

In addition, when a home is built – either partially or fully in a factory – there tends to be more certainty regarding timelines and less risk of weather delays.

Tailored financing for manufactured homes with flexible terms

Mortgages for manufactured homes generally resemble construction mortgages in that the disbursement of funds is staggered in line with the progress of building work.

At Pillar, we collaborate closely with the manufactured home supplier to ensure alignment between their payment schedule and our disbursement schedule, ensuring that funds are available for upfront deposits, progress payments and payment on delivery.

Rather than applying a one-size-fits-all approach, we remain flexible to meet the needs of individual clients and deals. For instance, if a client does not yet own the land where they plan to place their manufactured home, we can arrange one mortgage covering both the land and the new home or split these into two separate transactions.

The only type of manufactured homes that we do not finance are trailers and mobile homes.

Securing financing for manufactured homes

As a broker, helping your client secure a mortgage for a manufactured home follows the same general process as a mortgage for other types of homes.

At Pillar, our mortgage requirements and terms are also similar. For example:

  • We lend up to a maximum loan-to-value (LTV) of 80%
  • We lend on 1 year terms for construction
  • Your client must have an exit strategy

DOWNLOAD: Our Construction Budget to help keep track of your costs.

Necessary client documentation:

  • It’s important to gather as much information as possible from your client beforehand, including details about the company they will be working with, and due diligence to ensure it’s a reputable operation.
  • The documentation you submit should include a copy of your client’s contract and payment schedule from the supplier of their manufactured home.
  • If your client plans to hire an external contractor to build or finish off the home following delivery by the supplier, a copy of this contract is also required.

Have a deal in mind?

Pillar has the expertise to help you secure a flexible mortgage for your client’s purchase of a manufactured home. For questions or to discuss a prospective deal, contact our business development team today.

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