Some mobile homes are absolutely bank-financeable as long as the buyer is approved with enough money down. Older mobile homes are virtually impossible to obtain a traditional bank or conventional loan for due to their age, condition, foundation and the number of times the home has been moved.
Please see the list below of the different types of common mobile home financing for investors and buyers.
Common Mobile Home Financing Options
1. Borrowing Money From Friends/Family:
Whether you are buying a mobile home or selling a mobile home you may come across people that have or will borrow money from their friends and family in order to purchase a primary residence mobile home. As an end-user-buyer, seller, or investor there is usually nothing wrong with this.
Pro Tip: As an investor we want to be aware of any sellers that owe money on their unwanted mobile homes to a family member or friends. The reason for this is because a family member or friend will often times be more forgiving than a bank will if the seller is unable to get a high enough sales price to pay off the family member’s or friend’s private loan.
This means you may be able to purchase the home for less money than the seller owes on the home. This low purchase price may be due to repairs needed or many other factors.
2. Local Bank Financing:
Local banks and local credit unions may be a very good source for financing local mobile homes to end-users that will be living inside the mobile homes and raising their families.
Remember that Conventional loans, FHA loans, and VA loans are similar in that they are all issued by banks and other approved lenders, but there are some major differences between these types of loans.
- FHA Financing: FHA loans are loans insured by the Federal Housing Administration (FHA). If the borrower defaults on the loan and the mobile home isn’t worth enough to fully repay the debt through a foreclosure sale, the FHA will compensate the lender for the loss. This makes the lender more likely to lend, and typically for a lower interest rate and down payment than conventional financing as there is less risk to the lender.
- VA Financing: VA loans are loans insured by the Veterans Administration (VA). If the borrower defaults on the loan and the mobile home isn’t worth enough to fully repay the debt through a foreclosure sale, the VA will compensate the lender for the loss. This makes the lender more likely to lend, and typically for a lower interest rate and down payment than conventional financing as there is less risk to the lender. VA loans are for members of the armed forces, reservist, the national guard, and veterans.
- Conventional Financing: A conventional loan is not insured or guaranteed by the federal government. This means that, unlike federally insured loans (VA & FHA), conventional loans carry no guarantees for the lender if the borrower fails to repay the loan. Due to the fact there is no government insurance, conventional loans pose a higher risk for lenders so credit and income requirements from the borrower are typically stricter and more expensive than for FHA and VA loans.
3. Nationwide Lender Financing:
There are a variety of companies that specialize in financing mobile homes inside pre-existing parks and on private land. These nationwide lenders have various requirements and typically lend their own internal monies.
This means that many of these lenders control their own underwriting requirements, and may differ greatly from local banks. When dealing with companies like this you will need to call each one to understand their lending requirements and if your specific situation fits their lending criteria.
4. Local Loan Agencies or Private Money Mortgage Companies:
There may be local companies that specialize in lending other-people’s private money for local real estate deals that make good financial sense.
Pro Tip: Ask the organizers and/or presidents of your local real estate investor clubs if they know any small loan agencies or private money brokers nearby that specialize in lending smaller amounts of private money on 15+ year notes to end-buyers.