Families seeking to finance a modular or manufactured home in Arizona have many of the same financing options available for site-built homes, including Veterans' Administration loans that provide significant benefits to veterans and their families. Real estate has traditionally been a solid investment that grows in value and builds equity over the years. Manufactured and modular housing can be a budget-friendly option that can grow in value, especially for those who own the land, have it placed on a foundation, maintain it well, and add other structures like a garage or deck.
How Do Manufactured Housing Mortgages Work?
Manufactured housing, which is built to comply with federal building codes administered by the U.S. Department of Housing and Urban Development, can be financed in the same ways site-built homes are financed. A wide variety of mortgages are available for both types of housing.
Mortgages for purchasing or refinancing a manufactured home can cover the home only (chattel), land and home, or construction loans for houses and other structures like garages and decks. Qualifying for a mortgage for manufactured housing involves the same steps as qualifying for financing a site-built home. This process includes putting money down, going through credit checks, and proving sufficient income.
Who Is Eligible for a VA Loan?
Applicants for VA loans need to have a Certificate of Eligibility and plan to live in a home that's funded through a VA mortgage. Veterans qualify, and service members, spouses, or other beneficiaries can also benefit from the VA loans. Service members are eligible after 90 days of service at a time of war, 181 continuous days of service during peacetime, or six years of service in the National Guard. Spouses of those who died in the line of duty are also eligible.
The VA website offers assistance with applying for the certificate. With a Certificate of Eligibility in hand, qualified individuals can apply for a VA home loan for manufactured housing through a lender of their choice.
What Are the Limits for VA Loans for Manufactured Housing?
Like all mortgages, there are limits to funding VA loans for manufactured housing. Loans can cover up to 95% of the cost of a home. Time limits vary depending on the type of manufactured home. Single-wide homes with land may be financed up to 20 years and 32 days, while double-wide units with land may be financed for up to 25 years and 32 days. Chattel mortgages for only the manufactured home are limited to 15 years and 32 days for single-wide homes and 23 years and 32 days for double-wides.
The loan limits are lower for manufactured housing compared to site-built homes. Site-built homes can qualify for 100% financing or a zero down payment.
Which Lenders Provide VA Home Loans?
Private lenders, including banks and mortgage companies, administer VA home loans. Not all companies offer VA home loans for manufactured housing. The VA guarantees a portion of the loan, allowing lenders to provide better terms such as lower interest rates while eliminating the need for mortgage insurance payments for those under a 20% down payment.
What Are the Pros and Cons of VA Loans?
Small down payments and other benefits make VA loans attractive to those who qualify. The government-backed loans also have lower interest rates, offering savings that add up over the years. As with any financial decision, it's wise to weigh the pros and cons of VA home loans.
Advantages include better terms and interest rates compared to other home loans. Very low down payments and no penalties for paying the loan off early offer flexibility for those whose financial situations change over time. VA home loan holders with less than a 20% down payment don't need to pay for private mortgage insurance or a mortgage insurance premium, protecting the lender from potential losses. Private mortgage insurance is for traditional mortgages, while a mortgage insurance premium is required for Federal Housing Administration loans. The VA also caps closing costs.
Borrowers may also use VA home loan benefits more than once if they pay off a loan, sell their home, and buy another home. VA loans are also eligible for refinancing options, including an interest rate reduction refinance loan and other streamlined options. Applications are less restrictive than other loan types, and options include fixed-rate and adjustable-rate VA mortgages. Another qualified buyer may assume your VA loan. One more advantage is the ability to roll funding fees into the loan, reducing the down payment.
Disadvantages of VA loans include a required funding fee that helps offset the cost of low down payments and a lack of mortgage insurance. Funding fee requirements vary and range from 1.4 to 3.6% of the home's purchase price. Loans may exceed the value of the home when low down payments and the funding fee are factored in. Homes with VA loans may not be rented out, which restricts future usage of the property.
Consider your needs and the available mortgage options when seeking home financing.
What Are the Next Steps If Qualify for a VA Loan?
Qualified buyers who have a Certificate of Eligibility should take additional steps to prepare for getting a VA loan, including:
- Reviewing your credit reports, income from all sources, monthly expenses, and other factors to confirm it's an excellent time to become a homeowner.
- Becoming familiar with the terms of VA loans, such as loan limits, funding fees, closing costs, interest rates, and credit score requirements.
- Choosing a lender that handles VA home loans for manufactured housing and reviewing potential lender fees like a one-percent origination fee.
- Select a real estate agent or other sales representative to help you find a manufactured home and potentially land and begin shopping for a home that will meet your family's needs.
Home loans for modular and manufactured housing through the VA have many benefits that will save home buyers money in the long run, such as lower interest rates and no mortgage insurance. Cascade specializes in financing modular and manufactured housing and is experienced in handling VA home loans. We proudly serve the Phoenix area as well as all of Arizona. Confirm you are qualified by obtaining a Certificate of Eligibility, reviewing your finances, and becoming prequalified through Cascade.