July 8th, 2022
The United States real estate market has been scorching hot for over a decade, and manufactured homes have risen in demand as people are looking for affordable housing. Between 2018 and 2020, interest rates moved to historical lows. Since then, interest rates have increased, but the demand for manufactured homes has remained constant.
As the purchasing landscape evolves, many potential buyers wonder how interest rates affect manufactured home loans. Luckily, we created a comprehensive guide detailing this, which includes:
- What is a manufactured home?
- Why is manufactured home lending important?
- Are interest rates different for manufactured homes?
- What home buyers can do when interest rates rise
- How to apply for a manufactured home loan
Use this information to position yourself better as a prospective manufactured home buyer.
What is a Manufactured Home?
A manufactured home is a prefabricated home that has been built to higher housing regulations following 1976. This distinction is made to separate them from traditional mobile homes, as the floor plans and builds offer potential homeowners much more space and comfort.
Realistically, today’s manufactured homes are not meant to be fully mobile – they are often moved once to a purchased or leased plot of land, where they remain an economical option to live in.
Why is Manufactured Home Lending Important?
While a feature of manufactured homes is affordable structures that allow more people to own homes in California (and many other states), there are still costs that prospective buyers may need a loan for.
Though owning land is not always a requirement for manufactured home buyers, it can add another layer of ownership not found in previous mobile home parks and other land setups.
Additionally, the cost of construction and real estate has risen significantly over the last decade. While a manufactured home is still an affordable option relative to traditional housing, the up-front cost might still be challenging for some. This means a flexible and low-interest loan is a great option to secure housing.
Are Interest Rates Different for Manufactured Homes?
Manufactured home loans are often considered more risky and lent out at different rates by banks and other lenders. This is for a number of reasons, including:
- Many manufactured home purchases do not include the land they sit on. Thus, the asset is less secure for banks to lend against.
- Over 40% of manufactured homes are chattel loans – these contracts are designed for mobile homes and non-stationary property, and often have higher rates.
- Many manufactured loan programs such as VA and USDA manufactured loans require no down payment, which often correlates with a higher interest rate.
While some guidelines for manufactured home lending are more lenient to allow more people to qualify, it does sometimes drive up the rate. Even in a time of rising interest rates, they still are near historical lows.
What Home Buyers Can Do When Interest Rates Rise
Everyone’s financial situation and home buying experience will differ, but there are certain strategies that can help you combat rising interest rates when purchasing a manufactured home.
Some of these strategies include:
- Using a shorter loan term.
- Adjustable rate mortgages to start.
- Increasing your down payment.
- Finding a loan that fits your budget.
- Working with experienced manufactured home lenders.
It is important to work with a financial institution you can trust. The difference between a well-constructed loan and a hastily put together one can cost you thousands of dollars in the long-term.
How to Apply For a Manufactured Home Loan
In order to get the best lending experience for a manufactured home loan, it is important to learn what type of loan you can qualify and for what amount.
We recommend working with a reputable bank or credit union who can furnish a variety of manufactured home loans.
Your income, credit history, down payment amount, and a number of other factors will contribute to your interest rate. Ultimately, the best way to find a loan that works for you is to have a comprehensive conversation with a lender who cares about their customers.
Community West Bank Can Help Finance Your Manufactured Home
At Community West Bank, we want to help people find a home they own while allowing them to build wealth at the same time. If you are looking to buy a manufactured home today, every dollar we help you save will contribute to a brighter tomorrow.
If you are looking to find out more about your manufactured home lending options, please reach out to us today. One of our qualified representatives will be happy to talk to you about the process and get you started on the path to home ownership.
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