Selecting a modular or double-wide mobile home will require a construction mortgage because with the exception of the actual building itself, the other steps to complete the project are the same as building a home. The land needs to be prepped. If the home is a modular home, a foundation must be poured. For a double-wide, a cement pier or slab must be installed. Your home will need heat, water, septic, electric, steps and possibly a drive-way or deck. You can act as your own general contractor for the completion of these steps or one can be hired to manage the process.
Before you start looking at house plans or developing your own, you'll need to understand what price range you can afford. A commonly used guideline is 2.5 times your yearly gross income (income before taxes) plus the amount of your down payment.
Your monthly gross income (income before taxes) and your debt load are used to determine how much you can borrow. Your loan payment plus your monthly debt (not including your household expenses such as heat and electric) should not exceed 30% of your monthly gross income. Use our handy calculator to help you determine your maximum monthly loan payment.
A Construction Mortgage is used for the building stage and will be for 80% of the perceived value of your home at the time of completion. The perceived value is calculated by an Appraiser who uses estimates provided by you for the completion of the home with an evaluation of recent selling prices of similar homes in the area (often referred to as "comparables"). The homebuyer must provide 20% of the perceived value to obtain a construction mortgage.
The bank will develop an "advance schedule" which will outline each phase of the building process at which a payment will be made. This schedule is typically from 3 to 12 months. In order for the bank to develop the schedule, the customer must provide estimates for each of the steps involved with finishing the project such as excavating, water and septic, installation of steps, deck, etc. At each "advance" point, the bank will verify that the appropriate work has been completed and issue a check to the contractor and homeowner. Until construction is complete, the customer only pays interest on the amount of money being advanced to the builder.
Once the construction is completed in accordance with the contract, the Construction Mortgage is automatically converted to a permanent mortgage.
A wide variety of home loans and financing options are available for the permanent mortgage. Some choices are yours to make; others are based on specific circumstances such as:
The Pre-Approval step allows you to validate your ability to borrow and provides an estimate of your maximum loan amount. During the pre-approval process, a credit check will be performed. A letter can be printed by you and provided to your seller to assure them that your bank has tentatively approved you for this loan amount. Many contractors require this pre-approval letter so they can be sure.
Buying a home is an exciting time. To get started and make it easier, start by thinking about those features that are must haves – number of bedrooms, number of bathrooms, garage, etc. Then list what you absolutely do not want. Finally, list the things that would be nice to have but something you would be willing to give up for the right house or the right price. Now you're ready to go shopping!
For your convenience, we've gathered the names, contact information and websites of modular and mobile home dealers in our area. You can simply click on their website to learn more about them and view the homes they have listed.
Finding a Modular or Mobile Home Builder – List of Mobile/Modular Home Builders
So, you've been pre-approved, found your home and signed the contract. Now you're ready for the next step – getting your Mortgage. You can apply for your mortgage loan by contacting a lender or you can apply on-line. A lender will contact you if you apply on-line. You will be asked to provide a list of information to your lender so they can proceed with your loan review and approval:
Check List Click here to print checklist
Within 3 days of application, you will be provided with several documents:
Upon receipt of a satisfactory appraisal, your lender will contact you with the final approval. A commitment letter will be issued at this time.
A title search is required to uncover any possible problems with the legal ownership of the land such as a lien, an unknown heir or faulty land survey. Arrangements for the title search are made by the bank. A one-time fee is paid at closing.
At the closing, loan papers are signed and the rest of your closing costs and down payment are paid. The lender will establish the closing date. Before closing you should review all loan documents and your purchase agreement.
After the closing, your excavator can break ground and the home building process begins. Payments are made in conjunction with the advance schedule and an inspection is required before the final payment is made.
The original Appraiser will verify that the construction is complete. An inspection may be required as a result of something found during the appraisal process. It may also be requested by you, the buyer, to uncover hidden problems or to identify items that you may want repaired.
After the construction is complete, the Construction Mortgage will automatically convert to a permanent mortgage. However, you may wish to refinance at that time to a conforming mortgage to receive a better rate. This refinance has fees associated with it.