Mobile Home Refinancing Loan

From LoveToKnow Mortgage

A mobile home refinancing loan can be a potentially excellent way to reduce your monthly mortgage payment. There are a variety of loan options available, so it is important to do your research and shop around for the loan that meets your particular needs.

Be sure to do your research before you refinance your mobile home.

Mortgage and Personal Loans

Historically, most of the original loans homeowners use to finance their mobile home purchase are personal loans, not a traditional mortgage. Personal loans:

Are offered through the dealer where the mobile home is purchased.
Usually require a ten percent down payment.
Are used to finance the remaining balance along with any loan costs.
Usually have a term of ten to fifteen years and a higher interest rate than a traditional home loan. If the personal loan is for a used mobile home, the loan's interest rate may be slightly higher than the rate charged on a new mobile home.

In recent years some financial institutions have began to offer a traditional mortgage to the buyer of a mobile home. These lenders may provide both fixed rate mortgages and adjustable rate mortgages (ARMs). Some lenders only require five percent down and are willing to finance the remaining balance over a 20 to 30 year period.

Real or Personal Property

The lending options of personal loans and traditional mortgages revolve around the purpose of the loan. For example:

Real property – These loans are for the mobile home and the land surrounding the mobile home. Real property loans are typically traditional mortgages. Most lenders require the mobile homes to be permanently attached to the property.
Personal property – These loans are only for the mobile home. In these situations, the mobile home sits on a piece of rented or leased property, usually in a mobile home community. These loans are typically personal loans.

Reasons to Refinance

Refinancing gives the owner of a mobile home the opportunity to obtain a new loan to pay off an existing loan. The reasons for refinancing are similar to the reasons which are considered by an owner of a traditional home:

Lower Interest Rates - To exchange the current loan for a loan with a lower rate of interest so the homeowner can lower the monthly payments.
Shorter Loan Term - To exchange a personal loan with a short term for a personal loan with a longer term. This change in terms will lower their monthly payments.
Different Type of Loan - To exchange a personal loan for a traditional mortgage.
To Obtain Cash - To exchange the current loan with a new loan for the unpaid balance on the mobile home plus an amount of cash up to the amount of equity held by the homeowner.

Mobile Home Refinancing Loan Options

Lenders

You can refinance with your current lender or look for a new lender. If you have consistently paid your loan payments on time, and your current lender wants to retain you as a customer, they may be willing to refinance your current loan.

Some lenders may be unwilling to refinance a mobile home. This is particularly true if the homeowner is looking for a traditional mortgage on land which is not increasing in value and where the mobile home is decreasing in value.

Types of Loans

Freddie Mac Guaranteed Mortgage Loans

Financial institutions who offer traditional mortgage loans for mobile homes usually require very specific features in the loan. These features allow the loan to be guaranteed by the federal government. To be guaranteed through Freddie Mac, a mobile home loan must:

Be made available to low and moderate-income borrowers
Be secured by a minimum of a 5 percent down payment coming from the funds of the borrower
Offer terms which are similar to mortgage loans offered on traditional homes
Provide flexible financing with fixed-rate and ARM loans

The federal government also requires very specific requirements on the mobile home itself in order for the home to meet the requirements established for the loan to be guaranteed. If your property meets these requirements you have a better chance of being able to qualify for a mortgage since the lender has a better chance to being able to have the loan guaranteed by Freddie Mac. The mobile home must meet these requirements:

At least twelve foot wide with a minimum of 600 square feet
Built on a permanent chassis after June 15, 1976
Have the wheels and towing hitch removed
Be in compliance with federal safety standards
Be affixed to a permanent foundation and permanently connected to a septic or sewage system and other utilities
Be located on land owned by the borrower

Personal Property Loans

These loans often do not have many of the policies and restrictions of a mortgage loan. Be sure to shop around since lenders may be willing to adjust their rates, terms and fees for a credit-worthy loan applicant.

Shop Around

Lending programs and rates vary widely between lenders. If you are considering refinancing you should compare the rates, fees and terms of several lenders. Be sure you understand all aspects of the loan agreement, rates and terms before you make a decision on which lender you are going to use for your mobile home refinance.