Financing the Purchase of Land and Manufactured Homes
If land and affordable housing with manufactured homes are appealing subjects, then read on to get ideas for financing the purchase of land, a home or both.
One key to keep in mind: build favorable relationships with a credible lender, such as a local banker, so they know your plans.
Financing Undeveloped Land Purchases
Getting a loan on raw or undeveloped land is often a challenge because there’s no home to act as collateral.
A write-up on Investopedia says you need to be aware of the degrees of lender confidence.
Here’s a ranking from what makes lenders feel secure to more cautious:
· Most secure—property with an existing home in good shape
· Secure—a lot that’s ready for building and zoned for residential housing
· Least secure—raw land that’s completely undeveloped since this is a speculative investment
Sandy Cantu’s experience in residential real estate, plus the sale and purchase of land, makes her uniquely qualified to advise anyone buying or selling their land and property.
Make sure the land is properly zoned for residential use. Know if utilities are readily available or if they’ll need to be brought in.
If you’re strongly considering buying land for living on it long term, then start now to build a relationship with a lender through your bank or other financial institution. If you’re moving to a new area then check with local institutions such as community banks or credit unions. They may have more flexibility than typical big banks that have to follow rigid lending guidelines.
Show them that you’ve conducted due diligence on the property. From their perspective, they want to know that a buyer isn’t going to start on a project, pull out and default on their loan.
Seller financing where you negotiate terms and interest rates is also possible, but be certain to have an agreement drawn up properly.
In rural areas, the U.S. Department of Agriculture can be a source of favorable terms and loan amounts.
The more convincingly you can show your plans to have a house on the property, the more the lender will work with you to have the most favorable terms possible, notes Bank Rate.com.
Here is how manufactured homes can be advantageous. The work of prepping the land is minimal and you look for a lender willing to finance both the land and home purchase.
Financing Manufactured Home Purchases
If your land is already purchased, then you can seek out conventional loans, government loans or collateral loans.
A guide on Forbes.com notes that for a conventional loan, “Your home has to be at least 400 square feet, attached to a permanent foundation and have all the basic features needed for living, including eating, sleeping and sanitary facilities.”
First-time homeowners may qualify for financing through a Title 1 loan as noted on HUD.gov: FHA approved lenders make loans from their own funds to eligible borrowers to finance the purchase or refinance of a manufactured home and/or lot. FHA insures the lender against loss if the borrower defaults.
FHA is not the lender, but it insures loans to assure lenders that any loans in default will be covered. Also, borrowers who qualify for Title 1 loans aren’t required to own the land but they can lease a lot.
Currently, a manufactured home and lot can be financed for $92,904 according to HUD.
How do you make the decision on buying land and knowing what type of home to build?
Contact Sandy Cantu.
She cares deeply about her clients, whether they’re selling property or are in the market to purchase. She can also bring both seller and buyer together handling the proper documentation so the transaction is made with ease.
Learn more by downloading for free Your Guide to Buying Land: the Heart and Soul of America.
Case studies and resources make this a valuable reference.
And get even more guidance with this Sandy Buys Houses blog post: How to Reevaluate Where You want to Live.