Loans on mobile homes

For many moderate income American families, the mobile home is the only kind of housing they can reasonably afford. Mobile homes have been included in the count of new housing units being produced. In the beginning Mobile homes accounted for approximately one third of new housing starts in the nation, and over 90 percent of all new housing selling for under $15,000. Despite mobile homes prominent contribution, the Department of Commerce had not included them in its housing production figures; until the 1960 Census, they had been lumped in with “other” types of housing a category containing houseboats, tents, and converted railroad cars. The mobile home, too many federal agencies, was still “temporary” housing at best and totally invisible at worst.

 

The mobile home helped to meet the objective of affordability and without the use of subsidies. Since an increase in the use of mobile homes depended on the availability of land, the Government took steps to reform restrictive land use regulation and eliminate other forms of discrimination. The mobile homes were officially treated as primary and permanent housing. Such recognition could significantly improve mortgage terms and the secondary market for mobile home paper. Recognition, however, could also invite increased regulation and a new visibility that could cost the industry some of the advantages it had enjoyed.

 

The Congress passed the Mobile Home Construction and Safety Standards Act, authorizing Housing and Urban Development to establish and enforce a code for mobile home construction. The code would preempt local building regulations, but foundation standards would remain under local control. The act made mobile homes the first private-sector building type to be regulated by a mandatory federal code. It recognized the mobile home as a dwelling, but one that was separate and distinct, by virtue of being built on a permanent chassis. Modular housing was excluded from the legislation, so that the precedent set by a national code would remain restricted to a single building type. The Department of Housing and Urban Development implemented its new standards for mobile home construction, commonly referred to as the HUD code. The code was based heavily on the ANSI standard. It contained two singularly important provisions. First, it was a preemptive national standard, and, second, it was based on performance. The need for a preemptive standard had been demonstrated by the failure of efforts like Lustron and Breakthrough, which had run aground trying to negotiate through a maze of differing local codes. By establishing a single standard, a manufacturer was assured that the electrical system built for a mobile home in Indiana would also meet the requirements of any other state to which it was shipped.

 

The HUD codes assurance of the safety and durability of mobile homes provided a basis for extending federal loans to purchase them; there was growing recognition that mobile homes were relatively immobile, especially when set up on a private lot. Most households primary financial yardstick in housing decisions is that the monthly cost not exceeds 25 to 30 percent of their gross income. The benefit to a mobile home buyer of obtaining a loan at house rates, with its lower interest rates and longer terms, is obviously significant. If a household buying a $20,000 mobile home obtained a 13 percent loan, on 90 percent of the cost, for a ten year term, its monthly payment will be $276, whereas a ten percent loan, for twenty-year duration, would mean a monthly payment of $176.

 

The equity requirements to purchase a mobile-home include down payment, title, transportation, and set-up fees. If the loan carries a large down payment, the total equity requirement on a purchase may be a significant hurdle for the prospective buyer. Again, with a government-backed loan, the lender is assuming less risk and can offer a higher loan-to-value ratio, resulting in a smaller down payment. As the equity hurdle is lowered, more households can consider owning a mobile home.

 

The National Housing Act authorized HUD to make loans on mobile homes and lots for mobile home use. This allowed mobile home buyers, almost 90 percent of whom finance their homes, to do so at rates closer to those available to conventional home buyers. The original terms of authorized loans were relatively short, but after passage of the HUD code and testing for the durability of units manufactured under that standard, terms improved.

 

Up to thirty-year mortgages are also offered by private lenders. As an additional incentive for private lenders to finance manufactured housing, the Federal National Mortgage Association and the Federal Home Loan Bank Board have been authorized to purchase manufactured housing loans from lending institutions, thereby creating a secondary market for loans, and reducing the risk of originating and holding such notes.

 

It might be expected that with the more favorable rates offered by federally guaranteed mortgage programs a large percentage of mobile home loans would be drawn from this source. Working against the more extensive use of federal loans has been greater paperwork and the small fees offered to dealers and banks processing loans. As a result, the majority of mobile home loans are still financed as chattel though private banks, usually at rates one to two points higher than conventional home mortgages. Higher rates in the private market are justified by greater risk; yet, historically, the rate of mobile home loan defaults has been lower than that for conventional mortgages. Because the private loan market remains lucrative, some of the larger manufacturers, such as Fleetwood, Skyline, and Champion, have established their own financial corporations.

 

Other Articles

 

There are many financial lenders providing loan for bad credit

The company often sanctions loans within 24 hours

By combining few or all of your debts on a single calculated