Out of the gate, it’s incredibly important to make this distinction: Modular homes and manufactured homes are not the same thing, at least as the VA home loan program is concerned.
Manufactured homes are mobile homes, which typically come in single-wide and double-wide form. Modular homes are built in sections in a factory and transported to the site. Local contractors typically assemble the pieces, and the finished home is then inspected by local housing officials to ensure it meets codes and standards.
In general, modular homes are likely to appreciate in value over time. Manufactured homes, meanwhile, are likely to lose value. It’s usually considerably easier to obtain a VA loan to purchase an existing modular home than to buy either a new or an existing manufactured home.
But things can get more challenging if you’re wanting to put a brand-new modular home on a plot of land.
As a number of readers have come to know in the last few months, it’s pretty tough right now to find a VA lender willing to loan on manufactured housing. There’s more risk with these properties, from the likelihood of longterm depreciation to issues with delinquency and foreclosure. After the housing market collapse and subsequent foreclosure crisis, lenders are still skittish and unwilling to take on what they may see as unnecessary risk.
I can provide a list of financial firms I know to have loaned on mobile homes in the past, but I’m not sure about their present lending environments. In many cases, veterans and military families will secure financing from a manufacturer or a personal banking institution.
Modular homes are a different ballgame. The finished pieces remain inside of the factory and aren’t exposed to outside conditions until it comes time for transport. Depending on the look, it’s sometimes tough to tell a modular home from a traditional single-family residence. And unlike manufactured homes that must only meet a standard U.S. Housing and Urban Development (HUD) housing code, modular homes also need to satisfy local regulations.
The process for purchasing an existing modular home is simply the standard procedure: Prequalification, Preapproval, Contract, Underwriting, Closing and House Party.
Where things can get more complicated is if you’re wanting to buy a new modular home and have it installed on a piece of land. Lenders will often consider this new construction, and that changes the complexion when you’re talking about VA home loans. It’s tough to find VA lenders out there willing to do a true $0 down construction loan.
Often, borrowers need to obtain a construction loan from a builder or a local lender, then look to refinance that short-term loan into a permanent VA mortgage once the home is ready. This is a common pathway for both stick-built and modular new construction.
You can talk with a Veterans United loan specialist at 888-212-1958 about modular housing. You can also drop me a note at firstname.lastname@example.org.
Photo courtesy of Team Massachusetts