Finding Land, Understanding Credit, and Red Flags to Watch for When Home Buying
The process of buying a mobile home, or any home for that matter, can be overwhelming.
But there are a few things you can check off the to-do list before ever stepping foot in a mobile home dealership, ensuring you get the home you want, at the price you can afford, as quickly as possible.
Finding Land or a Mobile Home Community
Your first step is to know where you want to place your mobile home. There are several different available options for mobile home buyers. We’ll look at three of the most common.
(1) Privately Owned Land
Most mobile home buyers are looking to install their home on a piece of property they already own. If the land was purchased many years prior, or you are just now looking into buying it, it is important to check local regulation and flood zoning.
Some areas do not have restrictions on mobile homes per se, but may have requirements for roof pitch, dormers, exterior color, skirting, decks, width—you get the idea. While other areas may not allow manufactured housing at all.
To check on flood zoning, you can search most properties online through the county’s website and determine what your property has been classified as. While having a property in a flood zone doesn’t automatically disqualify you from installing a mobile home, there will be extra paperwork for county approval and extra cost in the height of the set-up.
Another thing to keep in mind when looking into placing a mobile home on your property or a property you are interested in purchasing, is the cost of installing utilities. If you already have your necessary utilities (water, electric, septic) you’re probably good to go.
But if you are working with “raw” land, now would be the time to get some quotes on just what it will cost to make your property fit to be a primary residence. If you are approved for the right amount, many of these improvement costs can be financed in to your home loan.
(2) Installing Home on Family or Friend’s Property
Another great option for getting your own home and saving money doing it is by installing the home on property your family or a close friend owns.
Many first-time home buyers are fortunate enough to have parents with a large property willing to allow them to install their home and rent free. Of course, it doesn’t have to be a parent-child relationship but should certainly be someone you can see yourself living in relatively close proximity to with little chance of a future falling-out.
Everything mentioned above in the section about privately-owned land still applies in this instance, with one more detail to consider.
If you are financing your home, the lender will want to see the Deed of Trust or Warranty Deed proving ownership of the land. This is very important to check on yourself if you are buying the home in cash and do not have the second eyes of a lender to ensure someone else cannot come and claim rights to the property later. This is one way to protect the investment you are making on your home and the place it will sit.
(3) Mobile Home Community
Another popular option especially among the 55+ community, is installing their mobile home in a mobile home community or “park”.
This living situation certainly has a bad rap and a ton of stigma throughout our nation. While there are certainly pockets of the industry that still fit the old stereotype, many of these communities have worked hard to upgrade their facilities and provide a place for folks to live similar to the way they would in an apartment—with picnic areas, gyms, laundry, swimming pools, and parks.
If you are interested in making the move into a mobile home community, it’s important to do your research through online reviews, in person visits, and price comparison.
Another important note on choosing to buy a home to live in a mobile home community is the resale value on your home will not appreciate as it would on privately owned property. If you ever chose to move your home onto privately owned property in later years, selling the land and home together would require a cash buyer as a twice moved mobile home is not typically financed by lenders.
Credit Score & Preparing for a Loan
Finances are another area that should be addressed in preparing for a loan.
If you know or suspect your credit score may be suffering, before going home buying is the time to begin an effort to repair it. But, there is a right way and a wrong way to go about doing this.
Credit score is calculated based on many different factors in your credit history: timeliness of payments, delinquent accounts, number of accounts open, amount of credit, percentage of credit used on open lines, and more. In short, it’s a complicated summary of these different factors which in turn generates a number depicting how desirable you might be to a lender.
Raising your credit score is all about proving consistent responsibility with your loans. If you have been making late payments, start paying on time, every time. If you have maxed out cards, begin paying them down slowly and consistently.
The key in the credit world is not to draw major attention to yourself either negatively or even positively. The Credit Bureaus do not want to see large debts paid off all at once or the constant opening of new accounts. Especially when buying a home, it is very important to keep your head down, paying your existing accounts in a timely manner and not opening anything new.
Your credit score is not, however, the only factor used when a bank is calculating whether or not to approve you for a loan. They will look at more than the score produced by the Credit Bureaus and examine the full history of your accounts.
In addition, lenders will take into consideration your debt-to-income ratio, job history, and size of down payment to both approve you for a loan as well as calculate your loan’s interest rate.
Budgeting for a Down Payment
While credit score is certainly a hot topic among the mobile home community, equally important in preparing for a mobile home loan is saving up for a down payment. The more you can offer up front, the more invested the bank sees you have become in the loan which can then lead to a higher chance of approval and better interest rate.
If saving hasn’t been your habit, it can be difficult to know where to start.
Always start with creating a budget.
Without a budget there is no way to know where all the money you earn is going. And I can guarantee you have more money than you thought.
Write down what you typically make in a month, leaving off the occasional bonus or gifts. Then write down what your recurring expenses are: utilities, groceries, gas, internet, phone, rent, and toiletries.
There will always be a couple of surprises that come around in a month, so make sure to allocate funds there as well.
Now, whatever amount is left from your income after you’ve paid for your expenses is what you have to put in savings. Creating the budget is not the hard part—sticking to the budget is.
Fast food, get togethers, movie invites, these can all be very tempting knowing how much money you have “extra” in a month. But that isn’t your goal! Your goal is to save for a down payment and become a home owner!
Reviewing your budget often and setting savings goals for yourself might get off to a rocky start, but if you persist, seeing your cash stack up will only motivate you to save more.
Preparing for the Credit Application
You’ve found a place to install your mobile home, fixed or maintained a good credit score, saved up for your down payment. Now what?
I’ll tell you, but first let me offer a few notes on what to expect and avoid when starting to shop.
Many dealerships will want to pull your credit score before filling out the lender’s official credit application. You do not have to and shouldn’t allow this. Imagine going to 5 or 6 lenders and having your credit score checked at each one after working hard to bring your score up, only to have it fall too low to get approved!
Politely decline on this request and keep your information to yourself until the dealership has provided you a price and other cost estimates and it’s time get serious about home buying.
For those with a really good credit score, dealerships may want to see your score as a way to charge you more for a home simply because they know you’ll be approved for a bigger loan. For those with a lower credit score, you may be treated poorly and find your sales person is no longer as enthusiastic as they were when you first walked in.
When it is time to submit the credit application, the dealership might ask for a “credit application fee” and say it is charged by the lender. This is not the case. Banks do not charge any fees to process applications and the “fee” is instead a way for the dealership to keep you from shopping around because they know you won’t want to pay a fee everywhere you go.
As part of the (free) credit application, there are a couple of documents to have ready to make things easier. Each applicant will need their two most recent paystubs, two years of W-2’s, a photo I.D., and their social security card.
These are documents the bank will request after you are approved anyway, so it’s helpful to have them in order and ready to go.
Once you receive the approval, you’ll be ready to start submitting any other documentation the bank might require like a property deed, bank statements, or tax returns. The requirements will be different for everyone. At this point, you are very close to finally buying your home and holding the keys in your hand as a proud new mobile home owner.
Continue your research as you seek to buy a mobile home. Having more knowledge puts the power back in your own hands and helps ensure you get the most out of your home buying experience.