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For more question
on manufactured home mortgage
call us at
1-800-450-0157
or email us here
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Many mortgage terms can be difficult to understand. The terms are
important, and it is important that every applicant for a manufactured
home mortgage has a working knowledge of them. The purpose of this
article is to provide an explanation of these terms. While you may be
aware of many of them, there are some that you may need to know more
about. This article will describe all of the terms that are pertinent to
manufactured home mortgages.
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Amortization
Appraisal
Regular monthly payments on a mortgage will reduce the principal and interest
every time a payment is made. The reductions can be tracked and an amortization
table, which you can find on the Internet, will help you see how fast the mortgage
is being paid off. Many people find the amortization table to be a handy tool for
understanding the progress they are making in reducing the mortgage balance.
An appraisal is required by the lender to help them determine the value of the
property they are investing in. The lender always hires an appraiser who is experi-
enced in appraising manufactured housing. The borrowers may have an appraisal,
but it will only serve to inform the buyer of the property’s value as that appraiser
sees it. A problem can arise when the lender’s appraiser does not appraise the
property as high as it needs to be to qualify for the mortgage. Every borrower
should take steps to understand the value of the property they are buying before
applying for a mortgage.
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Annual Percentage Rate (Apr)
Adjustable RateMortgage (Arm)
The APR is usually higher than the stated mortgage interest rate. The reason is the
APR is based on the amount borrowed including the principal and other fees paid
by the lender and added to the mortgage. The APR is based on all fees paid over
the life of the loan. One example is the Private Mortgage Insurance or PM! which
some borrowers are required to pay. The APR must be disclosed to applicants for
a mortgage within 3 days of filing the application. Since the APR is the interest
the borrower will be paying on the total that the lender has invested, it is a good
idea to consider this when selecting a mortgage. You are entitled by Federal law
to know what is contributing to the makeup of the APR. It would be a good step
because the APR is usually the most misunderstood term of the mortgage process.
Also, some mortgages include an origination fee for the lender.
The Adjustable Rate Mortgage (ARM) is a mortgage that usually has a low-interest
rate in the beginning and the rate increases at stated intervals. This mortgage can
adjust after the first year and every five years, or at some other time interval.
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Many people opt for an ARM for the lower interest rate in the beginning, but then
they find that the interest rate increases significantly, and sometimes it increases
the monthly payment more than the borrower can pay. This was a major cause of
the housing meltdown.
Balloon Payment
Closing Checklists
The Balloon payment is a lump sum payment on the mortgage usually after five
years. Monthly payments are smaller which makes the property more affordable,
but when the balloon payment is due, the borrower may not have the ability to
pay it. Refinancing may be difficult because the borrower’s credit rating may have
dropped, or the supply of mortgage money may have dried up. It may be more
difficult to get a new mortgage because property values have declined. Selling the
property to pay the balloon payment may not result in enough money if the hous-
ing market has changed.
This checklist will help the borrower keep track of all items that need to be handled
before closing. If the lender does not provide this, then the borrower should create
it. This list should contain everything the borrower needs to do to get ready for
closing. An example would be obtaining property insurance and making sure that
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a title insurance policy has been ordered by the lender. Also included should be
ensuring that any local government requirements that are met. An example of this
would be whether you have to pay for fire protection or whether it is provided by
the local government.
Closing Costs
Closing Statement
These are the costs that are finalized by the time of closing. They include all of the
expenses of providing a mortgage and all of the other expenses such as property
insurance and “points,” which are funds paid to the lender to lower the interest
charged to the buyer. It will also include fees associated with obtaining the mort-
gage, prorated taxes, the cost of property insurance, and any item that is required
to be paid before the borrower can move into the home.
This is a complete list of all charges the borrower will be responsible for. Many
charges will be included such as the appraisal fee, property installation inspection
fee, and the cost of the title insurance. Federal law requires that a closing state-
ment itemizing every charge be provided to the borrower at least 3 days before
the closing. This is an important document to review.
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Conventional Loan
This is a loan that is not insured by FHA. This loan usually requires a 20% down
payment. It may even require a larger down payment. If the lender does not re-
quire private mortgage insurance (PMI), then the lender assumes all of the risks in
the event of a default by the buyer. The credit profile is likely to be higher than an
FHA loan would require. However, the debt-to-income ratio may be less stringent.
The interest rates and the APR will vary between lenders, but not by a significant
amount. Conventional mortgage loans are available for manufactured homes, and
in fact, some lenders specialize in manufactured homes.
Disclosure
Discount Points
Disclosure documents are required by Federal law to provide all of the details
about the mortgage. These documents should be complete in disclosing all infor-
mation about the mortgage.
These are commonly referred to as points. Points are money paid at closing, and
they are a percentage of the mortgage amount. For example, one point equals one
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percent of the mortgage. Points increase the lender’s return on the mortgage. Part
of deciding which lender to use is determining how many points they charge. One
or two points may be acceptable, but four or five should not be acceptable unless
there is no other source willing to work with the borrower.
Escrow
Fannie Mae
Escrow is a fund created by the lender to hold funds provided by the borrower for
payment of expenses such as taxes and property insurance. The lender is entitled
to ask for more money from the borrower to cover a shortfall in the escrow ac-
count. If the balance of the account does not cover upcoming expenses, then the
lender can request funds to be deposited in the escrow account. There are limits
on how much money a lender can maintain in an escrow account. The limits are set
by state law and Federal law.
This is a Federal government agency that buys mortgages from lenders so that the
lenders can reinvest their money in other mortgages.
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Federal HousingAdministration (Fha)
Freddie Mac
Housing And UrbanDevelopment Agency (Hud)
FHA is a government run agency that provides mortgage insurance for FHA-ap-
proved mortgages. FHA has increased the availability of affordable housing be-
cause it will guarantee a lender that a mortgage in default will be paid in full. FHA
is funded by insurance fees paid by the borrower, and no government money is
invested in FHA. FHA does insure FHA approved manufactured housing mortgages.
This is a government agency established for the purpose of buying mortgages from
lenders so that the lender can make loans to more home buyers. Freddie Mac also
stimulates the real estate industry and creates low-cost housing. Freddie Mac is a
key player in supporting the manufactured housing market.
HUD is a Federal Government organization established to increase affordable
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housing by implementing policies and procedures that stimulate real estate invest-
ment. Manufactured housing is one of the primary ways chosen by HUD. HUD also
ensures the safety and quality of manufactured housing. HUD requires all manufac-
tured homes built after 1976 to have a document affixed to each section certifying
that the unit meets HUD requirements.
The Loan-To-Value Ratio
Title Insurance
The LTV Ratio is the loan amount compared to the cash value of the property.
Lenders will use this ratio to as a metric to help determine the risk involved in
making a mortgage loan. Manufactured housing can meet the LTV Ratios required
by lenders. The wise borrowers will discuss the LTV Ratio with their lender before
purchasing a model.
Title insurance is absolutely necessary because it provides assurance that the land
has no outstanding liens against it. Title insurance will also ensure that the proper-
ty boundaries are where they are alleged to be. The lender and the borrower will
be certain that the property has no encumbrances that could result in a dispute
over ownership of the property. It also ensures that the manufactured home will
be finished in the correct spot.
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For more question
on manufactured home mortgage
call us at
1-800-450-0157
or email us here
