Some Manufactured Housing Mortgages Require Only 5 Percent Down

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He adds that even though the loan requirements are tighter now, it is possible to get a mortgage for a manufactured home with as little as 5 percent down. (Down payments for manufactured housing usually run 10 percent.) Your credit scores, debt ratio and other paperwork must be in order and the land the unit is sitting on has to be part of the deal. It must also meet other Fannie Mae requirements.

The 5 percent down payment loans are available only through a network of lenders who have demonstrated expertise in the mortgages for manufactured housing, King says. The lender has to understand the property, titling, appraisal and servicing issues associated with manufactured homes. The lenders working with Fannie Mae in this program are AgFirst Farm Credit Bank, Flagstar Bank, GMAC Manufactured Housing, Huntington Mortgage Group, Origen Financial, RBC Mortgage, 21st Mortgage, Vanderbilt Mortgage and Washington Mutual. It is possible, however, to get MH financing through other lenders--some of which also might offer 5 percent down payments.

" There have been a lot of delinquencies and foreclosures in the manufactured housing area because some borrowers were putting people into the wrong homes--homes they couldn't really afford. They also tacked on additional fees and charges, leaving people overburdened."

Senior citizens, people living in rural communities, and others looking for low-cost housing are the biggest buyers of manufactured homes. In many cases it is the only affordable option to renting for first-time buyers or those who are retired. Industry watchers say there is a now a glut of used manufactured housing units on the market in some parts of the country. This has driven prices down, making them even more affordable.

King adds that although manufactured housing is usually very affordable, there are some major differences between MH and what the industry refers to as " stick built" houses. One of the biggest differences is that the value of stick built housing tends to appreciate, or increase, while the value of manufactured housing tends to depreciate. It's like a car. As soon as you drive your new car off the dealer's lot, it loses value.

These differences led to monumental problems for lenders and owners. In 2002, two of the biggest lenders in the MH field, Conseco Inc. and Oakwood Homes, filed for bankruptcy protection while a number of others dropped out of the market.

In a statement earlier this year, Fannie Mae chairman and CEO Franklin D. Raines said, " We want to strengthen the market for manufactured housing financing and eliminate predatory and anti-consumer features that have contributed to instability in the marketplace over time."

While Fannie Mae does not make loans, it buys approximately one out of every four mortgages made in the U.S. today, and it has set high standards for MH loans. Lenders who want to sell loans to Fannie Mae must conform to these new standards. Lenders in turn use the money from those sales to make more loans. Not only is Fannie Mae supplying more money for these types of loans, but it is also helping to stabilize the market and to reduce both loan defaults and interest rates for manufactured housing.

Some lenders treat MH loans like car or boat loans, in other words, personal property loans. But Fannie Mae is willing to look at them as " mortgagable" property as long as they meet certain requirements. " For Fannie Mae," King explains, " the home must be built to codes set by the Department of Housing and Urban Development and be permanently affixed to the land it sits on. The unit cannot have wheels, and the land must be part of the package. We do not accept mortgages that are for the unit alone." Fannie Mae also has specific requirements governing how manufactured housing is to be appraised.

One of the problems with combining the loan for both the home and the land is that each state has different procedures and laws regarding the matter, King added. South Carolina can be considered the manufactured housing capital of America because it has the highest percentage of units in the nation. Although it has held that status for years, it was only last year that the state finally passed a law allowing manufactured homes and property to be combined and treated as a single piece of real estate. This made it possible for MH owners to get a regular mortgage.

Even though manufactured housing can be expected to depreciate in value, the land it is on is likely to appreciate over the years. This gives the lender, Fannie Mae, and the homeowner something of lasting value.