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The Seven Steps of Manufactured Housing Construction Financing
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I
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Getting Pre-Qualified
This will provide you with a budget estimate for building your new modular home.
This budget is based on the maximum loan amount you qualify for.
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II
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Applying for Mortgage
Once you complete a contract to purchase a modular home, you're ready to apply for
your mortgage. You'll fill out an application and a credit report will be obtained.
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III
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Mortgage Approval
Your application and credit report will be reviewed. Once approved, a
committment letter will be issued stating the loan amount and other terms.
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IV
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Creating A Disbursement Schedule
After the mortgage is approved, a disbursement or 'draw' schedule will be created. This
schedule is a timetable for payments to be issued to the manufacturer and contractor
as construction proceeds. Payment for clearing the land, pouring the foundation, etc.
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V
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Mortgage Closing/Settlement
Once the disbursement schedule has been set, the mortgage settlement can be set.
This is the time when closing costs are paid, final loan documents are signed. At this
time, the construction of your home can begin.
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VI
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Home Construction
Now you can begin construction of your modular home. At this time, any deposits
due to the manufacturer and/or contractor will be paid. Upon completion of each
phase of construction, a requested disbursement or 'draw' will be made.
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VII
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Modifying to a Permanent Mortgage
When the construction of your home is complete, your loan will convert or 'modify'
to a permanent mortgage. You will then start your regular mortgage payments.
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What a Lender Looks At
Income & Debt
Most lenders require that you pay out no more than 27% to 35% of your
gross income on all shelter costs. This is known as the "Gross Debt
Service Ratio".
You may have other debt of course and the combination of that debt and the
shelter costs should not exceed 37% to 42% of your gross income.
This is the "Total Debt Service Ratio".
Credit History
This is your record of payment on previous and current obligations.
Lenders will review your record from your credit report. In the early stages
of the home buying process, it is a good idea to check the condition and accuracy
of your credit report.
Down Payment
Your housing affordability hinges on the amount of money you can come up with for
the down payment and closing costs. The more you can come up with, the less you will
have to borrow. At lease 5% of the value of the home (and property) should come from
your own savings.
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