Home placement/constuction loan

rtaggart613 · December 2012

My husband and I are looking into the possibility of buying a piece of land and placing a manufactured home. We're currently pre-approved with a broker, but the company doesnt have any lenders who do construction loans, so we'd need to find another lender, probably through the manufactured home company.

Does anyone have any experience with this? And do construction loans allow FHA?? We were originally approved through broker for FHA, but I don't know if manufactured required 20%.

Wulfgar · December 2012

No, from what I understand you will have to get a balloon home construction loan to buy the land and get the house put on the land. Then you get a regular mortgage to pay off the balloon mortgage.

nvrmndguard · December 2012

When we were considering doing this the manufacturer had a program that you could be preapproved for a mortgage (not having to be a construction loan), and they would "front" the costs for construction. In essence they would "purchase" the land and put the house on it and then you would go through all of the normal steps of buying a house once they had finished completing it. It did require I believe 5% down, but that may vary depending on the manufacturer. May be worth seeing if the manufacturer you are looking at will do something similar. There are a lot of hidden costs with building or doing a prefab (double wide), so there is no guarantee that your original quote will be what the final price is. Be sure that that estimate that you get from the manufacturer is WELL BELOW what your preapproval for a mortgage is, that way if something unexpected comes up, you will have some wiggle room before you go over your amount. I hope that makes sense. There were too many what-ifs for us to be comfortable doing it, so we ended up buying an existing home and we will build later when we have more leeway in our budget.

Amanda1443994 · December 2012

I do not believe you can get a FHA loan. When we were considering building, we already had owned the land and were just considering building. We were told we would have to get a construction loan, then once the house was completed, it could be switched over to a mortgage. However, during the time the house is being built, you basically pay a monthly 'mortgage' but the entire amount goes toward interest. None of the payments would go toward the principle until it was switched over to a conventional mortgage. Also, we were told we wouldn't have to put a downpayment because the land would serve as collateral. For example, our land was worth $300,000 and we were considering building a $430,000 home. Therefore, the value of the land was worth way more than 20% and wouldn't have had to put down a payment up front. I'm not sure if this is true everywhere and we are only in our mid-20s so we decided to buy and build in 5+ years so I don't know how this all works out if you go through with it.

amber0389 · December 2012

Amanda1443994:
I do not believe you can get a FHA loan. When we were considering building, we already had owned the land and were just considering building. We were told we would have to get a construction loan, then once the house was completed, it could be switched over to a mortgage. However, during the time the house is being built, you basically pay a monthly 'mortgage' but the entire amount goes toward interest. None of the payments would go toward the principle until it was switched over to a conventional mortgage. Also, we were told we wouldn't have to put a downpayment because the land would serve as collateral. For example, our land was worth $300,000 and we were considering building a $430,000 home. Therefore, the value of the land was worth way more than 20% and wouldn't have had to put down a payment up front. I'm not sure if this is true everywhere and we are only in our mid-20s so we decided to buy and build in 5+ years so I don't know how this all works out if you go through with it.

This is kind of a dumb question. If your land is worth $300,00 (or whatever it is appraised for when you build), and you build a $430,000. Does that $300,000 become your total downpayment towards the mortgage, leaving you a mortgage of $130,000? I mean the land is already paid for, so this makes sense to me, but I'm just wondering if that is how it actually works.

Home placement/constuction loan

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