Modular homes are financed the same as new site-built home constructions.
Homebuyers can choose to either find a home center with a modular home that they like first, then work with that home center to find a lender, or they can choose to secure a mortgage with a lender first, then work to find a home that fits the loan.
FINDING A LENDER
SCMHI recommends that homebuyers find a home center first, then find a mortgage that fits their situation.
Modular retailers already have relationships with lenders who specialize in financing modular homes, and can quickly link homebuyers with banks who offer programs that match their unique financial situation.
Homebuyers wishing to secure their own mortgage may consider starting with the bank where they already have an account. Nearly all banks in South Carolina, both large regional chains and small local banks, offer mortgages.
THE IMPORTANCE OF A SPECIALIZED LENDER
An additional reason it is recommended that a homebuyer work with a home center to be matched with a lender, is that a specialized lender will provide a more accurate assessment of the home’s value. At times, mortgage lenders unfamiliar with modular homes may not properly appraise the home’s value.
If a home is improperly appraised by a lender, the mortgage loan may either be denied or the home may not be approved for full funding. If the mortgage loan request comes up short, it is the responsibility of the homebuyer to cover the shortfall.
KNOW YOUR LENDING RIGHTS
Customers always have a right to supply their own financing. It is illegal for a home center to refuse financing that a homebuyer has already secured.
Home centers are subject to strict lending laws that prohibit them from requiring a homebuyer to work with a specific lender. This helps to prevent predatory lending in the industry and makes the homebuying process safer for customers.
While homebuyers have a right to their own financing, it is important that they work with a lender who has experience with modular homes. Home centers always have relationships with lenders they can reccomend.
THE SUBTLE DIFFERENCE BETWEEN SITE-BUILT AND MODULAR LENDING
Modular homes are financed identically to newly constructed site-built homes with one single exception: when the money is distributed to the workers. This is called the 10-80-10 rule. Once you are matched with a lender and construction is approved on you home, the lender will release funds in three rounds of distribution.
First, 10% of the mortgage is given to the contractors working on site prep once the location has been properly graded and the foundation has been poured.
Second, 80% of the mortgage is given to the home’s manufacturer, electrical and plumbing contractors, and the home’s installation crew once the home has been fully installed and has passed the initial inspection.
Finally, the remaining 10% of the mortgage is distributed to the home’s retail center once the home has been finalized for occupancy. This pays for the administrative work at the retail center and county hall, as well as any finishing touches on the home, such as landscaping and driveway paving.
The lender and the home center will manage this entirely on behalf of the homebuyer.