"Your Plan Or Ours"
Did you know that modular home mortgages can combine your land, home and site improvements? Did you also know that you can build a new home with no money out of pocket?
Financing can be a confusing subject for many who are interested in building a new home. Many banks and lenders do not offer loans for financing a modular home. Our Modular Home Mortgages page is where you will find valuable information on how to finance your new home. Financing a modular home doesn’t have to be confusing and Midwest Affordable Homes has relationships with many top lenders to make buying your new modular homes easy and worry – free.
If you have watched the news over the last few years, you may have gotten the impression that home mortgages are difficult to secure. You may have even heard that you would need a large down payment in order to build a new home. We are happy to tell you that mortgages are available and you may even qualify to build your new home with no money out of pocket. That’s right, you may be able to buy a new home with little or no cash. We’ll get to that a little later. First, here are a few basics you need to know about modular home mortgages.
If you were to purchase an existing home, the loan process is much different than if you are building a new home. The existing home is already in place and all you would need is a permanent mortgage also called an end loan because the construction of the home has already been completed. When you build a new modular home, you will need a specialized type of financing that pays for the home to be built and delivered to your home site. This type of loan is called a construction perm and is short for construction to permanent loan. This means that the loan will pay the builder and suppliers while the home is being built. Later, when your home is complete, the loan will convert to a permanent loan which is usually a 30 year fixed rate or 15 year fixed rate loan.
Now that you know the difference between an end loan used to buy an existing home and a construction perm used for financing a modular home when you are building, let’s look at two types of construction loans:
Both of these loan types are acceptable modular home mortgages for new construction, but there are some key differences.
Let’s look at the One Time Close first.
A One Time Close loan is often the most convenient and affordable way to finance building a new home. As the name indicates, there is only one closing and one loan process. This means that you can save money because you will only have one set of closing costs and fees. You will only need one appraisal and your credit will only be pulled once at the beginning of the loan process.
Another advantage of a One Time Close loan is that the loan does automatically convert to your permanent mortgage at the end of construction. While you will have to sign a few documents stating basically that you are ready to begin your permanent mortgage terms, there is no additional cost at this time.
The closing in a One Time Close loan takes place before construction begins. This is also a benefit because many lenders allow you to lock in the terms of your mortgage before construction starts. Often building a modular home will take 90 – 120 days to complete. If interest rates and loan terms should change during this time, the One Time Close loan protects you against rising rates and changes in the market. Ask us for a referral to a lending expert for more information about modular home mortgages.
The main difference between these types of loans is that in a Two Time Close, your construction loan does not automatically convert to your permanent mortgage when your home is complete. If you are using a Two Time Close loan, you will also need a separate end loan just as if you were buying an existing home.
This may not be a negative factor, you must understand that a builder will require you to also be approved for the end loan before starting construction. There may also be some duplicate fees associated with a two time close. For example, you may need a second appraisal for the end loan when the home is complete, the lender will also have fees associated with each loan.
By law, only a licensed mortgage professional can provide you quotes on interest rates and payments, but you can get a close estimate on your own.
Now that you have your total project cost from above, you can estimate your monthly principle and interest payment using an online mortgage calculator. The calculator will give you a monthly payment, but wait…You aren’t finished yet. Many first time home buyers forget to add the cost of insurance and property taxes. These items will also be paid monthly with your mortgage payment. Also remember that without putting 20% down on your new home, you will probably be required to pay PMI or Private Mortgage Insurance. Your lender can give you more details on what this will cost.
If all this is a bit confusing don’t worry…We are here to help. Just remember your total monthly payment is made up of the following items:
One final note on monthly payments: We have not previously mentioned item number 4 in the list above…Financing costs. Some lenders allow you to finance your closing costs and fees. If you choose to finance these costs associated with a modular home mortgage, you must also add them to the total project cost in order to calculate a total monthly payment.
As with everything associated with building your new home, Midwest Affordable Homes can walk you through the process of finding the right modular home mortgage. You may also want to speak with our preferred lender to do a fast and free pre-qualification. We recommend that you work with your Midwest Affordable Homes Representative and our preferred lender at the beginning of the home buying process. We will help you establish a budget and price range so you know exactly how much home you can afford. Ask us anytime how we can help.
Call us today for your free new home consultation and estimate
Nick North - Phone: 765-482-2074
Midwest Affordable Homes
124 S. Meridian St., Lebanon, IN 46052