Modular Home Loans

Financing a modular home is different from financing a "stick-built" (site-built) home. Most modular homes are financed like personal loans and not like property loans. They are financed like a car or a television. Still, loans for modular homes are becoming increasingly more available, thanks to their growing popularity in the housing sector.

Modular home financing packages offer many features, such as fixed or adjustable interest rates, single permanent construction loans, financing up to 95 % of appraised value, year-long construction periods, steady rates for interim financing, and the drawing up of construction schedules suitable to the consumer.

One modular home financing option is the one-time close construction/single permanent rate, which is a one-step program in which the interest rate is fixed during construction and modifies into a permanent loan after construction. The two-step option allows you to borrow up to 95 percent of cost for a permanent residence and 90 percent for a vacation home. It is based on a prime rate during the construction period and allows for a 12-month construction phase. The third option is lot loans, which are for those who have found the lot or site but are not ready to build.

Consumers who finance their homes with a personal property loan (also called a chattel mortgage) do not have foreclosure protection like those available for real property home mortgages. When the customer or borrower defaults on a loan, the home can be repossessed like a car.

Fortunately, there are some foreclosure laws that protect consumers from sudden repossession. Most states stipulate that the lender has to inform the borrower about impending repossession well in advance and give ample time to cover up the default and retain their homes. In homes where land and home are financed together under a real estate mortgage (like site built homes), foreclosure requires a lot of procedure and time before repossession takes place.

In the past, modular homes loans were mostly treated like personal loans and hence not protected by foreclosure laws. For example, some still states allow a Power of Sale clause, in which the borrower allows the lender to sell the property if he defaults on the loan payment. This means that the lender does not need to go to court to obtain a foreclosure.

But due to the rising popularity of modular homes, the laws are now more sensitive to the rights of modular homeowners. For example, state laws of Judicial Foreclosure require the creditor to get a court order to take possession of the property. He must provide evidence that the loan is in default, and a notice must be given to the borrower before foreclosure procedures begin. In addition, the Right to Reinstate clause gives the borrower the right to make adequate payments and regain his property. Finally, a Limit on Deficiency Judgment prevents the lender from suing the borrower for the amount still owed on the loan after selling the home, if such a case arises after repossession.

Even better for the modern modular home owner is that some states have a Right to Cure law, which allows the borrower to catch up on loan payments and retain possession of the property before repossession procedures start. Some states even have a Statutory Right of Redemption, whereby borrowers can get back their homes a short time after their sale.

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