Here’s What You Should Know

When you start searching for the perfect property, market conditions can have a significant impact. Still, buying during a recession may not be a bad idea—if you know what to look out for. Here’s what you need to know when shopping for a manufactured home during the recession.

Pick the Loan That’s Right for You

Understanding how mortgages work and choosing the right type of mortgage can make the difference between a smart buy and a bad investment.

FHA loans, especially, are ideal for first-time buyers because of their flexible down payment options plus looser credit requirements. However, when you’re buying a manufactured home, many mortgage lenders place limits on where and how you can buy one. For example, most lenders stipulate that the home must be on a permanent foundation to qualify for financing.

In contrast, investment buyers will face some limitations when it comes to loan types. A conventional loan is the most common option for investors. The upside is that rates are typically lower with a conventional mortgage. Plus, if you can manage more than 20 percent as a down payment, you can skip paying mortgage insurance. Survey your options, and look at both adjustable or fixed-rate loan choices.

Know What You Can Afford

When it comes to outlining what you can afford in a home purchase, everyone’s situation is different. Remember, many programs—like FHA—have limits on either the purchase price of the property or the manufactured home, or both.

If you plan to purchase a manufactured home in a mobile home park, factoring in expenses beyond the monthly mortgage payment is essential. For investors, this step is also crucial because a low mortgage payment won’t matter much if the space rent, for example, is prohibitively high.

In order to get a return on your investment, you need to make a net profit after paying the space rent and mortgage. Especially during a recession, when landlords’ hands may be tied if their tenants don’t pay rent, higher lot rent could mean the investment property is a bad buy.

Explore Manufactured Home Options

Many modular or manufactured homes can be found in established mobile home parks. But many others are standalone homes on private lots. With the right type of financing—such as a construction to permanent loan—you can even finance a land purchase and order a manufactured home to suit.

However, accurately estimating costs is crucial if you plan to build a home. Ordering a custom home can involve markups for upgrades like countertops, flooring, or swapping a bedroom for an office, for example. You’ll also need to consider site preparation fees—whether you purchase bare land or a plot with utilities connected—plus delivery and assembly costs.

Further, for those buyers using a USDA or other government program, funding may be limited—or stop altogether. Conditions change day by day, and with many first-time or lower-income homebuyer programs, applications may not be processed due to economic and other fluctuations.

Speaking with a knowledgeable mortgage lender is your best bet when it comes to keeping up to date with mortgage trends and program closures.

Expect Change—And Be Ready to Move Fast

You should be prepared to move fast on a recession home purchase from locking in a desirable rate to moving on a program before the government pauses lending. Things change quickly, and banks have also become stricter about credit requirements during the pandemic in order to reduce lending risk.

While you can’t predict what the market will do, or whether you’ll be one of the lucky ones, having a backup plan is a smart strategy. Consider alternative mortgage programs, even if you find one that might be the perfect fit. And, keep your credit in top shape, avoiding large purchases and credit risks. 

Keep an open mind about funding sources and programs, even if it takes longer to purchase a home. You should be willing to move fast, but you also don’t want to move on the wrong property or a mortgage deal that doesn’t serve you long-term. After all, your next property purchase might be a 30-year investment, whether you’re living in it or renting it out.

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