Preparing to purchase a modular home requires the same steps as building a site-built one. To start, do your research, then, as with any major purchase, build your budget. What will be your down payment and how much home can you afford?
The home you can afford depends on your income to ensure that you comfortably can make the monthly mortgage payments. There is no difference between financing a modular home and a site-built one.
Your lender will look at your debt-to-income ratio or DTI. Your DTI ratio is calculated by taking your total debt figure and dividing it by your income. The lender will look at your monthly income to determine your ability to repay the mortgage. The amount of financing that you will qualify for will depend on three factors: the total amount of the home being financed excluding your down payment, the amount of years to be paid back and the interest rate on the borrowed money. Interest rates can change daily and my vary according to the lender you choose.
The down payment can be the biggest hurdle. After the housing catastrophe of 2008, lenders are more cautious than ever when lending money for home mortgages. Although there are programs for first-time homebuyers, you should expect your down payment will be about 20 percent of a home’s value. Getting to that level eliminates costly private mortgage insurance surcharges and lowers the amount that you will need to borrow.
Another determining factor is your FICO credit score. In most instances, that is the first item that your lender will examine. If you have had past credit problems, let your lender know upfront. Your FICO score is determined by the three major credit scoring entities – Equifax, Experian and TransUnion. All have their own methods of determining your credit-worthiness. Based in part on your income-to-debt ratio and payment history, your FICO score from one or more of these companies will be disclosed to the lender. Scores range between 300 and 850 with 850 being the highest rating.
The next step is to take that information to your lender and get pre-qualified. Getting pre-qualified from a lender determines your eligibility for a home loan. A pre-approval lets your builder know that you are ready to begin your homebuilding journey.
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