The Manufactured Housing Forums

I'd like some feedback on this new (I think) kind of mortgage - maybe Mr. Murray has heard of it. The loan is split into 2 parts - 80% of the amount is financed at 4%. The remaining 20% is multiplied by 7.91 which is the second part of the mortgage payment. Example: Total loan amount: $131,000. Take 80% of that and get $104,800 - multiply times 4 and divide that by 12 - you get $349.33. Okay- that's the payment on the FIRST mortgage. Now, take 20% of the total loan amount which is $26,200 and multiply by 7.91 which gives you $207.24. Total mortgage payment (mortgage 1 and mortgage 2) = $556.57. As it was explained to me, the first few years (don't know what "few" means) you're paying on this loan, you're paying pure interest - no principle at all. This is a NO DOWN PAYMENT loan with NO PREPAYMENT PENALTY. The second mortgage (the 20% part) is based on a 7.25% rate fixed for 5 years with 20 year amortization. (Does that mean it's paid off in 20 years?)

Opinions from the experts, please. Is this loan available for manufactured homes? Not being a financial whiz, I don't know if this is a good idea for the home-buyer or not. I smell a rat. If I bought a house and after 5 years decided to sell it, how would I benefit if I'd only been paying interest all those years?

BOY....you have found a complicated deal...
First there are many 80/20 deals available...this one sounds a little complicated...

The first mortgage is WAY TOO LOW for a fixed rate...A 100K loan at 6.5% interest (about the going rate for good credit) is about 600/mo..Sorry I am afraid I do not have my calulator with me here...but this is very close...Current varible rates are about 5.5%...or about 500/mo for the first year...THIS MUST BE A VARIBLE RATE>>>>IT EVEN SOUNDS LIKE A DEEP DISCOUNT VARIBLE RATE...That means that the first year is bought down with additional closing costs to lower the first year payment an extra ordinary amount....This will disappear shortly and the loan will revert to the normal varible rate soon...This type of loan has just been made illegal in GA in thier preditory lending law..

THIS IS NOT THE TIME FOR A VARIBLE RATE LOAN.....Rate are low now..they will only go up in the future...

The second....it is also a varible rate loan..current fixed rates for 2nds are much higher....
5 year ballon w/20 year amortization means that it will be paid off in 5 years with a balloon payment of about $ 26,000 on the 60th month...Balloons are particularly dangerous for housing because no one can tell you your credit situation in the future...Things happen..even good folks can get ill and effect their credit..balloon notes are only good if you know there will be large chunks of money available to you in 5 years..

$ 131,000 loans WILL have p/i payments of about $ 850 in todays financing...anything less than that is a desiger loan to get you hooked only to raise a lot in the future..most likely well ABOVE $ 875/mo..PLUS PMI insurance of about $ 125/mo

The purpose of a legitamate 80/20 loan is that it does away with the requirement for PMI insurance...This can be a savings for those with very good credit....And the mixed rate can be about 7.25%.....

Just remember...If is sounds too good to be true...IT IS...

There is another possiblity here...With current fixed rates...Interest is about $ 850/mo...This could be a negative amortization loan also...That would mean your balance is going up about $ 300/mo or 18K in 5 years...That means you payoff would be about 150,000 after 5 years....even worse...

Well, I follow part of what you said, but I'm still sort of lost. Nothing was mentioned by this lender about a balloon payment - maybe just because I didn't ask. She DID say that even with conventional loans, the buyer is paying 98.6% interest for the first several years anyway. You mention "legitimate" 80/20 loans. What's the advantage and how do they work? I've got a very good credit score - is that the only requirement for letting the mortgage insurance slide or are there other factors? Are these 80/20 loans used for manufactured housing, or is it just site-built? Thanks for your help.

As I said..something is very wrong...in todays market some lender is going to earn $ 850/mo interest on this size loan..period..If your payments are lower than that..something is very wrong...and there could be sizeable negative amortization..this could be ok...as long as you truely understand it..

If you can...post the name and number of the lender..I will call them and get the exact info for you..

All mortgages available for stick built homes are available for manufactured homes..There is even 1 loan that I am aware of with no required payment for those with great credit...Of course the bank is adding the interest each month that goes unpaid....Yes..80/20 mortgages are available to you..tthus saving the PMI cost of a low or no downpayment loan...It does take very good credit to qualify for the 20% second...Sounds like you are there..

The lender whose example I used is Community Mortgage Services, Inc.
(770) 410-4950 - contact person - Debra Boice at extension 242.

HomeBanc is also offering this type of loan - Contact person - Cindy Gwynn -
(770) 499-5544 - or e-mail [email protected]. HomeBanc's interest rate on the 2nd mortgage is 9.38% and 4.25% on the first mortgage.

It's my understanding that other lenders such as SunTrust and Wells Fargo are also offering this loan program which makes it seem safe and respectable, but I take it that's not necessarily the case.

I would appreciate your checking this out, and thanks for your help.

131,000....Total Amount Financed....X...80%=

104,800 @ 4%...(Actually thier web site shows 4.25% today)

30 year term..Payment Equals..$ 500.33

then

26,299 @ 7.25....20 year term..Payment equals...$207.07

Total payment Equals..$ 707.40...Not $ 556.57....

Now..The first mortgage is a 1 Adjustable Rate Mort....Adjustable on a monthly basis...The only payment that will this low will be the first...after that..who knows..
The most it can increase is 2%/year up to 10% the most...

That means this loan is 500.33 first year, could be 628.33 second year, 768.99 the third year and 919.70 the fourth year and beyond...

These are the worse case figures....BUT....interest rates are very low now...lowest in over 30 years...be assured the payments will be much higher in the future...how much???..your guess is as good as mine..

The 2nd is also a varible rate...but you said it is fixed for 5 years...then..it can and probably also go up...This loan is not listed on the web site and the details are not clear...

The other thing...The first mortgage has 2 3/4% discount points associated with it...This is a fee of $2,882 on top of all the other closing costs....The same company is offering 6.5% fixed rate loans at 0 discount points...or no additional fee at all...

I have to talked to the rep...but..she was not real forthcoming....the other fee to be interested in is the origination fee.....

Thank you for all that research! I thought I was told that the first mortgage rate could only be adjusted every 6 months - not every month. And I don't remember whether that second mortgage was fixed for 5 years or not. And of course no mention was made about the discount points and I forgot to ask. But I don't understand - - - why would anybody elect to go with the complicated and possibly catastrophic 80/20 plan when they could get the 6.5% fixed rate for no additional charge?

If they were informed they would not...This is a standard sales tactic of many mortgage companies...Bait and switch...

Just remember that mortgage originators are commissioned salespersons and should be treated with the same care any consumer would any sales person..

Current fixed rates are about 6.75%..+/- 1/4% for good customers....Then you should shop the closing cost...These can vary a lot from lender to lender..

Thanks again for all your efforts. Let me reiterate what some other people have already said in this forum - i.e, you, Mr. Murray, are a real asset to this website, and I've learned a lot just reading your postings. You write very clearly, too, which makes it easy to understand a lot of things that are not so understandable to those of us who are not "mechanically inclined" (for lack of a better phrase.) You - and the other moderators on this site (David Oxhandler, Randy Eaton, Roy Bonney - have I left anybody out?) - are providing a great service.

Thank you very much! I hope you don't resign anytime soon.

Thanks....I will not resign...the pay is too good...smile...

My pay is the satisfaction that a few folks will be much happier with their purchase and champions of the manufactured home business..

Good Luck