Decent price for manufatured home but is high interest rate the catch?

[Gin]

My husband and I have been looking at manufactured homes for about six months now. I've worked on our credit for about the same amount of time and we are in decent, not stellar shape. His mid-score is 635 and mine is 660. We finally found a house that makes us excited!! The man who showed it to us and discussed all the options with us made us feel right at ease which is a bonus because most of the time when we visit a MH site, I feel like I hear circus music as they start their speel. At any rate, the home is a Clayton Heartlander Appalachia and is just perfect for our needs. This gentleman made us gasp when he said we could get this home for 67,000 fully furnished. Since this would be a second home, we wouldn't use it much so the funiture, which is actually quite nice (for a change) would be quite a bonus. We then went into his office and started a further discussion as he put it. When I pressed him for average interest rates for folks with a 635 mid-score, he told me it would more than likely be 9%!! Everyone else has told us we are looking at between 6 and 7% with a 5% downpayment. My quesiton is do you think he made the home price this low because he plans (hopes) to make up for it with such a high interest rate? We are not going to go through a loan process with him and will be contacting others to see if they can do this home but I have two quesitons for you kind people

1. Does anyone know the typical price of a Heartlander by Clayton? This one is shaped like a letter T because the family room is offset.
2. Am I crazy or is 9% an outrageous interest rate? I have been told for months that as long as your mid score is at least 620, you should be looking at no more than 7%.

Thanks for any help you can offer me.

Have an awesome day!
Gin

[Clarence Yeary]

Gin,

I might be able to help you out. My business manager use to sell for Clayton and all financing is done through Vanderbilt Mortage which Clayton Homes own so they can actually make loan approvals easier & faster then privately owned lots.

Now lets see if we can shine some light on your suitation:

#1. ALL HOMES FINANCED THROUGH VANDERBILT MORTAGE HAVE AN INTEREST RATE OF 8.5 to 9.5% regardless of your credit score! Matter of fact, they are one of the few mortgage companies who DON'T rely that much on credit scores. They are going to get you to buy the loan down 2 points. This is going to be several thousand dollars if you want 7.5% interest. You'll be surprised how much this home is going to cost you by the time you add state tax, closing cost and buy down cost, etc. Beleive me, Vanderbilt has financed homes with 520 credit scores at 8.5%! I know this cause my credit score last year was 520 and that was my interest rate!!

#2. The next thing you have to worry about is insurance! As you well know mobile home insurance is higher! Vanderbilt will finance the annual amount in with your monthly payment. So, if your monthly payment is $400 a month plan to add another $70 a month for insurance! And they WILL NOT DO IT ANY OTHER WAY!!

#3. If you have your heart set on that particular double-wide I agree with you that you should seek other financing options.. and could possibly get get 7.0% depending on your down payment. Simply put, it's hard to find good interest rates when you are buying a double-wide.

I hope I haven't discouraged you but Vanderbilt has a great system set up for making alot of money!! Even if the price of the home is impressive sometimes hidden charges can make it an "average" deal!

Please let me know what happens.

Clarence Yeary - Kentucky

[rmurray]

Congradulations on getting your scores higher...You can shop lenders here on this site...But you will find..home only mortgages with only 5% down expensive by all lenders...Only mortgage lenders are offering the 6 or 7% you have heard...The property under the home will be tied to the loan,,,You are right to shop mortage money..2% on this size loan would be over $30,000 over the life of the loan...serious money for most of us...

[Gin]

Thanks for such informative responses, gentlemen. The dealer actually called my husband today and asked him if we were close to making a decision. I had done a websearch yesterday on Clayton and found that they finance through Vanderbilt whom I have read a lot of negative things about. So, my husband, armed with this information asked him if they only used Vanderbilt. They guy says 'no, why'? And my husband told him that he wouldn't consider financing through them. The man tells my husband he doesn't blame him--he doesn't like them either. Then my husband tells him there is no way we are paying 9% interest and that several other places have told us to expect no more than 7%. The man THEN says "yeah, he thinks he can get it around 7% too. This is maddening!!! He is obviously only saying what he thinks will get us to go through a loan process with him. Does that work with people? I mean, if you go into it saying you won't pay 9%, does he really think you'll change your mind and sign the papers?
And, now reading your responses, can you tell me what an appropriate interest rate would be? We own the land and can afford as much as 10% down. We decided to buy a double wide after seeing several of our friends go through the process. The average interest rate seems to be around 7% (and their credit scores are lower) and some of them didn't even have a down payment--they just used their land which had low value. Most of them went through Fleetwood who often has a sign that boasts "Low interest rates and no down payment." Is this misleading? I know rates are lower but do these lower rates apply only to 'stick built' homes? Again, thanks for helping me. This forum is wonderful!

Have an awesome day,

Gin

[Clarence Yeary]

Hi Gin,

I agree with Murray. You can find home only loans on this site probably around 5% down with a credit score of at least 620. If you don't owe money on your land you can get a mobile home ANYWHERE with no money down! Why? Let me explain: If you find a home for 65k chances are the manufacturer only has about 37k building cost in that home! When you add your land (let's say its worth 20k)and set the home up on your property, they will have a total of 57K invested in your deal. BUT HERE'S THE BAD PART.....YOUR COST!!

House .......................$65,000
State Tax (5%) .... ......$ 3,700
Set Up ...................... $ 3,500
Water,Sewer, Electric..$ 3,500
Decks ................. .....$ 1, 600
Permanent Foundation $ 2,500
Closing Cost ..............$ 1,500

YOUR INVESTMENT TOTAL ................$81,300!

See, they only have 57k invesed in the whole deal! If they forclosed on your property in 90 days they will be over 24k ahead!!

Now lets answer your question about "stick built" homes. You can buy a "stick built" house much easier and cheaper than a mobile home...FOR A FACT! With your current scores you can find numerous mortages for No Money Down as long as the property appraises for that amount you're financing! You can probably find rates as low as 6.5% with your scores! Insurance is also much cheaper and you probably know that a "stick built" house will appreciate in value. People who buy mobile homes are considered a higher risk than a traditional house mortage. I wished it wasn't that way but it is. There are plenty of home builders that would build the house on your property and roll it into one note with NO MONEY DOWN!!

Take your time and buy what makes YOU happy! That's what counts.

Clarence Yeary - Kentucky

[jgn]

With a MH you can expect to pay 1/2% interest over what a site built home would be.
You would be better off negotiating the furniture for a better price, better skirting or something that is worth taking a mortgage for, taking 30 years to pay off a couch is very expensive and nothing is free.
Insurance on my MH runs the same as any site built home in the same location. Insurance is based in large part by what type of fire department you have. I pay the same for my MH as I would a site built home because it is in the sticks and poor fire coverage.

[rmurray]

With your scores..strong equity you are offering..you should be able to find good mortgage programs at about 5.75% at today'a price...You will not need the added cost of FHA financeing..Does this salesperson really believe you will bump rateand payment at the close...bet your life on it..if he has been in the business for any time..he has senn scores of folks bump at closing..This is a proceedure that is taught in sales schools..Almost all folks will give in once they have decided on the home they want...I trust he thinks you will...$100/mo bump is not unusual...of course that is $36000 over the life of the loan...Hold your guns...

[trmimo]

It has nothing to do with the manufacturer's cost.
Most finance companies aren't manufacturers and they look at it the same way.
It's about loss recovery. If the lot is collateral and you default, the finance company recovers a much higher percentage of the loan amount when they sell it than if they had to remove the home. With the suggested $101,000 deal (remember the $20,000 lot), the bank sees a possibility of selling for around $100,000 with just the $65,000 home the bank looks at moving costs, repairs and depreciation giving them a recovery amount of $25,000 to $35,000.
The site improvements should be included in the financing, not paid for out of pocket as you would on a chattel loan.
That is why the Fleetwood customer putting up the lot as down payment gets a better rate.
Any finance company will offer better terms on the land home/combination.
Try mortgaging a site built house without the lot and see how far you get.
All that said, Vanderbilt will steer you to a chattel loan, because that is their forte, and they require the clayton store to buy the deal back if it defaults, and clayton lot managers don't want the extra cost of buying back the lot and improvements.
If you finance as a land/home package most clayton stores would rather you financed with someone other than vanderbilt.

[Gin]

Okay, so I think the lightbulb is finally going off!! The man specifically told us NOT to allow our land to 'stand good for the loan' because it would mean a higher interest rate when in fact, the opposite is true. When and if we decide to buy our manufactured home, we should allow the land to be used as a down payment? I am not really frightened of this because my husband and I both have fairly secure jobs (I'm a teacher and he's a mine foreman) so unless an illness occurred (for which we have insurance) or some other catastrophic event happened, we should be able to pay off the loan with no worry of defaulting. It's just that it sounds like one should pay a down payment rather than just putting their land up so it kind of made sense for a second when he said it.
Thank you all so much for such excellent advice. I checked our scores again this morning and my husband's mid score is now a 647 which should mean an even better rate--certainly not at 9%! I feel sorry for those who see a pretty house and let a slick talking man convince them that they are getting the best rate possible. This man is around 60 and a very fatherly type. He kept patting my hand and telling me that he would give us a really good deal because we were 'young' (we're 40! lol) and he wanted to make sure we had a good future ahead of us. Thank goodness I have done a lot of research and even more thanks for a forum like this from people who have been there.

Have an awesome day!
Gin

[rmurray]

Check with your teachers crdit union about finance..They may have a great program...Good Luck...Folks in your area are lucky to have such thoughtful teachers..