If you’re a homebuyer on the lookout for your new home, you might have come across park model homes. These exceptional tiny homes are an excellent choice for you and your family. Now, how do you secure financing for them? Is there a specific loan you should pursue to secure park model home financing?
Because park model homes are categorized differently than other traditional homes and RVs, it can be challenging to know where to start when looking for home loans. Fortunately, we’re going to explore more about park model home financing. Let’s discuss what options you have for your new park model home and some of the challenges that you might encounter along the way.
Let’s first start by exploring what a park model home is and why it differs from other properties you’ll see available on the market.
What Are Park Model Homes?
Park model homes, like the properties available at Simple Life’s The Hamlet and The Village communities, are typically homes that are around 400 square feet or less and built on a single chassis mounted on wheels. Some people use these for temporary living, while others use them as vacation or permanent homes.
Park model homes differ from other homes because they are usually classified as RVs rather than traditional homes. Additionally, they are also more compact, mobile, and subject to different zoning laws. You can take your park model home to RV parks, mobile home parks, and even campgrounds!
What Type of Park Model Home Financing Can I Secure?
If you are looking at financing options for your park model home, it can be difficult, especially compared to traditional homes. However, you do have several options to choose from that will make it easier for you to afford your home. Here are some of the most common park model home loans you can choose from and their benefits and challenges:
- Personal Unsecured or Secured Loans: In some cases, you may need to pursue a personal loan to cover the cost of your park model home. With an unsecured loan, you experience higher interest rates but no collateral, while secured loans often require collateral. The terms will differ for every loan, mainly depending on the provider. However, you can expect each loan to last for about 3 to 7 years.
- RV Loans: These 10-to-20-year loans have competitive interest rates and are similar to auto loans. However, they typically carry higher rates than most traditional mortgages! As long as you have a great credit score, stable income, and a solid debt-to-income ratio, you can find a great loan from any major provider, potentially like RV Lending Group or other major banks.
- Manufactured Home Loans: The next option you have for park model home financing is a manufactured home loan, which can have shorter terms and higher interest rates while being backed by FHA or VA programs. With FHA Title 1 loans, you may be able to get park model home loans without land, but VA loans require that you are a veteran and you meet all other listed requirements.
There are other park model home financing options—like Chattel Mortgages and credit unions—but these are among the most popular options for park model homes. So, now that you know what options you have, what are the common challenges people face when financing these properties? Let’s explore that next!
Common Challenges You’ll Face When Financing Park Model Homes
As much as you prepare for park model home financing, you might face some challenges. For instance, unlike traditional homes, you might face higher interest rates. Many park model homebuyers find themselves with up to 15% interest, all dependent on their credit and chosen lender. On top of this, the duration of your loan is shorter, typically only 5 to 15 years, which will result in higher payments than traditional 30-year mortgages.
Many buyers also find that they have to put a sizeable down payment on the property, even if they are able to secure the park model home loans. Sometimes, you may have to put as much as 20% down, but this can help you lower your interest rates.
How to Secure Better Financing Terms for Your Park Model Home
Much like securing a traditional mortgage, you can take steps to secure better financing terms for your park model home. Here are some tips we can provide to help you prepare for your park model home financing applications:
- Improve Your Credit Score: Get your credit score as high as possible to ensure that you have access to lower interest rates and better loan terms.
- Prepare for Your Down Payment: The more you pay, the better you’ll be positioned to lower your monthly payment and secure better park model home loans.
- Browse the Market: The last thing you want to do is decide on the first lender you find. Shop around and find the best fit for your needs.
- Negotiate or Co-Sign: Be willing to negotiate to find the best loan terms and interest rates, using quotes from other lenders as leverage. You can also co-sign with someone who has a better credit score to help you secure a lower interest rate.
What to Expect in the Financing Process
Now that you know a bit about the challenges and how you can improve your park model home financing options, let’s discuss what to expect during the financing process. Much like a traditional home, as you can imagine, you’ll go through five distinct steps:
- Pre-Qualification: In this step, you’ll be assessed by the lender to see how much you can borrow. This entails a soft credit check and basic details provided, including proof of income, identification, and more.
- Application: Next, you’ll provide detailed financial statements, credit reports, identification, proof of income, and documentation on your park model home’s specifications. Then, you will submit and wait a few days to a few weeks for a response.
- Approval: The lender will verify your information, assess your creditworthiness, and look at your collateral. Your approval is dependent upon your credit score, debt-to-income ratio, employment stability, and the value of your desired property. If you’re approved, you’re all set for closing!
- Closing: After you’ve been approved, you’ll finalize your loan agreement, sign the documentation, and pay your down payment and closing fees. This might involve a bit of time but be sure to prepare for the additional cost closing!
- Post-Closing: After your park model home financing is secure, ensure you pay your monthly payments on time and, if possible, set up automatic withdrawals.
As you can see, the process is easy, and with all that we have discussed, you’re all set to find your new park model home in Simple Life’s North Carolina communities or in another location of your choosing!
Find Your New Park Model Home at Simple Life
We hope that this article has shown you more about securing park model home loans and the steps required to secure park model home financing! With an understanding of the challenges, what makes these loans different, and how you can secure them, you’re prepared to find your new home. For high-quality tiny homes in North Carolina, visit Simple Life’s website today to browse our available properties. We look forward to welcoming you home!
