Unconventional mortgages: Types of properties that may qualify

• Condos/barndominiums
• Tiny homes
• Container homes
• Manufactured homes
• Cooperative housing (co-ops)

Condos and barndominiums

Condo living can be a great option when you want to start building home equity without having to commit to an entire house. Barndominiums function in a similar way, but refer specifically to living spaces that have either been built in the style of a barn or have been converted from an existing barn into a residential property. Depending on the specific condo or barndominium, you might be able to secure Conventional or government-backed home financing.

Tiny homes

Tiny homes come in a variety of shapes and sizes, but usually average out at just 225 square feet. Cost-wise, things vary. Prefabricated tiny homes could cost as little as $30,000, whereas custom-built tiny homes could cost as much as $150,000 or more. Still, even that cost is more palatable to some people than the average cost of a full-blown house. 

And thanks to a wider range of financing options, it’s easier to obtain a mortgage for a tiny home that can be placed virtually anywhere.

Container homes

Another rising trend? Container homes, or the refurbication of shipping containers, remodeled and rearranged in various ways to create truly unique homes. Like tiny homes, these options can cost as little as $10,000 if people forego finer details, but price tags can balloon upwards quickly for more in-depth configurations and customizations. Still, even the larger container homes shouldn’t cost more than $200,000 to build according to UpNest, a Realtor.com company. 

Pro Tip: While one container might feel like living in a studio apartment (or the aforementioned tiny home), two or three shipping containers can be laid out to feel more like a traditional house.

Manufactured homes

Manufactured homes are similar to container homes, in that they generally consist of prefabricated pieces that are arranged onsite. They’re also sometimes referred to as modular or mobile homes, and come with a number of advantages:

• Quick to build
• Fewer location restrictions
• Less costly

That said, manufactured homes also come with some disadvantages. They’re typically harder to finance if they’re mobile, which means a mortgage lender may require the home to be permanently set in one location. 

Concerned about cost? Good news: like other unique homes, modular and manufactured homes range in price—with single-wide homes running an average of a little over $75,000 and double-wide homes tacking on another $100,000 to that figure. 

Cooperative housing (co-ops)

While it’s not common, in some cases you may actually be able to finance your co-op living with a home loan. Qualifying criteria is determined on a case-by-case basis, so unfortunately there’s no standard co-op scenario to stack the numbers against. In general, cooperative share loans are typically more involved than traditional financing, and it can be difficult to find lenders who provide this service. The good news? Cardinal Financial just so happens to be one of those lenders.

Types of unconventional mortgages

Okay, now that we’ve broken down a few different types of unique homes, let’s talk about the unconventional mortgages you can use to purchase them. 

One popular option is the MH Advantage^TM loan, which offers affordable housing alternatives to buyers nationwide so long as the unique home is built on a permanent foundation. The MH Advantage loan comes with flexible underwriting standards and reduced pricing for manufactured homes that meet specific construction, architectural design, and energy efficiency standards.

That means, if you like the idea of a modular home or a tiny home but aren’t thinking about traveling the country, you may be able to qualify for financing.

However, if—after reading through all of these unique home types—you’re thinking a conventional home may be more up your alley, consider the possibilities of building your own home with a one-time close loan. That way, if you’re struggling to find a home you want in the current market, you could create your own custom home that’s unique in its own way. With this loan option, you don’t have to pay for the land and the home separately, and you close before construction ever begins. Once the project is complete, the loan becomes a Conventional mortgage. 

Pro Tip: If a new build is out of your budget, Renovation loans are another streamlined way to customize a home, typically for less than a new build.

So, how do I get an unconventional mortgage?

Like a traditional home loan, most lenders will need standard information like your credit history, income, and tax forms to determine if you qualify for an unconventional mortgage. Luckily, you may be able to enjoy more flexibility with qualifying criteria on an unconventional mortgage since, by design, it’s a loan intended for a unique borrower situation. 

Regardless of what home type you choose to pursue, we’re here to help you find the right financing options. One of the best things you can do in your adventure toward homeownership is to obtain a rate quote and speak with a loan expert who can help you find what you’re looking for. 

Unconventional mortgages are a great way to finance container homes, tiny homes, and more unique property types while building home equity.

The post Unconventional Mortgages: How to Finance Unique Homes appeared first on Cardinal Financial.

Despite popular thought, owning a manufactured home doesn’t have to mean higher rates and prepayment penalties. The value and quality of these homes are improving, and so are the financing opportunities. In fact, if you own the land and the manufactured home, the rates and fees are almost identical to a conventional single-family home. Stick to these six tips when financing a manufactured home.

1. Own the land

If you purchased a manufactured home, you are probably financially aware and responsible. Chances are, you wanted to avoid getting in over your head with an expensive home. While purchasing property may be a little pricier up-front, it’s actually the less-expensive route if you factor in the cost to rent and the higher rates offered for home financing. There are land-and-home packages out there and, once you own the land and the home, it’s likely the value of your property will increase.

2. Opt for refinance

Consider this: If you took the builder’s or seller’s preferred financing, you have the option to refinance out of it. This route could help you make this investment more personalized to fit your needs.

Refinancing a manufactured home is quite common in the mortgage industry. One type of refinancing transaction is “cash-out,” in which case you can refinance and use that cash to make fancy upgrades (hello new kitchen!). But, in these situations, the rates offered can be higher than a rate-and-term refinance. Reap the benefits of the enhanced kitchen (or similar upgrade) but be informed: If you choose to take cash out, you have to wait six months after buying the home—or, you can take advantage of the rate-and-term refinance the next day and save money over the life of your loan.)

3. Make it a 15-year term

In general, the risk on a 15-year mortgage term is much lower and the rates are more attractive than other available term lengths. People who find themselves three or four years into a 30-year term with a rate of 7–9% are pleased to discover that they can refinance into a 15-year term and their monthly payment may stay around the same amount. In this situation, the borrower may continue to have a similar payment but, instead of paying for another 26 years, they only have 15 years left. Where there are alternatives, there is an opportunity.

4. See if you qualify for HARP and streamline loans

If your original loan was FHA or conventional, you could qualify for these special programs. Keep in mind that not all lenders offer these programs. Not sure if you have a HARP Eligible Loan? Find out here and here to see if your home is listed. If your home is listed, you may qualify for a HARP loan. If you currently have an FHA loan, check your monthly statement to see if it’s listed as FHA. If you’re eligible for these programs, you’ll want to take advantage of them and the extra cash they can put in your pocket.

5. Get familiar with your credit score

If possible, try to keep your total credit used below 30% of your credit limit. This relationship (expressed as a percentage) between the number of outstanding balances on all of your credit cards divided by the sum of each card’s limit is called your credit utilization ratio. Need a deeper explanation? See a great example here of how credit utilization ratios are calculated.

6. Have some money in the bank

Try to keep some money in savings and avoid transferring funds between accounts. Underwriters generally like to see that your savings is stable and doesn’t fluctuate much. A lot of transfer activity may cause an underwriter to ask for a paper trail—proof of the transfers and where the funds originated. Any chance you have to legitimize your money will work in your favor.

Manufactured homes may have a reputation for carrying higher rates and prepayment penalties, but that notion is quickly changing. As the mortgage industry progresses, more opportunities are opening for affordable manufactured home financing.

The post 6 Tips for Financing Your Manufactured Home appeared first on Cardinal Financial.