When exploring financing options for manufactured homes, buyers often come across a variety of loan types, each designed to fit different financial needs and goals. One option that occasionally sparks curiosity is the adjustable-rate mortgage (ARM). While most people associate ARMs with traditional site-built homes, they can also play a role in manufactured housing financing under the right circumstances.
Let’s break down what an ARM is, how it can apply to manufactured home loans, and whether it might be the right fit for you.
What Is an Adjustable-Rate Mortgage (ARM)?
An adjustable-rate mortgage is a type of home loan where the interest rate changes over time. Typically, an ARM begins with a fixed interest rate for a set period, often three, five, or seven years. After that, the rate adjusts periodically (usually once a year) based on market conditions.
This means your monthly payment could go up or down depending on how interest rates shift. The main appeal of an ARM is that the initial rate is usually lower than that of a fixed-rate loan, making it an attractive option for buyers looking to save money upfront or who plan to refinance or sell their home before the rate adjusts.
Are ARMs Available for Manufactured Homes?
Yes, adjustable-rate mortgage options do exist for manufactured homes, but they are less common than fixed-rate loans. Availability largely depends on how your home is classified and what type of lender you’re working with.
If your manufactured home is:
- Permanently affixed to land and classified as real property, you may be eligible for a conventional ARM through lenders that follow Fannie Mae or Freddie Mac guidelines.
- Not permanently affixed and considered personal property (chattel), you’ll likely need to work with a specialized lender, and ARM options may be more limited or unavailable.
It’s important to note that not all lenders who offer manufactured home loans will have ARM products, so comparing lenders and understanding the loan terms is key.
Pros and Cons of an ARM for Manufactured Housing
Like any financial product, ARMs come with their benefits and potential drawbacks.
Pros:
- Lower initial payments: The early fixed-rate period often offers reduced interest rates, making monthly payments more affordable at first.
- Short-term flexibility: Great for buyers who plan to move, refinance, or sell their manufactured home before the adjustment period begins.
- Potential savings: If market rates drop over time, your interest rate and payments could decrease.
Cons:
- Rate uncertainty: After the initial period, your interest rate can increase, which could lead to higher monthly payments.
- Limited lender availability: Not all manufactured housing lenders offer ARM loans.
- Budgeting challenges: Fluctuating payments can make long-term budgeting more difficult compared to a fixed-rate loan.
When an ARM Might Make Sense
An ARM can be a smart option for certain manufactured home buyers, especially if you:
- Plan to live in the home short-term before upgrading or relocating.
- Expect your income to grow in the future, making potential payment increases easier to handle.
- Want to take advantage of lower initial interest rates to reduce upfront costs.
However, if you value stability and predictability in your monthly payments, a fixed-rate manufactured home loan may be a better choice.
Final Thoughts
While adjustable-rate mortgages are less common in manufactured housing, they can still offer flexibility and potential savings for the right borrower. The key is to understand how ARMs work, compare your options, and work with lenders experienced in manufactured home loans.
At ManufacturedHomeLoans.com, we’re here to help you navigate all your financing options, whether you’re exploring ARMs, fixed-rate loans, or specialized programs designed for manufactured homes.
