Rocket Mortgage is now offering a conventional loan option for buyers who want to purchase or refinance a manufactured home, which expands the home financing options in a rapidly shrinking industry.
Borrowers can use this loan to finance a manufactured home with a down payment of as little as 5% for primary residences or at least 10% for second homes, the lender said Wednesday. Cash-out refinances are available on primary residences, and rate-and-term refinances are available on either primary or second homes.
“In the past year, there was roughly $12 billion in sales of manufactured homes. These are clients with great income, credit scores and who are very creditworthy,” Bob Walters, CEO of Rocket Mortgage, said in a statement.
Manufactured homes have improved in quality over the years and have become an affordable option for homebuyers. The building materials used in today’s manufactured homes are the same as the materials used in site-built homes. However, the prices for manufactured homes are cheaper by about 30% compared to site-built homes, according to a report from the Manufactured Housing Institute.
Manufactured homes are built at indoor homebuilding facilities and then delivered to the land chosen by the owner. Once the home arrives on site and is placed on a permanent foundation, it becomes a real property and is able to be financed through a mortgage.
But not every manufactured home owner owns the land. A borrower on a chattel loan — which is a loan for a manufactured home — may or may not own the land where the property sits, but a chattel loan remains intact even if the property is moved off-site. The home itself is a depreciating asset, however, which makes it difficult for manufactured homeowners to build equity or intergenerational wealth.
About 17.5 million Americans have a chattel mortgage, which accounts for 42% of the manufactured market, according to the Consumer Financial Protection Bureau (CFPB). The GSEs, which back mortgages on traditional site-built homes, currently do not provide financing for chattel, which means consumers with chattel loans don’t enjoy the consumer protections as homeowners with traditional mortgages.
While Rocket Mortgage racked up more than double the refi volume of any lender in 2021, the lender’s mortgage originations declined to $34.5 billion in the second quarter from $53.8 billion in the first quarter. The lender has been pivoting to purchase mortgages and has been introducing products to court more borrowers.
In September, the lender announced a program dubbed the “Inflation Buster,” which reduces homebuyers’ monthly mortgage payments by one full percentage point for the first year of their loan.
Most recently, Rocket Companies rolled out a loyalty program that will discount closing costs when purchasing a home through its subsidiary, Rocket Mortgage.
Rocket will announce its third quarter earnings results on Thursday, November 3.