Manufactured Home Buyer Tip: Knowing and Managing Your Credit Score is Key to Obtaining a Manufactured Home Loan
When applying for financing to purchase a manufactured home, a lender will consider your debt-to-income ratio and other stability factors such as length of employment, how long you have lived at former residences, and your credit score. Although these are contributing factors in determining your qualifications for financing, your credit history can be a single determining factor as to whether or not you will be approved for a manufactured home loan.
When you apply for a loan to purchase a manufactured home, your lender will check with one or more of the three leading credit reporting agencies to obtain your credit score. Not only will this score determine your qualifications for the loan, but it can also affect the amount of down payment that will be required on the purchase and sometimes the interest rate you will be charged. Higher scores improve the likelihood that you will be approved for a loan.
There are a lot of hard-working Americans desiring a quality affordable home, which is exactly what manufactured housing represents, and have the income to repay the loan but have been denied because of their low credit score. Many would suggest the score “is what it is,” and there is nothing they can do about it. Actually, there is much that can be done to improve your numerical credit score.
Many factors come into play when determining a credit score. The most common are your payment history, amounts owed, types of credit used, length of credit history, and any new searches and inquiries for acquisitions of new credit. Knowing exactly what affects your credit score will also give you a guideline to credit score improvement. The factors you can influence are as follows:
Payment History
Missing payments are the most common cause of a low credit score. Missed payments that occurred years ago will not necessarily influence the score as heavily as a missed payment from a month ago. Also, a missed payment on a high-balance account stands to cost a lender more if the account remains unpaid and therefore factors more severely into the score.
Amounts Owed
If an individual uses more than 50% of their credit limit on average, this will negatively affect their score. For example, it may be better to have two credit cards at less than 50% of its limit than one card at 75% of the credit line.
Type of Credit Used
Having more than one credit account can positively affect the score, as it allows lenders to evaluate an individual’s typical payment habits. However, too many accounts can serve as a red flag to lenders.
Length of Credit History
A longer consumer credit history provides a more accurate picture of payment habits.
New Credit (and inquiries)
Individuals shopping for a new car or mortgage loan will likely have their credit checked multiple times within a few days. Most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score. If a consumer applies for several credit cards within a short period of time, their credit score may be driven lower as looking for new credit can equate with high risk.
If you have a low credit score (below 620), it may prevent you from purchasing your manufactured dream home immediately; however, understanding the factors that influenced your credit score can reverse the trend by avoiding those things that have an adverse effect. By doing so, you could be on your way to manufactured home ownership and financing sooner than you may have thought.
