Construction and Manufactured home financing options

Everyone wants to buy a lot with some space, plop a home on it and live their best life! is this possible, yes, but here are some things you should really think about before purchasing that vacant lot! 

Transcript

Speaker 0:01

Hello everyone and welcome. Thank you for joining us today in this episode of Bed Bath and Banter Arizona Real Estate. I am Amy Battin with Waterstone Mortgage.

Speaker 1 0:11

And I'm Ryan Battin with West USA Realty.

Speaker 0:13

And today we are going to discuss the construction one-time closed lending process. So a lot of people have a dream of building their own home. I have these conversations literally every single day. And especially people that come through our radio show listeners. You know, we're just kind of tired of all of the traffic and all of the busyness and not having any space. And, you know, I have people reach out to me daily saying, I just want to buy a piece of land. I want to plop a manufactured home or a small house on it and just live my life.

Speaker 1 0:48

Don't want an HOA telling me what to do. On and on, yeah.

Speaker 0:51

Sounds incredible. That's exactly what most of us want. The problem is it's not really that easy to attain. Obtain. Obtain.

Speaker 1 1:01

Yes. Either way.

Speaker 1:02

Either way, attain or obtain. So, you know, I start asking, you know, some questions with regards to, you know, do you have funds? Do you, you know, financing options, you know, credit income, you know, all that good stuff just to see where we, you know, can go with this. Um, so a lot of things that people don't realize is, you know, it's not like getting a regular home or a regular loan. Yes, a mortgage on a home that's already just established. Okay. When you do a construction, whether it's a site-built home or a manufactured home, which we do offer financing for that, there is there's lots of extra steps you have to go through. Um, it is more costly, it takes longer, and you know, you do have to have some money to invest into it. Um, so I'm gonna get the pros out of the way first. And Ryan, please chime in on the real estate side. So the pros for at least the lending side is um you can use if you already own a piece of land, that can be your equity in the transaction already. So, you know, you already have your down payment if you already own the piece of land. Uh, that's a positive. We have construction programs that have um we do a VA construction program, which does not require anything down, which is incredible. So that's for our veterans or active military. But um, if we want to do anything manufactured home or a site built, your options are conventional and FHA. Now you can do uh 3.5% down conventional and 5% down. I'm sorry, 3.5% down FHA and 5% down conventional. Those are awesome options, but you cannot utilize down payment assistance with any of these programs. You have to have uh your own cash, your own skin in the game to do it. But Ryan, um I know I'm kind of catching you off guard with this, but what would you say the number one uh thing that people need to look for when they're looking for a lot to purchase and they want to build on it or put something on it? What's the one uh hurdle that people run into?

Speaker 1 3:05

For me, at least what my experience what I've seen is uh is this property um close to utilities? Because that's gonna be a huge factor in the overall cost of it. Um, you know, if you have to uh di uh drill a well, if you have to add a septic system, you have to run electrical lines, I mean that could be an extra $200,000 to the cost right off of the top.

Speaker 3:31

Yeah, and not including like let's say you're in it's in an area where you can connect to connect to the city services. Running to connect to the city sewer is super expensive. Yep. That tends to be one of the reasons that people they buy land and agents are more than happy to sell you a piece of land without talking to you about your future plans with it. Um, you know, I do a lot of loans for people who have land and they do nothing with it. And the number one reason is, oh, we can't get utilities. It's too expensive to get utilities. I'm just gonna sell the piece of land. You know, and there goes their plans.

Speaker 1 4:07

Yeah, I know. Um, and it depends uh probably probably primarily on the well side of things, how deep you have to dig. Uh, but I've had several clients over the last couple of years have gotten quotes, and it's ranging anywhere from you know 60,000 to uh 120,000 for a well. Oh my goodness. Just a well, right? That's not the land that you bought or you know, you paid for. That's none of the real true construction costs of the home. Um, you know, and then you know, a septic system. I mean, brand new septic system, you're probably in that forty, fifty thousand dollar range, right? For that. So, I mean, it's you know, it's it sounds fantastic initially. Um, and it can be done, right? We're like, we're not I'm not trying to poo-poo it at all. No, not at all. But you do need to to look at it with your eyes wide open um and and understand that the things that you want, the no HOA, some privacy away from the the hustle and bustle, um, they come at a cost, right? There's you know, it's yeah, it's not just I buy the land, um, let's go ahead and put the house up and build it, right? You need all the infrastructure as well.

Speaker 5:15

And I love that people want that. I want to help them with it, but a lot of people just don't understand. They're like, what do you mean I can't just plop a plop a manufactured home on it and not worry about any of that stuff? Absolutely not. Unfortunately, it's not like an RV where you already have, you know, access to, you know, water, electricity, and tanks and all that good stuff. You know, you really it it is a lot of extra cost associated with that. And plus permitting, you have to make sure the type of property you want to build is acceptable for that area. Sure. You know, there's been a lot of talk uh recently in the last you know several years about container homes and and tiny homes. Um, those are very difficult to finance. Uh, a lot of those are more cash transactions because, you know, we have a lot of restrictions when it comes to lending. Now, if you are someone who is flush with cash and you can do this, you can pretty much do whatever you want within the requirements of the city. Um, or if you move in the outskirts, there's a lot more flexibility. But you can pretty much do whatever you want if you're not getting a loan. When you're getting a loan, you know, unfortunately, we get to call a lot of the shots and it ends up being not exactly what people want. And then they say, never mind, we'll just go buy an existing home.

Speaker 1 6:31

Yeah, the lenders got to have collateral, right? That they have faith in.

Speaker 6:35

Yes, absolutely.

Speaker 1 6:36

Yeah, uh, you know, and the other thing too, we didn't even really dive into much, but it really probably I think it gets it can kind of straddle a little line between pro and con for it. So um the cost of blueprints is not cheap. Not cheap. So if you're, you know, again, you're not just getting a manufactured home, plop it on a piece of land. You're not, that's not what you're doing, but you want to build a custom home, something of that nature. Um, you know, it's easy, gosh, depending on the the detail of it, 10, 20 grand right for blueprints. Like no, no problem, you'd hit that number, right?

Speaker 7:09

So I think it depends, uh, excuse me. It of course depends on the size of the home. Uh, you know, we have a brother-in-law that's an architect, and that's what he does. Uh it really depends on what you're trying to do and what you're trying to build. You can get blueprints and or plans, you know, as low as $5,000. If you're, you know, if you're building a really small home that doesn't have a lot of complexity. So all of these little things like just kind of go into the mix that people don't realize. Once we start breaking it all out, you know, the utilities, the the blueprints, the type of property that you can build, how much it's gonna cost, how long it's gonna take, you know, they sometimes, if you're doing a brand new construction of a site-built home, like you know, you're building it from scratch on the property, that can take about 12 months.

Speaker 1 7:55

Yeah. 12 to 18 months. It can.

Speaker 7:57

So sometimes people are like, you know what, I'll just customize, you know, the next home I want to buy, you know, just kind of making some changes inside. Uh, they lose their ideas of wanting to build, which I don't love being a dream killer, but you know, I don't think that we're really educated on what it takes to build a home.

Speaker 1 8:15

Oh no, I mean, at the end of the day, the it sounds really good, right? I again, no HOA. Um, I I don't have to have neighbors around me, you know, if I don't want to have that. Um, you know, I can have the home built how I want to have it built, right? And it meet the needs I all that sounds fantastic. Um in theory.

Speaker 8:36

Yeah.

Speaker 1 8:37

Right. And and it is fantastic if you can pull it off. The the problem is I don't think that, you know, the average person doesn't realize all the other things that go in to making that happen.

Speaker 8:48

Yeah, I have a really savvy investor, client, who wants to build his own home, and this is gonna be a really nice, you know, $2 million home in Peoria. And, you know, he came to me and he wants to do what's called an owner build. He's a contractor and wants to build his own home. Well, I don't know a mortgage company that allows any older owner builds. You have to have another general contractor that you hire to manage and control everything. Um, so you know, he came to me and wants to borrow, you know, a million and a half, and we won't let him build his own home. So he's actually selling and financing all of his other properties to get the cash so he can just cash build.

Speaker 1 9:30

You know what's wild.

Speaker 9:31

So he doesn't have to be deal with our our restrictions.

Speaker 1 9:33

I was just thinking about it as you were saying. Um don't get me wrong, I understand that government's a necessary evil. But how but how atrocious is it that you can't get a loan to build your own home?

Speaker 9:52

Well, you think about it, right? There's a lot in the background of that. You know, a lot of owner builds, you know, of again, some general contractors, they're just incredible and they really see it as an investment. But some of them can get emotionally involved, some of them can hide some costs or hide some um different additions they're or or features they're gonna put in the home that, you know, we may not approve or, you know, may not be cost effective. I don't know what the reasoning is overall, but I yeah, that's a problem that everybody runs into is they don't allow any owner builds. But typically people who are uh general contractors know other general contractors that they can work with.

Speaker 1 10:33

Yeah, and or you know, I mean, if if they understand or or realize that they can't get financing for it, you know, do like your client did, where they just, you know, hey, find another way, save some money, stack some chips, whatever they gotta do, right, to make it happen. Um, you know, it's curious. We have a friend who I, you know, just in talking about this, it it made me think I I really want to ask him. Uh I think he'd share with us too. Oh, yeah. Um, what the cost was for his blueprints. I mean, this guy's got a a bowling building, like a seven million dollar house. Yeah, a bowling alley, a shooting range, a shooting range, like a 15-car garage garage.

Speaker 11:13

Well, he's made so many adjustments. His blueprints are probably north of $200,000 at this point. He's changed a lot in the property. So yeah. And it's taken him five years just to get started.

Speaker 1 11:23

Yeah. So a full-on undertaking.

Speaker 11:26

I may not live that long. I'm I'm very happy just buying a home that's already existing. I'm fine with that.

Speaker 1 11:31

Sure.

Speaker 11:32

Yeah, no, I I maybe our last home I I'll want to build and I'll be in a position to do that. But I uh there's just so much that goes into it. And I'm I'm not someone where I want to walk into a home and it be brand new, all mine, no one has ever sat on the toilet. I actually don't really care about that. I like some things being already done. Um, that way any problems that were gonna arise have already come up and been addressed. Because that happens a lot in the first two years of having a a build, a new build, that you kind of run through all the tweaks and and figure everything out. And then I can occupy the home and enjoy it.

Speaker 1 12:05

Yeah.

Speaker 12:05

No, I I don't have an imagination. I'm thank goodness I'm not an interior designer. Um, I can't see past what's in front of me. So I don't personally, I'm I'm just not someone that's not.

Speaker 1 12:17

That's interesting too, because when it comes to financing, you're extremely creative.

Speaker 12:21

Yes, yeah. I'm just not like uh creative with yeah, with physical stuff, I guess.

Speaker 1 12:26

Yeah, what is it? What what do I call you?

Speaker 12:28

Oh, the Yoda.

Speaker 1 12:29

Well, the Yoda, yes, but no, the um gosh, help me out. The Carrie Washington.

Speaker 12:35

Oh, Scandal.

Speaker 1 12:36

Scandal. What was her what's her character's name?

Speaker 12:39

I don't remember.

Speaker 1 12:39

Anyways, needless to say, Olivia.

Speaker 12:42

Oh, yeah.

Speaker 1 12:43

What's her last name?

Speaker 12:44

I don't know. It's been so Pope.

Speaker 1 12:45

Pope, Olivia Pope. Well, it's been so long. There we go. Yeah, a little brainstorming, folks. We figured it out. Uh Olivia Pope. So if you ever watch some scandal, you would you would get it. You'll get the reference, right? So Amy's a fixer. That's what she is.

Speaker 12:57

I do enjoy it. It is definitely my pleasure. Um, okay, so obviously we didn't get into the nitty-gritty in construction, but you know, just to reiterate, we do have construction financing. Um, we do one-time closes, we do renovation loans, which is on a home that you already own that you want to uh fix up or add on to. Um, we do the FHA 203K loans that you can also get money to fix up either on a purchase or a refinance and do some much needed repairs and use the equity in the home to do that. Um, and we do offer, like I said, VA and FHA construction loans, which not everybody does. I'm really excited about that. Uh the process is not for the faint of heart, you know, the process from start to finish uh easily will take, you know, 45 to 60 days. But then you get through all of the headache of all of the lending requirements, and you're on your way to build your very own home. It is very exciting.

Speaker 1 13:55

Yeah, I mean, yeah, I think it's nice to be able to have your own personal touches. I mean, I've seen things that I really like, like um, and I've seen this in actually, I think in some track built homes, but uh right off of the master closet, having the laundry room.

Speaker 14:11

That's my next feature in our next home for like what a time saver is of it so much.

Speaker 1 14:16

Like as the clothes are dirty, you literally just take it over to the machine right there.

Speaker 14:19

That is the one reason I would build my own house if I couldn't find a home that had that uh in the future. Fortunately, um in a few years we're gonna be empty nesters. I'm 100% happy.

Speaker 1 14:28

I think we're moving to Belize, if I'm not mistaken, right?

Speaker 14:31

I wouldn't mind. I wouldn't mind.

Speaker 1 14:32

Yeah, uh, you know, and then you know, the our kids can send their kids, right, when they are here, when they arrive. We don't we're not grandparents yet. But when they get, they can just ship them to us, we'll keep them for a month, whatever, hang out with them, whatever, and then we just send them back.

Speaker 14:46

I guess we'll have to talk about that.

Speaker 1 14:47

Right. We don't we definitely don't want to, we're those parents. We don't want to uh as our our ch our children get adult age and they move out, we want to go MIA, right? Absolutely we don't want them moving back in.

Speaker 15:00

Yes. So I'm I'm moving to a studio apartment once everybody leaves with the laundry room in the bedroom. Uh right next to the toilet. Yes, yes. Um, so really quickly, um, I just want to dive into another topic. Sure. Um, let's talk about the difference between manufactured homes on land and in parks, and we can uh just kind of clarify what this means because I mean most of the construction calls I get, I call them construction calls, are people wanting to put a manufactured home on a piece of land. And they think that's the easiest and cheapest way to do things. Um again, it's completely possible. It's just not possible to do it with nothing out of pocket. But um, I just want to revisit the difference between these two uh these two types of ownership.

Speaker 1 15:46

So leasehold.

Speaker 15:48

Lease hold is where a manufactured home is in a park. Uh you you go into it, it's clear it's a park. There's a whole bunch of manufactured homes, um, and it's set up, you know, with streets and they have a little office and a maybe a little community center clubhouse type thing, a pool. That is a mobile home park. And we do not offer financing for that type of property. Uh that is more of a personal loan and or it's called a chattel loan, is the exact term for it. And they have uh specific lenders who offer that type of financing. Uh I know it's 10% down, and it is a fully qualifying loan, so a tiny bit more expensive to get into. And sometimes the payment isn't even better than just buying a regular home because you have the lease on the we call it the park rent. Yeah. Um, and that can range the ones I've seen here in Arizona. I don't even think I've seen any at $500. But let's say $500 to $1,200 a month.

Speaker 1 16:47

Yeah, and that's and the reason for that is is the the the trailer park, if you will, um, they own the land. You do not. Right? So they're allowing you to park your manufactured home on their land, and every month they're charging you that rent. So what she said, anywhere from five to twelve hundred dollars. I know I just had one uh four or five months ago they closed. Um and I believe the uh the park rent for the land, I believe, was like eight or nine hundred dollars. My goodness.

Speaker 17:16

And that was in surprise, right?

Speaker 1 17:18

Uh yes, that was in surprise. Um and you know, that's not even uh factoring in, if you will. Let's say that you did financing on the manufactured home. Right, and you got a payment there too. Yeah. Right? So um it can actually get quite a bit more expensive than just going to buy a home.

Speaker 17:38

Yeah. And I mean, I'm definitely a proponent of it if that's what fits your budget and fits your lifestyle.

Speaker 1 17:43

It's just a lot of people think it's a cheaper way to go, and it isn't typically the the the way that it could be, and even then it's up for debate for sure, um, is if you had a plot of land that you owned and you wanted to plunk one down on it. Right. So that because then at least you at least, yeah, you're sure you're gonna have property tax, but you're not gonna have that ongoing rent. That rent. And that in in the parks, those rents tend to go up over time. Oh my goodness, tend to go down.

Speaker 18:11

Their background checks are crazy, crazy. Yeah, so I uh my sister and I bought one for my parents uh when we were 18 years old and ended up selling it about 10 years later after my mom passed. And the park wouldn't approve anybody, anybody we tried to sell it to. You have you can never have been arrested. You can't, I mean, I I honestly don't even remember all the restrictions now.

Speaker 1 18:34

You gotta be six foot, it was like a tinder thing, right? Like, you know, you gotta meet these certain requirements. You know, if you're a guy, you gotta be over 200 pounds, your girl gotta be under 150 pounds, whatever it was, right? Like it was pretty it was pretty. No, anyway.

Speaker 18:48

Um, no, but it was really, really, really strict. They their income had to be three times the park rent or three times everything. I honestly can't even remember all the details, but I remember for like six months, they declined every single person that we tried to sell it to. So we ended up finding someone who bought it and moved it out of the park.

Speaker 1 19:05

They just picked it up and took it.

Speaker 19:06

That was incredible. I wouldn't have done that. I didn't think it was worth it, but it was so wonderful to like stick it to them and say FU park, we're selling it no matter what. And now you have a vacant spot because they wouldn't approve anyone. When you are not in a park, that is not an issue. When you're on your own piece of land, that that's not a concern. You can have, I mean, obviously I never recommend it, but you can have, you know, DUIs. You can have been in prison or jail or you can make a little less money and still qualify. So, oh, sorry.

Speaker 1 19:37

You made me think of something. Oh yeah. Right. Um, and I know this through talking with you and with uh with Jamie, your twin. Um with regards to a manufactured home being on a piece of land, if you went ahead and you picked up said home and moved it to another piece of land somewhere else, what does that do for the f the financiality of it going forward?

Speaker 20:00

So that is not a direct answer. Um typically we do not allow financing on any properties, manufactured homes that have been moved more than once. So it can go from the manufacturer to the lot, but yeah, but it can't be moved from the lot to another lot and be um eligible for financing. And the reason is because it's manufactured, we don't know what integrity of the property was uh compromised in the move.

Speaker 1 20:29

Yeah.

Speaker 20:30

So we can't guarantee that the home is gonna be stable and safe once it's moved twice. So we do not offer financing on homes that have been moved. So that would be a situation where you would have to pay cash.

Speaker 1 20:41

Yeah. And so that that really affects the price.

Speaker 20:44

Oh yeah, yeah. Anything that only um is eligible for cash financing, whether it's condition of the home, the property type, the age of the home, whatever reason, um, that typically those are typically cash transactions.

Speaker 1 20:57

Yeah.

Speaker 20:58

Yeah. So when you see a really good deal out there, you're like, oh, in Phoenix it's only $100,000. I have to jump on this. Chances are you can't jump on it. It's only a cash transaction.

Speaker 1 21:07

Yeah, yeah. No, we and we get those all the time. Yeah. Uh hey, why is this one so well it's because you can't get a loan for it. Yeah. Right. So Yeah.

Speaker 21:16

So um uh and then uh manufactured homes on land. So when you have a manufactured home uh that is permanently affixed to the land that it's sitting on, and you are owning or purchasing the lot, that you can do a regular real estate transaction or a regular real estate loan on. Um so that's the big difference. In a park, you cannot get a regular real estate loan on its own land. You can. The only caveat, the only two caveats are it has to be newer than 1976 and it has to be permanently affixed to the land. And I apologize, the third one, it can't have been moved twice.

Speaker 1 21:53

So permanently affixed with a tie down.

Speaker 21:55

Yes, yes, yeah. Now, and if you have a property that does Does not have the current tie downs, you can do what's called retrofitting in order to get the property eligible for financing and have it permanently affixed. And the what's the reason we want it permanently affixed, Ryan?

Speaker 1 22:13

So you don't see people or yourself being interviewed by a news station, right? A tornado came through here, picked it up, and blew it over to the next county.

Speaker 22:21

We don't have tornadoes, but we definitely have monsoons.

Speaker 1 22:23

Yes.

Speaker 22:24

And I mean, I was I I had a not myself, but I did a loan in Black Canyon City once. And I went and met with the people, and they were telling me that when we had this really huge monsoon in, I don't even know, 2004 or 5, I can't even remember. Um, but it they they actually had their neighbors' homes picked up and floated away.

Speaker 1 22:43

Yeah.

Speaker 22:44

Because they weren't permanently affixed. Um, it is very important to have those tie downs, in my opinion.

Speaker 1 22:49

Oh, yeah, I know for sure. You definitely can imagine waking up to that. And also your home's a boat. Yeah.

Speaker 22:54

No. I mean, you'd never think that, you know, Arizona's a dry state. Like you don't think that happens, but the last 20 years we've had quite a few storms that include flooding. Like flood insurance wasn't even a thing here until really the last 20 years.

Speaker 1 23:07

Right. Let me look at what happened uh just what recently, last six months or so to Glow Florence. Like they were totally just devastated by the rains. So yeah.

Speaker 23:18

Yeah, it's been uh something's going on weird in our weather. But um, but yeah, so those are the two different types of manufactured, and we talked about uh construction financing. Um and you know, if you want to learn more about this, you can visit our website anytime at keeping it realistate with amb.com and that will give you all of our contact information. We'd be more than happy to chat with you about your situation, your questions. Uh, we're very easy, no strings attached and no obligation. We would love to help. And you can go online anytime to my website and make an appointment for your free and painless home loan consultations, my favorite term. Uh, thank you so much for joining us today and happy March, happy St. Patrick's Day. Clearly, I love St. Patrick's Day. I'm so excited, folks. It's my favorite month of the year, and it's not even my birthday. I wear green every single day. Um, anyways, I hope you guys have a wonderful rest of your day, and thank you so much for joining us here at Bed Bath and Banter, Arizona Real Estate Edition.

Speaker 1 24:14

Bye, everybody.