9/23/2013 - When this article was first written, the assumption was that Murphy Bank would offer 30-year mortgages. In conversation with Richard Laxton this morning, he corrected me. They will only offer 20-year mortgages at standard home mortgage rates ... with no mortgage insurance required with 20% down.
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| Mesa Dunes blooms |
Mesa Dunes resident Ann Silver probably said it best when she said there are two requirements for a real estate sale … a buyer and a mortgage banker willing to lend.
There are probably a lot of us who would like to buy our lots … if the price is right … and if we can get financing. We won't know about the appraised price of the land for some time, but I wanted to get a better understanding of how the financing works in this conversion situation so I started calling people. You can see the list of people I contacted at the end of this article.
The first thing I discovered is that the financing would be a mobile home loan rather than a land loan which is on undeveloped land. The good thing about that is that the mortgage could be for up to 30 years; the bad part is that very few lenders make mobile home loans. Here's what I found:
Mortgage Qualifications
Because this would be a refinancing of the mobile home to include the land, it would have the same requirements as a regular home mortgage based on interest rates at the time of the mortgage. (Today's rate is about 4.5%)
- Good Credit … Richard Laxton at Murphy Bank indicated that a credit score of 670 or better is what they look for.
- Income … the monthly mortgage should be no more than 33% of monthly gross income. Therefore, if your mortgage was $900 a month, you would need to have a monthly income of about $2,750.
- Equity … amount borrowed should not exceed 80% of the total appraised value. For instance: If the land value were $150,000 and you wanted to borrow that amount, you would need to have a minimum of $37,500 in appraised value/equity in your mobile home unit so that the total appraised value would be at least $187,500.
Note: Richard Laxton stated that Murphy Bank does not sell their loans so they have more flexibility about making loans and that they will work with special circumstances such as foreclosures or one time credit events.
Comparables
This is where financing gets interesting. What is a comparable? Community West Bank takes an extremely conservative view on this and stated that they would not lend in this park until a "strong history" of comparables was established ... within this park. When asked how this could happen, he basically said they wouldn't loan to the first round of buyers.
Fortunately, Richard Laxton at Murphy takes a little broader view of comps and would look at resident-owned Knollwood in Santa Maria and Chumash Village in SLO for example. They have also packaged units together in Knollwood and helped negotiate a land price reduction.
Permanent Foundation
Apparently few if any of the units here in the park are on a permanent foundation with tie downs. Lou at MH Mortgage said this is mandatory and that a 433a certificate needs to be filed. He said this retrofit costs between $1,500 - 3000.
Richard Laxton at Murphy Bank said that this wasn't "mandatory" but that we ought to do it as it would save problems in the future. He is sending me the name of a company that does batch retrofitting so that we could get a group rate. His estimate of individual cost (if not batched) was $3,500. The group he recommended is On the Level Contractor, Janis Arendsen, 760-415-1982.
Conclusion … Author's Opinion
When I first began this investigation, Susy Forbath stated that Murphy Bank was probably going to be the lender of choice. After talking to everyone I could find, I concur.
Richard Laxton was very generous in taking the time to explain his understanding of the conversion and the financing options. He is very familiar with this park and when I asked him what range he would guess the value of the land would appraise at, he responded $150 - $200K.
He also said Murphy Bank will be setting up an office in this area with Michael Fitzgibbons as the lead. I asked him if Michael would be willing to come meet with us to explain in more depth the financing process and answer questions and he said definitely. I'll try to set this up sometime soon.
Guesses about monthly payments:
Guesses about monthly payments:
If the land price turns out to be $150K and you got a loan for that amount at today's interest rates (5%), the monthly payment would be about $989. With a guesstimate HOA fee of $200, and additional tax on the lot of $100 would make the total monthly payment $1,289.
If the land price is $200K, that monthly payment would go up to $1,320 for the mortgage, plus HOA & Tax for a total of $1620. Here's a link to a mortgage calculator if you want to play with numbers.
If the land price is $200K, that monthly payment would go up to $1,320 for the mortgage, plus HOA & Tax for a total of $1620. Here's a link to a mortgage calculator if you want to play with numbers.
People contacted:
- Krista, Bay Federal Credit Union, 831-479-6000 … Mesa Dunes park is not on their lending list.
- Neil Rosofsky, TRIAD Financial Services, 916-952-6963 … does not lend in this type of conversion. Referred to Doug or Sheryl at US Financial Network, 800-655-9044 or Lou at MH Mortgage 916-861-2292.
- Will Cunningham, Community West Bank, 805-681-3366. Issue with initial comps.
- Richard Laxton, Murphy Bank, 559-225-0318
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