Can someone break down the steps of getting a loan for a mhp

mobile home university
1

I havent completed a loan on a MHP as of yet, but I assume it cant differentiate much from a traditional commercial loan. Here are a few steps , please corret/add where neccesary:

  1. Contact the Lender

  2. Lender receive preliminary info about park and gives a Yes or NO

  3. Lender send official documentation

  4. Borrower returns completed docs and sends in deposit

  5. Appraisal is ordered (takes 4 weeks±)

  6. Property is inspected?

  7. Loan is packaged and submitted to Loan Committee for approval

  8. Once approved ,docs are sent to borrower (typically 10-12 pages)

9)Borrower signs and returns

  1. Loan Funds

Here are my questions :

  1. At which stage are loans usually rejected?

  2. What is decent amount for a deposit ?

  3. How much is average appraisal costs?

  4. Are there lenders out there known for pocketing deposits?

  5. DO lenders typically have issues with large cash outs from parks that have been turned around?

  6. What are typical fees involved with the loan?

2

Kali,

These are great questions and some of them will vary with the type of lender you use for the financing.

  1. At which stage are loans usually rejected?

Hopefully, this takes place early on in the process. If you are using a local bank, the main criteria they look for is debt service coverage ratio, track history and experience of the borrower. Your relationship with that bank is vital. The final area that can cause rejection is a low appraisal.

Conduit lenders will usually have set criteria for a loan and you should be able to tell right from the beginning whether the deal is workable with this type of financing.

  1. What is decent amount for a deposit ?

I’m not exactly sure what you are asking here. In most cases, you can expect at least a 20% down payment requirement from the lender to get funding. However, this doesn’t have to be your money in some cases. You may be able to get the seller to carry back a 20% second mortgage and get into the park with little money out of your pocket.

Some banks do ask for an application fee to start the loan process, but I haven’t seen that very often.

  1. How much is average appraisal costs?

In my area (Southeast) the average appraisal will run $2,000. This document is thick and more extensive than a single family home appraisal. The appraisor has to look at all three methods (capitalization rate, replacement or cost value, and comparables) of evaluation and weigh each one in the final value.

  1. Are there lenders out there known for pocketing deposits?

I haven’t heard of an institution who practices this at all.

  1. DO lenders typically have issues with large cash outs from parks that have been turned around?

In most cases, the lender will not allow you to “cash out” on a purchase loan. However, this is common during a refinance down the road when the property has been turned around.

  1. What are typical fees involved with the loan?

If you use conduit financing, the fees are going to be high. On a $1M loan, expect somewhere around $40-50K. However, it won’t take long to get your money back because the interest rates are much lower than bank financing.

With local financing the fees usually run between 2-3%.

Steve Case

3

Kali:

Thought I would add a little to Steves reply…

Here are my questions :

  1. At which stage are loans usually rejected?

The biggest killer is low appraisals and unfortunatly you usually don’t find this out until late in the process due to the 3-5 weeks it takes to get it done at a cost of 2-3K which is non-refundable from the start.

  1. What is decent amount for a deposit ?

I assume your asking about your non-refundable deposit that covers appraisal, credit report and usually a processing fee. You won’t be asked for this until you have a letter of commitment from the lender detailing rate/term, PPP, lock out, recourse etc…

  1. How much is average appraisal costs?

Depends on appraiser…2-3K is normal.

  1. Are there lenders out there known for pocketing deposits?

Deposits are not really deposits because once the money is spent its gone.

  1. DO lenders typically have issues with large cash outs from parks that have been turned around?

I assume your speaking about a cash out refinance which lenders usually don’t go over 65-75% LTV but don’t care how much you take out under there max LTV.

  1. What are typical fees involved with the loan?

As Steve said 2-3% could be expected. Some fees are non-negotiable and others they will give on. The last few loans that I have done are 5-10K in fees with no origination points charged.

4

Kali,

Same questions with my 2 cents.

Here are my questions :

  1. At which stage are loans usually rejected?

I’ll have to agree with Steve on this one. I have financed several mobile home parks and have never had an issue with appraised value. Loan professionals that specialize in multifamily will be able to estimate a value very closely as they are aware of market factors such as vacancy rates, expense ratios, etc. and can utilize these numbers in the same way an appraiser does in the capitalization approach to value (In my opinion the most important “investor value” indication as it is based on cash-flow and surrounding local comparable properties).

I have found the most common appraised value issues arise during a refinance rather than a purchase. There are too many reasons why things work out this way to discuss in this post.

  1. What is decent amount for a deposit ?

If we are talking about a deposit with seller for a purchase, then I don’t think there is really any good standard to use. I have seen as little as $500 deposited and as much as $200,000 for a mobile home park.

Regarding a lender typically this is collected after some initial screening and analysis. The biggest factor will be the “type” of money you are pursuing. Conduit loans you can expect at least $15,000 or as much as $50,000 or more to get the ball rolling. Local banks can sometimes get you going with no deposit or a very minimal one (This is very affordable for them from the higher interest rates typically charged). A good net worth or deposit account relationship can usually grease the wheels a bit. The “in between” portfolio money such as that of a national lender will most likely be in the range of $3,000 - $8,000.

Also all these program may have different avenues of securing a rate some more costly than others. Conduits will usually be a 1%-2% rate-lock deposit. Local banks usually don’t charge for this unless it is a forward rate-lock. Portfolio program will usually have some flat fee or deposit ranging from $500-$5,000.

  1. How much is average appraisal costs?

Appraisals are usually in the same range for mobile home parks of between $2,000 and $6,000. Multiple tax parcels or buildings will sometimes create a reason for higher fee. Also many lenders wrap the appraisal, inspection, engineering into one lump fee. Make sure you understand what your 3rd party fee covers.

  1. Are there lenders out there known for pocketing deposits?

I have heard many stories… However in my experience not a lot of companies make this a practice. I think the more typical situation is a misunderstanding of what funds are actually doing.

I.e. My company usually collects $5,500 after initial analysis in order to engage an appraiser, inspector, underwriter, etc. Up until the appraiser is engaged, all of the money is refundable. Once our underwriter signs off on the package and engages appraiser, $3,500 is committed (Appraiser is paid, because they are getting paid regardless of loan closing). $2,000 at that point may still be refundable. The more time into the process we spend the less money is usually available to be refunded. Sometimes a borrower may misunderstand the process and the specific lender’s deposit policy.

  1. DO lenders typically have issues with large cash outs from parks that have been turned around?

Typically a lender does not consider cash-out requests with a permanent finance option until the park has been owned at least one year. Typically lenders may have certain cash-out restrictions for years 1-2. Finally after two good years of seasoning your cash-out is only limited by a lender LTV max. We have programs that allow 80% cash-out for any purpose on a mobile home park.

For a “turn-around” I assume you are talking about making an under performing park a performing one. We have programs that allow a person to acquire a distressed property, apply capital improvements, increase occupancy, etc. and then can take out the interim financing on top of any verifiable capital improvements up to a 75% LTV with no seasoning other than stabilization (Typically 3 months, but as market tightens down these guidelines get tighter too. I have seen requirements of 6 months recently.). What one considers stabilized will depend on lender and surrounding market conditions.

  1. What are typical fees involved with the loan?

Steve and Finance Guy nailed this one…

Conduits: $15,000-$50,000 3rd party. 1%-2% Rate lock deposit.

Local bank: <$10,000 total

Portfolio: $5,000-$10,000

This also assuming no origination points. Typically though more points up front means lower rate.

I love multifamily financing!

5

Kali:

Did you ever get financed for this deal? Just following up…we met at the last MOM in Albany, GA.

Don Wilson (OK)