If you plan to buy a manufactured or modular home and also plan to finance your purchase, you want to know what options you have.
When financing a manufactured or modular home purchase, home buyers usually have two options: a traditional home mortgage or a chattel mortgage.
A chattel mortgageis a loan on personal property and a traditional mortgageis a loan on real property.
If you and the lender that you choose determine that a traditional mortgage is right for you, which could be an option if you have land with your home purchase, you might want to look into a digital mortgage option called an eMortgage.
First, what is an eMortgage?
An eMortgage is a traditional mortgage, but the term refers to the digital and electronic processes that are used during the mortgage origination and closing process.
According to Fannie Mae, eMortgages are created only if the promissory note is signed electronically during an eClosing.¹ A true eMortgage is an entirely paperless process for the mortgage origination, creation and closing that doesn't require any documents to be printed.
Can you use an eMortgage with a manufactured home?
If you do find a lender who finances manufactured home purchases and uses eMortgages, of course it's possible to use one to finance your home purchase! However, as you'll learn below, many lenders do not currently offer eMortgages.
So how does an eMortgage work?
Lenders usually follow this process for an eMortgage:
- An eNote, which is a digital copy of the mortgage note, and other relevant documents are electronically signed by the borrowing party. This is digital loan origination.
- Next, eNotarization and an eRecording of applicable documents are completed.
- Then an eClosing system will check and seal the documents.
- The lender will store loan documents in an eVault, a secure digital document storage and protection system, and eDeliver the documents to the home buyer.
So, is the process entirely digital?
To be a true eMortgage, yes, the process should be completed entirely online. However, many lenders who are embracing a paperless process offer certain parts of the process digitally and other parts as a traditional print and sign process, which is not a true eMortgage.²
One reason is that laws regarding eNotarization as well as eRecording can vary by state and county. This can result in the eClosing also being a hybrid process where some documents are eSigned, but other documents may need to be printed and signed.
What is an eClosing?
An eClosing is when a lender has all closing documents accessible for signing and completion online. However, like we previously stated, this process tends to be a hybrid process where certain documents such as the promissory note is printed for a physical signature while other documents are signed electronically.²
Who offers eMortgages?
Across the home financing industry, only a few lenders currently offer eMortgages. A limited number of companies across the country do offer eMortgages that are typically then sold to Fannie Mae and Freddie Mac.
Other lenders integrate eClosings and eNotes. FHA and VA also accept eSignatures on select documents,² suggesting they are moving toward an entirely paperless mortgage process.
Why don't more lenders offer eMortgages?
For many lenders, using an entirely digital process for originating, processing and closing a home loan would require a mortgage process overhaul.
Not only would it include changes to the technology that lenders use,³ it would take extra considerations and requirements for how the lender completes their financing process.²
There are also varying rules on eNotarization. Regulations around eNotarization are controlled at the state level and the laws vary quite a bit from state to state. Many states don't have specific requirements put in place and some have highly specific laws in place that some lenders find limiting.³
For now, eMortgages are generally used with a Fannie Mae or Freddie Mac backed home loan, but into the future, look out for the growth of mortgages that are entirely digital.
Soon, the paperless mortgage process could be an option for financing your new home purchase and even sooner, you'll see more and more hybrid electronic financing options.