Getting a loan for mobile homes can be pretty difficult since they’re classified as personal property rather than real property. This classification lists mobile homes similar to cars or boats, which means traditional mortgage loans are not available to this type of residence. However, there are ways for you to get a loan for your manufactured home.
Chattel Loans
Many banks refuse to give a traditional mortgage to a mobile home on the basis that they are real property rather than personal property. This classification can force borrowers to take out a chattel mortgage. Unlike a traditional mortgage, a lender can place a lien against the mobile home until the loan has been satisfied. If you want the title to your home, you’ll have to pay off the loan completely.
Chattel mortgages also allow lenders to seize the property if you default on the loan, allowing recovery for any losses experienced by the financial institution. This situation makes it very advantageous for lenders and unfortunate for borrowers. Additionally, chattel loans offer much less generous interest rates when compared to traditional mortgages. Interest rates on chattel loans are anywhere from 7-12.75%. This rate is substantially different from the average conventional mortgage, which is 3.8-4.7%.
Traditional Mortgages
With those interest rates, you may feel like all hope is lost, but don’t worry! There is a way that you can get a traditional mortgage. Some lenders are willing to give loans to people who want to purchase a home that was manufactured before June 15th, 1976. While it may be difficult to find a financial institution that offers mortgages on these homes, the terms are much better if you can manage to get a traditional mortgage. As stated before, these loans have a much lower interest rate when compared to chattel loans.
HUD Financing
If you have low income, the department of Housing and Urban Development has ways that you can help finance a mobile home. You’re able to get what’s referred to as a “Title I” loan that is used for the purchase of a manufactured home and a developed lot.
The maximum loan amount through HUD for mobile homes is $69,678. If you needed to borrow for land, you may borrow an additional $23,226. However, there is the option to lease land through HUD as long as you plan on living at that location for three years or more. The length of the loan depends on which type of manufactured home you choose to purchase.
If you get a single section manufactured home and lot, you can have up to a 20-year loan term. For a lot, you have a maximum of 15 years. Finally, if you’re purchasing a multi-section home and lot, you have a maximum 25-year loan term.
If you do accept an HUD loan, there are a certain number of requirements you must meet to be eligible:
- You must have sufficient funds to make the minimum down payment.
- You must be able to demonstrate adequate income to make payments on the loan.
- You must occupy the home as your principal residence.
- You must have a suitable site to place the mobile home.
There are also requirements that you must follow to be eligible for these loans. A full list of is on HUD’s website. In addition to purchasing the home, you can also use this loan to buy built-in appliances and equipment as well as wall-to-wall carpet if your mobile home lacks flooring.
