« Chattel loans are usually used when the mobile home will be located in a park or a manufactured home community, and they are home-only loans, excluding the land, » Andreevska says. Because these loans do not include real estate, the closing process is typically faster and less demanding, and the loan processing costs are lower than with a conventional mortgage loan.
However, the amount you can borrow is usually much smaller than with a traditional mortgage. Repayment periods are also usually limited to 15 to 20 years. « Moreover, the interest rate is higher because of the shorter loan period, » Andreevska says. « This means that overall, the monthly payment amounts often actually exceed the payments on a conventional home. »
Instead of borrowing money from a bank, you can go directly to the source. For instance, you could finance directly with the dealership selling your mobile home. Though the loan is made by the retailer, it can eventually sell the loan to a third party.
If you’re buying a mobile home from a private owner, it’s also possible to work out a financing deal with them. In this case, you’ll want to be sure that the home’s title is clear, meaning there are no liens or judgments against it, and that the seller owns it outright. You’ll also need to put a promissory note and bill of sale in writing and have both parties sign.
This is known as a retail installment contract, which is a common form of mobile home financing
Though there are several options for financing a manufactured home, it’s not always easy to qualify . Pogol says that just because a program guideline says lenders can approve an application doesn’t mean they have to approve it.
« And while it might seem odd that a lender would turn down a government-backed loan that protects the lender from losses, there is more to it than that, » she says. For example, lenders who end up with higher default rates than the average for their area can lose their approval to fund those loans, so they tend to be cautious. « These stricter guidelines than required are called ‘overlays,’ and they are fairly common, » Pogol says.
Chattel loans are designed specifically for movable property, which is what the term « chattel » means
Another potential obstacle is the home condition. Pre-1976 mobile homes usually can’t be financed with traditional mortgages since they were manufactured before HUD-enforced guidelines. Plus, because older manufactured homes tend to depreciate, or at least usually don’t appreciate at the same pace as traditional houses, lenders may be pickier about the applications they will accept, Pogol says.
If you are attempting to finance an older mobile home or you present a bigger risk from a credit or income standpoint, Pogol recommends placing a larger down payment to increase your odds of getting approved.
« If you don’t have a large down payment, perfect credit and a low debt-to-income ratio, you will probably have to look harder for mobile home financing, » Pogol says. « Companies that specialize in these loans often charge much higher rates and want larger down payments. I recommend that buyers always try first for a mortgage, and only resort to more expensive options if necessary — and if they can afford it. »
— U.S. Department of Agriculture. If your mobile home meets USDA guidelines, you may be able to find a lender that will finance its purchase. To qualify, your home must be considered real property, and its site must be designated as rural by the department. It must also be less than a year old. In many cases, you can finance with no down payment.