Many potential home buyers think that obtaining a mortgage for a manufactured home is very difficult. However, buying a manufactured home with the help of a loan isn’t more difficult than getting a mortgage for a conventional site-built home. It’s just slightly different.
That is mostly because instead of just one type of loan, there are two financing options for manufactured homes: conventional mortgages and chattel mortgages. A potential manufactured home buyer may qualify for both products or just for a chattel mortgage, depending on his or her eligibility as a borrower, and whether the home is classified as real or personal property.
When buying a manufactured home, the underwriting criteria for chattel mortgages are often identical to the criteria for traditional mortgages. Therefore, if a prospective manufactured home buyer is eligible for a conventional mortgage, he or she will most likely qualify for a chattel loan as well.
To qualify for manufactured home financing, a manufactured home buyer must meet certain requirements, which are established by lenders in accordance with applicable federal and state rules and regulations.
Is the Manufactured Home Classified as Personal or Real Property?
The manufactured homes that aren’t attached to a permanent foundation, which means they are classified as personal property, can only be purchased with a chattel loan, also referred to as a home-only loan. This type of loan can be used when buying a manufactured home, regardless of where it will be placed (e.g. on privately owned land, on family land, in a land-lease community, or on private rental lots).
On the other hand, if a manufactured home is classified as real property, which means that it is securely affixed to a foundation that complies with HUD’s requirements, the home buyer can choose to finance the home with either a chattel or a conventional mortgage. Conventional mortgages for manufactured homes work exactly the same as any other traditional mortgage for site-built construction.
Although chattel mortgages are similar to conventional mortgages in that they both offer the same tax breaks, one drawback is that chattel mortgages are for shorter terms than traditional mortgages. A chattel mortgage can also be more difficult to obtain because only a handful of specialized lenders offer this financing option for manufactured home purchases.
If You’re Planning on Buying a Manufactured Home…
Manufactured homes can be bought from previous owners, retailers, communities, or at dealerships. Although some retailers and dealers work with favored lending institutions on a regular basis, buyers don’t have to use the lenders recommended by dealers or retailers. Simply put, manufactured home buyers can shop around for manufactured home loans just as they would do when looking for conventional mortgage financing for site-built houses.
If a home buyer qualifies for a conventional mortgage, he or she will be able to purchase a home that is classified as real property and the land to which it is permanently affixed, and roll everything together into a manufactured home loan with land. Compared to taking out two different loans, opting for one mortgage to finance both the home and land can bring significant benefits, such as a lower interest rate and a longer repayment term.
The Application Process
When buying a manufactured home, the mortgage application process is similar to the process of obtaining a mortgage for any residential property. In short, the first thing a potential manufactured home borrower should do is file and submit the application and documents required by the lender. The manufactured home lender will verify the income, assets, employment history, credit score, credit report, and the financial obligations of the applicant. Based on the initial assessment, the lender will be able to indicate the best financing options for each applicant and the maximum amount he or she can borrow.
Depending on the financing options available to you, financing a manufactured home can be slightly different from financing site-built construction. But to make the best decision, it’s important to get in touch with an experienced and trustworthy manufactured home lender.