So, you’re thinking of buying your first mobile home. You’ve researched manufacturers, made an extensive mental list of customizations and tweaks, and you’re already dreaming of the life you’ll lead and love in your fancy new build.
Then, the panic hits. You’re ready to approach your manufacturer, take a look at their homes and cherry pick your dream build, only to realize you’re not quite sure how you’re going to pay for it.
Or, even worse, you’re so confused by all the financial jargon, that you’re not sure who even finances mobile homes or how to find the right finance option for you.
If it’s any consolation, you’re not alone. That dizzying haze of financial confusion has got many prospective buyers in a twist.
If you’re looking for a much simpler way to navigate the confusion and put your mind at rest, stick with us to discover all you need to know about financing mobile homes and choosing the best option for you.
Let’s Talk Credit Scores
Unfortunately, we have to kickstart this conversation with a topic no one wants to discuss. Credit scores. They’re a sore spot for some and a complete headache for others.
However, your credit score will often determine which finance option you go with, so it’s not a conversation to be missed. When you apply for financing (and this applies to anything), a lender will assess your credit score to determine your suitability.
If your credit score is good, you’re more likely to be accepted. If it’s not, you may be denied.
If you want to finance a mobile home, you have plenty of options to explore. However, most will require an assessment of your credit score, so be prepared.
FHA Loan Program
The Federal Housing Administration Loan Program offers Title I and Title II loans. These can be used to purchase a new home, or make improvements to an existing property.
These loans can also be used to buy mobile homes. Let’s take a quick look at the differences between these two options.
Title I Loan
If you don’t own the land your mobile home is pitched on, and even if you don’t intend to buy it, lenders can still offer you a Title I loan. However, if you’re not buying the land, you’ll need to sign a lease to occupy the land for a minimum of three years.
Loans vary between $69,000 to $92,000. Your eligibility will depend on whether you need to finance the home and lot individually or together. There are also maximum loan terms for different mobile homes, which your lender may discuss with you.
Title II Loan
These loans are a little more complicated. You’ll have to meet some specific requirements (like having a floor that’s a minimum of 400 square feet), and they cannot be used for mobile or manufactured homes that dwell on leased land. The terms are complex, so for more information, talk to a lender.
Your Bank
Your bank is also a lender. Because mobile homes are less expensive than traditional homes, you may be able to take out a personal loan with your bank to finance your purchase.
However, some banks now have limitations on who can take out personal loans and for what amount. Don’t just accept the first figure given to you by your bank. You may find that you can take out a larger loan with a separate lender, but it’s an option worth considering.
Manufactured Home Loan Lenders
Some lenders now offer mobile home loans to borrowers who want to finance their property. These companies provide customers with a wide selection of loans that cover owned land or leased land and new and used mobile homes.
Like all lenders, loan terms, minimum credit scores, and starting interest rates vary from company to company.
However, most mobile home or manufactured home lenders tend not to loan to customers with credit scores below 500. Maximum loan amounts will also vary depending on the lender and the type of loan you want to get.
Chattel Mortgages
Mobile homes and traditional homes are not the same. Mobile homes can be moved, and owners tend not to own the land they occupy. For this reason, mobile homes are actually considered personal property rather than real estate.
This is what makes chattel mortgages one of the most popular options to finance a mobile home.
A chattel mortgage is a loan used to buy personal property that can be moved, such as mobile homes and even equipment used on construction sites. Mobile homes, not being attached to their land, are considered chattel.
A chattel mortgage is not the same as a traditional mortgage. With a traditional mortgage, the lender doesn’t own the property, but they can take it into their possession. With a chattel mortgage, the lender owns the property completely until the borrower has paid off the loan.
You can apply for a chattel mortgage through a private lender. They’ll often have specific terms, which may vary depending on the type of property you’re financing.
Chattel mortgages also tend to have shorter loan terms, lower processing fees, and tax-deductible interest on the loan. However, some lenders may charge you much higher interest rates than you would be charged on a traditional mortgage.
Like all loans, the maximum amount you can apply for will differ from lender to lender.
Final Thoughts
If you’re looking to finance a new mobile home, remember that your credit score is the key that can determine whether you’ll be accepted.
Thankfully, if your credit score isn’t as good as you’d like it to be, some lenders will still be willing to help you finance your purchase.
There are several finance options to explore, from chattel mortgages to personal loans. Before you settle on a choice, approach a series of lenders and assess the terms for each loan.
Financing is a big commitment, and you should only settle with the lender that can offer the best deal.
While tiny homes are becoming increasingly popular, there are still many people that are unaware of the best accessories, and necessities to purchase. This is why I decided to set up Clothesline Tiny Home, to share my experiences with others.
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