Banks That Offer Chattel Loans: A Comprehensive Guide

Chattel loans allow buyers to finance movable personal property like manufactured homes vehicles, and equipment. While not as common as traditional mortgages, they serve an important role for certain purchases. If you’re considering a chattel loan it helps to understand what they are, their benefits and drawbacks, and which banks offer them.

What is a Chattel Loan?

A chattel loan is a loan secured by movable personal property known as chattel rather than real estate. The chattel serves as collateral for the loan. If the borrower defaults, the lender can repossess and sell the property to recover their money.

Chattel loans are commonly used to finance:

• Manufactured homes – Also called mobile homes, these are factory-built structures transported to the site. Homes built before June 1976 are “mobile homes” while newer ones are “manufactured homes.”

• Modular homes – These are factory-built but meet local building codes and sit on permanent foundations. They can often be financed with conventional loans.

• Vehicles – Chattel loans allow vehicle owners to claim tax deductions related to the vehicle. This is common where there is a national Goods and Services Tax (GST).

• Equipment – Chattel loans finance heavy equipment like tractors and forklifts. This allows immediate use of the equipment to generate income for repayment.

While chattel loans don’t mortgage the land itself, borrowers typically rent or purchase land for the home or equipment. Some lenders even include land lease costs in the loan payment.

Comparing Chattel and Conventional Loans

Chattel loans differ from conventional mortgages in a few key ways:

• Property type – Chattel loans finance movable property while conventional loans finance fixed real estate.

• Land – Chattel loans don’t include land while conventional loans typically do.

• Loan size – Chattel loans have lower maximums, often around $200,000 to $300,000.

• Terms – Chattel loans have shorter repayment periods of 10 to 25 years versus up to 30 years.

• Rates and fees – Chattel loans tend to have higher interest rates but lower origination fees.

• Qualifying – Chattel loans can accommodate lower credit scores and higher debt-to-income ratios.

Benefits of Chattel Loans

Chattel loans offer several advantages for the right borrowers and situations:

• Access to financing – Chattel loans work for borrowers with lower credit scores or higher debt ratios. They provide a financing option those borrowers may not otherwise have.

• Faster payoff – The shorter repayment terms mean you pay less interest over the loan’s life versus a longer conventional mortgage.

• Potential tax deductions – In some cases, chattel loan interest may be tax deductible if used for business purposes.

• Lower fees – Origination fees and processing costs are typically lower than with conventional mortgages.

For purchasers of manufactured homes or equipment, chattel loans can be an affordable financing solution when used responsibly.

Drawbacks of Chattel Loans

Chattel loans also come with some drawbacks to consider:

• Higher rates – Interest rates are typically 0.5% to 1% higher than conventional mortgage rates.

• Shorter terms – The loans amortize faster, resulting in higher monthly payments. Borrowers have less time to repay the balance.

• Risk of repossession – If you default, the lender can repossess your home or equipment since it serves as collateral.

• No equity – With the property as collateral rather than an asset, you don’t build home equity like with a traditional mortgage.

While still useful, borrowers should weigh the costs and risks of chattel loans versus other products. Be sure you can manage the higher payment.

Banks That Offer Chattel Loans

Many national, regional, and local banks provide chattel loans for manufactured housing and equipment purchases. Here are some of the top chattel lenders:

• Wells Fargo – One of the biggest lenders in this space, Wells Fargo offers home-only chattel loans nationwide.

• Bank of America – Also a national lender, Bank of America finances manufactured home purchases via chattel loans.

• U.S. Bank – U.S. Bank offers chattel loans for manufactured housing and RVs in the states it serves.

• BB&T – Now Truist after a merger, this southeast lender provides chattel loans for homes and vehicles.

• Cascade Financial – A top lender specializing in manufactured home financing, Cascade offers chattel loans nationwide.

• 21st Mortgage – 21st Mortgage is a major chattel lender serving manufactured home buyers across the U.S.

• Vanderbilt Mortgage – Headquartered in Tennessee, Vanderbilt is a large chattel lender throughout the southeast U.S.

• Regional banks – Many mid-sized regional banks like Third Federal and BMO Harris offer chattel lending products.

• Local banks and credit unions – Community institutions frequently provide chattel loans, especially in manufactured housing communities. These local options are worth exploring.

Borrowers should shop rates and terms from national lenders as well as options from regional or local banks and credit unions.

Chattel Loan Requirements

While more flexible than conventional mortgages, chattel loans do have requirements borrowers must meet:

Credit score – Minimum scores range from 575 to 620 depending on lender. Sub-600 scores often need additional criteria.

Down payment – Typically 5% to 10% down required. Programs exist with as little as 3% down.

Debt-to-income ratio – Many lenders allow ratios up to 50% versus 43% for conventional loans.

Loan term – Terms range from 10 to 25 years based on loan size, home type, and lender practices.

Loan amount – Loan limits often fall between $20,000 and $275,000.

Property – Home must be a manufactured home on non-permanent foundation.

Land – Borrower must lease or own land where home will be sited.

Programs can vary so discuss requirements directly with potential lenders.

Applying for a Chattel Loan

The application process involves these key steps:

• Check your credit and scores using a free service to understand your standing.

• Research lender options including banks in your local area. Get rate quotes from multiple lenders.

• Determine if you will purchase land or rent a lot for your manufactured home.

• Calculate an affordable monthly payment based on your income and expenses.

• Compile documents including pay stubs, W-2s, tax returns, and bank statements.

• Complete the full loan application directly with the lender. This pre-approves you subject to underwriting.

• Work with the lender through underwriting. Provide any additional needed documents.

• Once approved, finalize land purchase or lease arrangements.

• Close on time after final underwriting approval.

With good preparation and research, buyers can navigate the chattel loan process smoothly.

The Bottom Line

While less common than traditional home loans, chattel loans fill an important niche. For borrowers with lower credit scores or higher debt ratios, they provide a means of financing manufactured homes, vehicles, and equipment. National, regional, and local banks all offer chattel lending programs. Borrowers should research multiple options to find the best rates and terms. With proper planning and budgeting, chattel loans allow borrowers to achieve property ownership that might otherwise be out of reach.