Chattel loans for mobile homes allow buyers to finance a mobile or manufactured home and the land it sits on through a single loan. These loans are a great option for those looking to purchase a mobile home without having to take out separate loans for the home and land. In this comprehensive guide, we’ll cover everything you need to know about chattel loans for mobile homes.
What Are Chattel Loans?
A chattel loan, also known as a mobile home loan, is a type of financing used to purchase a mobile or manufactured home. With a chattel loan, the home itself serves as collateral on the loan
Chattel loans differ from conventional mortgages in a few key ways
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They have shorter repayment terms, usually 15-20 years.
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They typically have higher interest rates than conventional mortgages
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The maximum loan amount is usually lower than a conventional mortgage.
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Chattel loans finance the mobile home itself, not the land it sits on.
If the borrower defaults on a chattel loan, the lender can repossess the mobile home. For this reason, chattel loans carry more risk than conventional mortgages secured by real estate.
What Is A Manufactured Home?
Manufactured homes, once known as mobile homes, are factory-built residences that are transported to a site and installed. They differ from modular homes in that they have a permanent chassis used to move them.
There are a few key things to know about manufactured homes:
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They are built to federal standards regulated by HUD since 1976. This sets quality, safety, and energy efficiency standards.
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They can be customized with floor plans, finishes, and exterior looks.
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They are more affordable than site-built homes, thanks to factory construction.
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They are considered personal property unless placed on a permanent foundation.
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Models built before 1976 may be called mobile homes, while newer models are termed manufactured homes.
Chattel Loans For Mobile Homes With Land
Traditionally, chattel loans only finance the mobile home itself, not the land underneath. The borrower must finance or rent the land separately. However, some lenders now offer chattel loans that include both the mobile home and land in the financing.
Benefits of chattel loans for mobile homes with land include:
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One loan for home and land. This streamlines the financing process.
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May have lower rates than combining a chattel and land loan.
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Longer terms possible in some cases, up to 30 years.
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Easier to sell down the road than a home and separate land.
If you’re buying a mobile home and land, check if your lender offers combined chattel lending. This can make the purchase simpler.
Chattel Loan Requirements
While requirements vary by lender, here are some typical chattel loan qualifications:
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Minimum credit score of 580-620. Lower scores may be approved with a higher rate/down payment.
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Debt-to-income ratio below 50% in most cases.
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Down payment of 5-20% of the purchase price.
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Sufficient income/assets to repay the loan.
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Loan terms of 15-23 years typically. 30 years possible with land.
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Mobile home must meet HUD manufacturing standards if built after 1976.
Your individual qualifications depend on your credit, income, and the lender. Those with good credit scores, low debt, and solid income stand the best chance of approval.
Chattel Loan Rates And Fees
Chattel loans tend to have higher rates than conventional mortgages due to the increased risk of lending on mobile homes. Here are some average costs:
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Interest rates of 6-10% (conventional loans average 5-7%)
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Origination fees of 1-2% of the loan amount.
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Closing costs of about $2,000-$4,000.
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Monthly mortgage insurance not required but can be added.
Always compare loan estimates from multiple lenders. Look at both rates and fees to find the best deal. Government loan programs like FHA may offer lower rates for those who qualify.
Chattel Loan Pros And Cons
Chattel loans provide an affordable financing option for manufactured homes but aren’t right for everyone. Consider the pros and cons when deciding if this type of loan is best for your needs:
Pros
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Fast loan approval and closing timelines
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Lower down payments required
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Purchase home and land together
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Interest may be tax deductible
Cons
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Higher interest rates than conventional mortgages
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Shorter repayment terms than conventional loans
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Limited maximum loan amounts
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Home can be repossessed if payments lapse
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Difficult to sell, as fewer buyers finance with chattel loans
For buyers unable to qualify for conventional financing, chattel loans provide an accessible route to homeownership. But make sure you fully understand the risks and benefits before committing.
How To Apply For A Chattel Loan
If you’ve decided a chattel loan fits your home buying needs, here are the steps to take:
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Check your credit score and report for errors or issues. Time to correct these before applying.
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Shop lenders and get pre-approved for financing. Compare loan estimates.
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Find the right manufactured home that meets loan requirements.
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Make an offer and apply for financing if approved.
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Provide documents needed for underwriting once under contract.
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Secure any down payment funds required.
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Close on time once the lender gives final approval.
Work with your lender closely throughout the course of the loan application. They can guide you on the property and home documentation required.
Alternatives To Chattel Loans
If you decide a chattel loan isn’t the right fit, here are a few options to consider instead:
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Conventional Mortgage – If your manufactured home meets eligibility, a conventional mortgage secured by real estate may offer better rates/terms.
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USDA Loans – For low-income buyers in rural areas buying manufactured homes. Offers subsidized rates.
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VA Loans – For veterans buying a manufactured home that meets VA requirements. No down payment needed.
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FHA Loans – FHA Title I loans provide low down payment manufactured home loans. Rates higher than conventional.
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Personal Loans – Higher rates but an option if you can’t qualify for home financing.
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Buy Land Outright – Purchase land without financing so you just need a chattel loan for the manufactured home.
Talk to a loan officer about all your options to choose the most affordable path to buying a manufactured or mobile home.
The Bottom Line
Chattel loans provide a way to finance mobile homes at lower costs than conventional site-built homes. If you’re looking to buy a manufactured home, make sure to weigh the pros and cons of chattel lending versus other options. Shop multiple lenders to find the best rates and terms that fit your budget and homeownership goals. With the right loan choice, you can find an affordable way to buy a quality manufactured home.
What is a Chattel Mortgage?
In a chattel loan in Texas, the lender holds a lien against the manufactured home that is used as collateral for the loan. The lien protects the lender’s interest in the property by providing some security in the case that the borrower fails to fulfill contract provisions. In the event of a default in payments, for instance, the lender can initiate repossession and sell the mobile home to pay off the debt from the mobile home loan. Once the borrower repays the loan, the lender begins the process of removing the lien.
A Chattel mortgage can deliver a series of benefits, such as:
- The interest charged on the loan is tax deductible, with some limitations
- Monthly mortgage payments can be structured similar to conventional mortgage payments
- Because chattel mortgages are secured loans, their interest rates are generally lower compared to interest rates associated with unsecured loans.
Before applying for a Texas chattel loan, a prospective home buyer should carefully review the eligibility requirements of the financing options available for these types of homes, and ponder their pros and cons.
After deciding which manufactured home loans financing alternative is best for his or her particular financial situation, the buyer should get approved for the loan with a quality loan company before starting the mobile home hunting process.
If You Need a Chattel Loan in Texas We Can Help!
Figuring out how to get Texas mobile home financing can be a challenge without expert help. If your manufactured home is permanently affixed to a HUD-approved foundation it can be purchased with a conventional mortgage such as an FHA loan. This would include a modular home on a permanent foundation.
However, MOST mobile homes are typically placed on blocks and gravel pads. This makes your mobile home titled as personal property, and it can ONLY be financed with a chattel loan mortgage. Chattel mortgages are typically what people refer to as mobile home loans – it is a loan on personal property and not real estate. Personal property loans are different than traditional FHA mortgages.
On average, about 65 percent of the manufactured home buyers who choose to affix their homes to land they already own or are still paying for—and therefore could purchase them with the help of a traditional mortgage loan —prefer to take out manufactured home loans in the form of a personal property loans like a chattel mortgage. This would include, for example, most mobile homes on land we offer in our land and home packages catalog.
Considering the confusion surrounding the topic of mobile home financing in Texas and the increasingly widespread use of chattel mortgages as a mobile home loan option, there is no better time than now to talk about this financing option.
A Chattel mortgage is a form of mobile home financing that can be used to purchase or refinance a manufactured home that’s not permanently attached to land. For example, chattel loans can be used to finance the purchase of manufactured homes that are placed in land-lease communities, on individual rental sites, on family land, or on land that home buyers own outright or are still paying for.
All About Chattel Loans for Mobile Homes
FAQ
What credit score is needed for a chattel loan?
How does a chattel loan work?
What is the interest rate for a chattel mortgage?
Are chattel mortgages hard to get?
What is a manufactured home chattel loan?
Unlike a conventional mortgage, which includes the house and land it sits on, a manufactured home chattel loan will only finance the property itself. Chattel loans for manufactured homes are ideal for borrowers who don’t own the land where they want to place their manufactured home.
Can a chattel mortgage be used for a mobile home?
Real property includes land and property that cannot be easily removed from the land. When a chattel mortgage is used for a large, movable asset like a manufactured home — called a mobile home before June 15, 1976 — or a piece of equipment (the “chattel”), the asset is held as collateral on the loan.
Are chattel mortgages right for You?
Chattel mortgages aren’t for everyone. If you want to explore buying non-movable property, a FHA loan can be a great choice with its lower down payment requirements. You can also use a conventional loan to purchase a modular home, which isn’t the case with manufactured homes. Talk with a loan expert about your home-buying options. Chattel Vs.
What is a chattel dwelling loan?
Chattel dwelling loans are only for moveable property, while a traditional mortgage is for homes on permanent foundations. Unlike a conventional mortgage, which includes the house and land it sits on, a manufactured home chattel loan will only finance the property itself.