Posted on: 4 October 2018Share
Many people are attracted to manufactured homes because they tend to be cheaper than standard single family houses and certain types of manufactured home can be easily relocated from one piece of land to another. However, these types of homes can be difficult to finance. Here's what it takes to get a mortgage on a manufactured house and alternative financing options if your home doesn't qualify.
Home Must Be Considered Real Estate
It may seem strange that a manufactured home wouldn't be considered real estate since it is, in fact, a house. The truth is that these homes can actually be categorized in one of two ways: as real estate or as personal property, and the category your house falls into determines whether you'll qualify for a traditional mortgage.
To be classified as a piece of real estate, a manufactured home must be set on an approved foundation that essentially permanently affixes it to a piece of land. You must own the land the property sits on and the home must be taxed as real property. If your home meets these requirements, you can apply and get approved for conventional or government-secured mortgages, such as FHA.
On the other hand, if your home sits on a chassis, you pay fees to the DMV, and/or you don't own the land the home sits on, your manufactured home will be classified as personal property and treated as though it were an RV.
Homes categorized as personal property don't qualify for traditional mortgages because the properties are mobile, meaning they can be moved at any time to any place. Lenders consider these types of homes high-risk because the homeowner can simply relocate the house if they stop paying the mortgage to avoid having the property taken by the bank.
Financing is Still Available
Just because your home may not qualify for a conventional mortgage doesn't mean financing is not available at all. Some lenders offer what's called chattel mortgages, which are similar to the loans used to finance vehicles and other movable property. The lender places a lien on the home that lets them repossess it and sell it to cover the company's losses.
Qualifying for a chattel mortgage is pretty much the same as getting a conventional one. The only difference is the interest rate may be higher and the loan term is typically only 15 to 20 years compared to the maximum 30 years for conventional mortgages.
Alternatively, some manufactured home companies have in-house financing available. So, this is something you'll want to ask about when shopping for houses.
For more information about mortgages for regular or manufactured home, contact a local home loan service.