Chattel Loans for Manufactured Homes: What you Need to Know

The most common form of financing available when purchasing a manufactured home that is not attached to real property is classified as a chattel loan, whereas a manufactured home attached to real property utilizing a permanent foundation system is considered as real estate and financed as real estate. The following contains excerpts from a report by Santiago Financial, Inc.

If you are looking to finance a manufactured home—especially one to be located in a rental park or on leased land—you most likely would come across the term “chattel loan”.

Pros and Cons of a Chattel Loan

Pros

• Easier to Finance Park Homes: If you plan to live in a mobile home park or leased lot, a chattel loan may be your primary avenue for financing.
• Less  Complex Closing Process: Closing can sometimes be simpler and faster compared to a traditional mortgage.
• Flexible Requirements: Borrowers who don’t qualify for a standard mortgage might still secure a chattel loan, provided they meet credit, debt-to-income, and property requirements set by the lender.

Cons

• Potentially Higher Interest Rates: Without real estate as collateral, lenders may charge more to offset their risk.

• Shorter Loan Terms: Chattel loans often have shorter repayment periods, which can lead to higher monthly payments.
• Limited Ability to Build Equity: Because the loan is focused on a home alone, you may build equity more slowly than you would with real estate attached.

Eligibility Factors

1. Home’s Condition and Age

      Lenders typically require the home to meet certain guidelines. This may

      include being HUD-compliant if it’s a manufactured home built after June 15,

      1976, and having a proper VIN or serial number.

2. Credit Profile

       Credit Score: While requirements vary by lender, a higher credit score can 

        Yield better rates and terms.

       Debt to Income Ratio: You’ll need to demonstrate you can manage monthly

        payments without overextending yourself.

3. Location of the Home

         Many chattel lenders only finance homes in certain states or communities.

         Park approval: If the home is in a mobile home park, the lender may require

         That park meets specific quality standards or has certain amenities.

4. Down Payment

           Depending on the lender, down payments can range from 5% to 20% of       

           of the home’s purchase price. A larger down payment might help reduce 

           the overall loan cost or interest rate.