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Types of Manufactured Home Financing

Of the many financing options available to you in your mobile home purchase, most are similar to a single-family home mortgage. They are all underwritten by a bank that has specific programs for your loan. Most major banks do not have a mobile home loan program, and be weary of anyone telling you that they do. There are many financing options for you to buy a manufactured home, but the best move you can make is to work with a company that specializes in mobile home loans.

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Types of Mortgages

There are two structures that most loans fit into, an Adjustable and a Fixed Rate Mortgage. The broker or lender will offer the terms of their mortgage based on the financial circumstances of the borrower and the details of the manufactured home they intend to purchase. The difference in these mobile home loans is in how the interest rate is applied. The interest rate is the yearly price charged by a lender to a borrower in order for the borrower to obtain a loan. This is usually expressed as a percentage of the total amount loaned.

With an Adjustable or Variable Rate Mortgage the interest rate varies upward or downward over the term of the loan depending on current money market conditions. Borrowers with an Adjustbale Rate are better off in times when the index is low, such as currently. But this can be a gamble, because as the index rises so will the interest rates om Adjustable Loans. The worst part of this type of loan is that it is possible for your mortgage payments to grow beyond your means to make payments, usually resulting an a foreclosure.

A Fixed-Rate Mortgage is a A loan where the interest rate and payments remain the same over the life of the loan. Every Chattel Mortgage loans have a fixed rate, which a much more stable loan because the lender is contractually obligated to keep your interest rate the same for the life of the loan.

In recent times, interest rates have been low and borrowers with an Adjustible Rate Mortgage on their mobile home have paid less interest overall. However, most borrowers with a Fixed Rate Mortgage believe that the cost is worthwhile to be able to avoid uncertainty.

Securing your Loan

Every mortgage is secured by the home and property, and if payments are not received then the bank can take back their property. Keeping in mind that every mortgage is secured by something, there are two forms of security, a chattel and real property. A mortgage is structured based on what is securing the loan.

If the motgage is secured by Chattel or Personal Property , then the loan is secured against personal property, which is common in the financing of manufactured homes where the borrower does not own the property beneath the home. Because a manufactured home is semi-moveable like a car, lenders consider a chattel mortgage more risky. Therefore, the loans are more difficult to finance and the interest rates are usually higher. Many mobile home buyers can not afford the pricey land beneath a mobile home, or it is not offered in the sale, so they purchase the home and pay a space rent on the lot.

The other type of security for a mobile home loan is real property, which refers to real estate, and immovable property. For obvious reasons, lenders see real property as less risky, and the terms of the loans are usually better than with personal property. When a borrower is buying the land and an mobile home placed on the land, then they are usually going to pay much more than with a chattel mortgage. For this reason, the financing programs and providers are very different. It takes experience to know where to find the best financing for a specific mobile home purchase.