According to a report published by the Consumer Financial Protection Bureau (CFPB), manufactured housing accounts for only 6% of all occupied houses. But the compared with the housing market, its proportion in home loan originations is even much smaller. At first, we must figure out what manufactured housing is. Some people still refer to it as a mobile home. The term implies that the hose is movable. Unlike a common house, which is constructed at the exact site where it will stand, a mobile home is a type of prefabricated housing that is largely assembled in factories. After finishing the assembling, people in the factory transport it to the site of use.
People living in manufactured homes are usually in a poorer financial condition in comparison with the public. It is reported that the average income of a family living in a mobile home is half that of the common families. Besides, the CFPB says in the report that about 32% of households living in a manufactured home are headed by a retiree. Due to the differences between manufactured housing and common housing, as well as the differences of financial situation between the house owners, financing options that the two types of home owners can make differ from each other. Generally speaking, financing options for manufactured home owners are limited.
A mobile home owner can make his choice from two options: a traditional mortgage and a chattel mortgage.
You may be familiar with a traditional mortgage loan. The lender puts a lien against your house, so it serves as collateral. The interest rate is the most favorable in a 30-year term loan. And you make the payment every month.
However, there is a certain requirement if a manufactured home owner applies for a traditional mortgage. The house should be a permanent attachment to the land. In other word, the home owner should not only have the title to the mobile home, but also the title to the land where it stands.
On the other hand, if the home owner only possesses a lease of the land, then a chattel mortgage is his sole option. Since the homeowner does not own the land forever, the house is regarded as personal property instead of real estate. You can’t get a traditional mortgage without a real estate. In a chattel mortgage, the lender put the lien on the mobile house. Therefore, the movable house becomes the collateral in this case.
Before you try to get a chattel mortgage, you must learn about it. The closing cost of it is cheaper than a traditional one, but the interest rate is often higher, especially for those with a bad credit score. Furthermore, the term of a chattel mortgage is shorter though the famous lending company 21st Mortgage offers terms as far out as 23 years.