Whether you're just starting out and purchasing your first home or settling down for the retirement years in your last home, a manufactured home could be a great option. Manufactured homes are affordable, convenient options for families of all ages and sizes. Today's manufactured homes offer stylish exteriors and modern interior finishes, making them hard to distinguish from traditional site-built homes. If you're considering purchasing a manufactured home in California, a chattel mortgage is one of your financing options.
What Is a Chattel Loan?
A chattel loan covers property, such as machinery, vehicles, and manufactured homes that can be moved. A chattel loan would cover only the manufactured home and not any land under the house. The manufactured home acts as the loan's collateral. If you already own the land your manufactured home will sit on and you default on the loan, the lender can only take the manufactured home in foreclosure. The land would stay with you.
Chattel loans in California generally require between 5% and 10% for a down payment, which is slightly higher than government-backed loans but still under the 20% down payment required on traditional site-built properties. Traditional loans will also typically have higher closing costs and the ability to borrow higher amounts overall. Chattel financing tends to cover lower loan amounts for shorter terms than traditional financing.
Real vs. Personal Property
Manufactured homes can be classified as either real or personal property, depending on the setup. Personal property is any type of property or asset, except for real estate. Examples of personal property include your vehicle, campers, ATVs, RVs, aircraft, boats, and motorcycles. Personal property has no fixed location, meaning that it can easily be relocated to a new spot. Real property exists in one place and can't be moved easily. Real estate qualifies as real property, as it stays in one location.
Manufactured homes are classified as personal property unless they are permanently affixed to the land, in which case they become real property. The type of financing you qualify for depends on whether your manufactured home is classified as personal or real property. A chattel loan is specifically designed to cover manufactured homes classified as personal property.
Chattel vs. Traditional Financing
Traditional financing covers the home and the land on which the house is located. A chattel loan covers only the manufactured home, often placed on land you rent or own. Manufactured homes are typically covered by chattel financing because the property is classified as personal property. The exception to this rule is when a manufactured home is permanently affixed to a HUD-approved foundation.
Manufactured homes that are permanently affixed to a HUD-approved foundation built after June 15, 1976, can qualify for traditional loans, including government-backed loans that may save you money. On June 15, 1976, the Department of Housing and Urban Development released strict guidelines regarding the construction of prefabricated or manufactured homes to ensure safety. Homes built before this date do not qualify for any government-backed financing, including FHA or VA loans.
What Property is Eligible for Chattel Financing?
Several types of property qualify for chattel financing because they are considered personal property.
Manufactured homes are built off-site in a factory-type setting and then delivered to the location they will be placed. They are transported from the factory to the owner's site in one or more sections. You can purchase a single-wide manufactured home, which will be 18 feet or less wide and no longer than 90 feet, or a double-wide at 20 feet or more in width and 90 feet or less in length. There are also multi-wide options for manufactured homes.
Manufactured homes built prior to June 15, 1976, are often referred to as mobile homes, although in some cases, people use manufactured and mobile interchangeably to refer to both types. The distinction between mobile and manufactured homes is the date of the guidelines set forth by HUD to create safer construction of prefabricated homes. Mobile homes often still have the wheels attached to the undercarriage, simply covered up by underskirts. When purchasing a mobile home built before June 15, 1976, you may have difficulties finding a lender. Many lenders don't want to finance a property that doesn't meet current codes.
Heavy machinery or equipment, including tractors, forklifts, payloaders, and similar farming or construction equipment, can be covered under chattel financing. Chattel loans are prudent for this type of equipment, as you can start using them immediately to generate income to repay the loan.
Any licensed vehicle can be financed using chattel financing. This includes recreational vehicles, such as motorcycles, ATVs, boats, campers, RVs, and trailers. You can also finance aircraft via chattel loans. A chattel loan can also be used to finance an automobile, typically for business purposes. Before funding any vehicle with a chattel loan, you'll want to be sure it's your best option. You may qualify for traditional vehicle financing through a private lender that's a better fit.
Why Choose a Manufactured Home?
Manufactured homes of today are well-designed, structurally sound, and affordable. They are built to both federal and state standards and must meet the guidelines put forth by HUD in 1976. Manufactured homes have changed a lot over the years and are now often indiscernible from traditional site-built homes. They can vary in size from single-wide to multi-wide and even be affixed permanently to a foundation, much like traditional housing. Advantages to manufactured home living include:
- Affordable monthly payments.
- Lower taxes.
- Downsizing to a simpler lifestyle.
- Easier homeownership.
- Option to rent or own land.
- Possible improvements, such as decks, garages, and porches.
Taxes will vary on a manufactured home, depending on location and whether it's permanently affixed to the land. Homes placed on rented land may not have property taxes, depending on local and state laws, but typically the landowner rolls land taxes into the lot rent. If you want to learn more you can read our blog the 4 Key Advantages of Manufactured Homes.
When you're ready to purchase a manufactured home in California, reach out to the experienced team at Cascade Financial Services. We proudly serve the Sacramento area as well as all of California. We can help you decide if a chattel loan, or any of our other financing options, is best for you. If you'd like to get started on the application process, you can access our home loan onboarding on our website. Contact us by phone at 855-517-2158 today! You'll be on the road toward homeownership.