These days, prefabricated mobile homes come in a wide range of sizes, layouts, and designs to cater to the needs and preferences of homebuyers from all walks of life. Some of the mobile homes in Sacramento, California are so well-built and -appointed they're considered luxury homes.
Although it's typically much more affordable than an ordinary home, a mobile home still costs a pretty penny. Unfortunately, this type of property doesn't always qualify for a conventional loan. So, how do you get financing to buy a mobile home? Let's find out in this helpful guide.
Financing a mobile home is a little different from obtaining a traditional mortgage. In many cases, a mobile homeowner isn't planning to purchase or doesn't own the land on which their property is situated. So, they only need financing to purchase the mobile home and not the land. This is the reason why most home loan providers don't consider such a property eligible for a regular mortgage, which covers both the home and the land.
Some lenders may offer you a mortgage to purchase a mobile home if it sits on a permanent foundation and meets their specific requirements. However, it's difficult for any movable property to be considered real property, especially if you aren't the owner of the land under it. Thankfully, even if you don't qualify for a conventional mortgage, you can find another way to secure the funds you need to buy a mobile property. Below are two financing options available to a mobile home buyer:
A chattel home loan is a personal property loan specially designed for buying a mobile home or another type of movable property. It provides funds for buying only the movable item and not the land it resides on, making it a popular financing option among property buyers who intend to rent a lot in a mobile home community. This type of loan is secured against the home itself.
While it shares some similarities with a traditional mortgage, a chattel mortgage is different in a number of ways. Such a loan typically has a shorter term, which usually ranges from 15 to 25 years. It's also important to note that a chattel loan doesn't allow you to borrow as much as its conventional counterpart. Depending on the lender, the maximum loan amount can be anywhere from $200,000 to $300,000.
In addition, a chattel home loan has less stringent eligibility requirements compared to a normal mortgage, which makes it easier for you to finance your mobile home purchase. Since it only involves financing the movable property, this type of mortgage is simpler and takes significantly less time to process. With its easy approval, quick processing, and short loan term, a chattel loan is a great option.
Since a mobile home can be much cheaper than a traditional home, you may be able to finance your purchase through a personal loan. A personal loan is a flexible form of financing that you can use for virtually any purpose, including buying a mobile home. It's usually unsecured, meaning you don't need to provide any collateral. Therefore, the application process tends to be easier and involve less paperwork. However, the main drawback of a personal loan is that it typically comes with a high interest rate.
Most personal loan providers offer maximum loan amounts of $25,000 to $50,000. If you're planning to use a personal loan to buy a mobile home, you probably have to look for a lender that will allow you to borrow $100,000 or more, which can be difficult, but not impossible.
When it comes to financing a mobile home, a chattel home loan is generally a better option. This is especially true if you're planning to buy more expensive property. In contrast, you'll have limited options if you decide to get a personal loan.
Since it's a secured loan, a chattel loan usually comes with a considerably better interest rate than a personal loan. Another reason why you should finance a mobile home with a chattel home loan instead of a personal loan is because of the more relaxed credit requirements. With a personal loan, the lender has to take a bigger risk, as they don't have collateral to protect themselves against potential losses in the event of default. Therefore, they usually only accept borrowers with good credit ratings. To be eligible for a personal loan, typically with many lenders you need to have a credit score of 660 or higher. On the other hand, the minimum credit score required for a chattel home loan is around 580.
If you're thinking of buying a mobile home in Sacramento, consider applying for a chattel mortgage with Cascade Financial Services. Our chattel loans come with flexible terms to suit your specific financial circumstances and competitive interest rates to minimize your monthly payments. Give us a call or complete our online loan application to get pre-qualified today!