If you're familiar with a traditional mortgage, you might know that a mortgage secures the loan to real property. Real property is defined as land, all the permanently attached structures to that land, and the rights of ownership. On the other hand, a chattel loan is secured by a piece of personal property that is movable. The borrower on a chattel loan may not own the land where the property sits so a chattel loan remains intact even if the property is moved off-site. Chattel loans are a common way to obtain a manufactured home. According to the Consumer Financial Protection Bureau (CFPB), about 42% of loans used to buy manufactured homes are chattel loans. These moveable manufactured homes are considered personal property, which is why they are sometimes referred to as mobile homes.
Once manufactured homes are constructed and transferred to their site, if they are not situated on piers, wooden pillars, a solid foundation, or a basement, then they're considered personal property and therefore require a chattel loan. Although the chassis is hidden and the home typically doesn't move once it's been placed, these manufactured homes still retain a permanent chassis for transportation. As a result, these homes may still be commonly referred to as mobile homes.
Before June 15, 1976, the terms mobile home and manufactured home were used interchangeably and had the same meaning. On that date, the U.S. Housing and Urban Development (HUD) implemented stricter standards for mobile homes. As a result, homes manufactured after that date are technically referred to as manufactured homes, while homes constructed before that date are mobile homes. These HUD standards apply to the design, construction, transportability, strength, energy efficiency, fire resistance, and overall quality of the manufactured home.
*Loans with a qualifying FICO score less than 600 are subject to additional guidelines requirements.
**5% down payment is subject to additional minimum FICO and residual income requirements. Please talk to a Loan Officer for further details on down payment and FICO score minimum.
You might think that chattel loans are the same thing as regular conventional loans. That's not the case though, as chattel loans offer their own benefits. Some of the more important ones include the following:
***Tax deductibility of interest varies. Consult a tax professional to determine if chattel loan interest may be tax-deductible in your situation.
Chattel loans are available through manufactured home loan lenders and you can reach out to these businesses directly. Before you do though, you should follow a few steps:
After you've completed those steps, you'll want to submit your application and secure your down payment, if applicable. Being able to complete the application can improve your odds of qualifying for the chattel loan.
Keep in mind that if you have a chattel loan and happen to default on it, the lender can take possession of your personal property. Try to make timely and complete payments to avoid losing your home. That's why it's important to work closely with a manufactured home loan provider since that company knows the ins and outs of the industry. If you would like to learn more about some helpful mortgage tips check out our blog.
If you're interested in purchasing a manufactured home, a chattel loan might be the perfect solution. Whether you have more questions about the process or are looking to make a home purchase with a chattel loan, Cascade can help you. We've been in business since 1999 and have grown to become one of the top manufactured home loan providers in the country. Contact us today and we can help you get started on your paperwork today!