According to data from the Consumer Financial Protection Bureau (CFPB), mobile homes are a tiny share of home loans in the U.S. Part of the reason lies in the fact that aspiring mobile homeowners have a shaky financial situation. For example, data show that their wealth is as much as 75% lower than that of the other families. This explains why they are often denied when applying for a traditional mortgage, and directed towards a chattel mortgage instead. This article explains how you can secure a traditional mortgage loan for the acquisition of a mobile home.
Why are traditional mortgages often inaccessible to aspiring owners of mobile homes?
Besides the reason mentioned above, aspiring owners of manufactured homes see their traditional mortgage application get denied because these homes aren't considered real estate. Instead, traditional lenders view them as personal property since they can pretty much be transported from one geographical location to another.
Because of this feature, chattel mortgage is the sole type of financing that exists for mobiles homes. But the problem with chattel loans is that they provide homeowners with much fewer benefits, such as in terms of protection. For example, lenders have the right to put a lien on the home until the borrower has completely paid off their loan. In addition, chattel loans come with unattractive interest rates, which can be a considerable barrier for those who have a low credit score.
One of the only advantages of chattel loans is that their closing costs are smaller, and they can be obtained within a relatively short time period.
Landownership gives you access to traditional mortgage loans
The only way to see your traditional mortgage loan application get approved is if you can show to the lender that you own the piece of land on which your mobile home is going to be affixed. Indeed, because the building will be permanently attached to the land, your financial institution will regard it as real estate, which will automatically make you eligible for traditional mortgage loans.
It's important to keep in mind that you don't need to own a piece of land before being approved for traditional mortgage loans. Indeed, you'll also be eligible if you can prove that you intend to purchase the land in the near future.
Now that you've been told how to qualify for a traditional mortgage loan, make sure you do the necessary today, and start taking advantage of the benefits that are associated with this source of financing, such as the FHA protection. For more information about mobile homes, contact a company like AAA Homes, Inc.