Manufactured
Home Loans are Easier than You Think
These days, many people
are making the choice to buy a manufactured home. Young people, in particular,
are finding that the dream of traditional home ownership is out of their reach
as prices have skyrocketed in recent years, so they are making the choice to purchase
more modest digs. Securing a mortgage on a stick-built home or a condominium is
pretty straightforward, but what about getting a loan for a manufactured home?
The process is similar, but there are key differences to keep in mind when thinking
about applying for a manufactured home loan.
In the past, mobile homes have
been considered personal property rather than real estate, and were financed as
such. Often, this required a down payment of at least ten percent, with the balance
of the purchase price spread out over ten to fifteen years. The interest rate
on a loan like this was closer to a car or a boat loan; higher than that of a
traditional mortgage. However, the interest was still tax deductible since it
was used to finance the buyer's primary home.
These loans are still in existence
today, and are quite common in fact. However, as the quality of these homes has
gone up and the mobility has declined, additional lenders have come into the picture
with loans that more resemble mortgages. In many cases now, if the home cannot
be moved and the buyer also holds title to the land beneath it, then the loan
for the manufactured home is considered a mortgage. Other hybrid type loans exist,
which only require a five percent down payment, with the balance financed out
over twenty to thirty years.
One thing to keep in mind is that if local
regulations require you to title the home as personal property rather than real
estate, some states require that you pay a personal property tax, which may or
may not be higher than what you would have paid out in real estate taxes on the
same manufactured home.
Also, traditionally manufactured homes were an asset
that declined in value, as opposed to real estate which generally appreciates.
These days, as the quality of manufactured homes is being continuously improved
upon, manufactured homes may also appreciate with the local real estate market,
albeit not as fast as stick built homes or condominiums. So if you are planning
on going the mobile home route, it is important to choose the neighborhood wisely
and pick one where the real estate is more likely to appreciate in value.
In
short, although buyers of mobile homes often cannot secure mortgages on their
property in the traditional sense, the improvements in quality of the structures,
along with the vast amounts of money to be made in this market, has enabled banks
and other institutions to offer loan terms that are more favorable to the buyers.
Whether the home is classified as personal property or real estate will depend
on the local laws in effect, but it has become much easier to purchase this type
of home than in the past.
