Real vs. Personal Property Loans in Manufactured Home Financing

Mini house on mortgage rates with calculator and keys

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Manufactured home financing is complicated and confusing.

Instead of dealing with one type of loan, manufactured home buyers will need to understand two completely different financing options, or products, as well as the terms that are used for each.

Understanding the process of financing a manufactured home, and the terms used during the process will increase your chances of getting the best deal. We’ll go over the two major financing options available to manufactured home buyers, real property, and personal property. 

The Difference

Manufactured homes can be tilted in two ways—as real property or personal property. The titling of the home determines the type of financing available for the home. There are two loan categories—traditional home loans (or mortgages) and chattel loans.

  • Real property is the same classification that a site built home receives. A manufactured home that is titled as real property will be granted traditional home financing or a mortgage loan through a lending institution or bank. There are several advantages to a traditional home loan such as longer loan terms, special tax deductions, and lower interest rates. For a new manufactured home to be classified as real property it typically needs to be permanently installed on land that the buyer owns. A permanently placed manufactured home means the structure has been properly anchored to the foundation or ground and meets the manufacturers, state, or HUD minimum requirements. Lots of people misunderstand the concept of permanent placement. It has very little to do with the skirting material. A home can have cinder block or brick skirting and still not be permanently placed if the tie-downs or anchors are not used correctly. 
  • Personal property is the same type of classification that an automobile or a household appliance receives. When a manufactured home is classified as personal property, it will be financed with a chattel loan. These are loans made on items that are movable and typically carry higher interest rates and shorter terms, though the deposit needed to initiate the loan are often lower than a traditional mortgage. These loans are typical for homes that will be placed on land that is rented or leased.

Chattel loans can be difficult to get, so dealers often offer their financing through corporate-owned financial institutions. They may also have a small list of favored lending institutions that they work with on a regular basis. The buyer doesn't have to use either one; they can shop for their chattel loan just as they would a traditional mortgage.

The Bottom Line

In addition to being complicated and confusing, manufactured home financing is often unfair because the national organizations such as Fannie Mae and Ginnie Mae that ensure real property mortgages don't offer the same enticements to chattel loan originators. As a result, chattel loans, regardless of how high your credit score is, simply cannot compete with traditional home mortgage rates. 

If you have the ability to obtain a real property mortgage, you may want to take advantage of it. The amount you can save on interest and tax deductions often outweigh the upfront expense it costs to have a home installed permanently on the land.