Did you find the mobile home that you’ve always wanted? But are you a little short on cash for the down payment?
Do you own land and wonder if you can use it as a downpayment for a mobile home?
We’ll explain how you can use a land-in-lieu of loan, and the process of getting one, so you can use your land as a down payment on a mobile home.
Related: How to Finance a Mobile or Manufactured Home
Why Do You Need a Down Payment on a Mobile Home?
When buying a house, you’ll need a down payment; the same goes for purchasing a mobile home. Why? The down payment shows lenders that you have a personal investment in the large purchase you’re about to undertake.
Otherwise, it would be easy for people with good credit and income to ask for a loan without having to invest anything into the purchase. In addition, a down payment ensures that if the banks do have to foreclose, the homeowner and the bank both have something at stake.
Factors for Determining a Down Payment
Several factors like your income, credit history, and the amount of the loan you’re requesting will determine the amount of the total down payment required.
A typical down payment will fall between five and ten percent of the total home price with any additional improvements to the land rolled into the loan.
Frequently the higher the down payment that a loan applicant can put down will result in better interest rates and other terms of the loan, which can help save them money in the long run.
Using Land as Down Payment For a Mobile Home
Using a Land-in-Lieu type of loan, you can use the land for collateral for a mobile home. This type of land lets you use the equity in the land you own in place of cash for your down payment on the mobile home.
With this type of loan, you can use up to 65% of the appraised value of your land towards the required down payment. And you can do it without a survey or a permanent foundation required.
You can often finance fees, closing costs, and site improvements into your loan, which can help reduce out-of-pocket expenses. Private Mortgage Insurance is also not required. A one-time close at the title company can also help minimize closing costs.
This option can appeal to people who own their land as it eliminates the need for a significant cash down payment.
Are you looking for a mobile home? Click here to search Home Nation’s amazing inventory!
The Process of Using Land-in-Lieu as a Down Payment
The process and the paperwork required to finance a land or home loan are similar to the land-in-lieu process.
The loan process begins with filling out a free credit application. Then, your lender or housing consultant will guide you through filling out the application correctly to use your property in a land-in-lieu downpayment.
After your credit approval returns, you’ll receive a list of all the documentation needed to move closer to the closing table.
The documents you submit will then be processed, cleared, and approved by the lender. They will then order an appraisal of the land and a title search.
Related: Top Mobile Home Myths
A title search is a process where a title company researches a property and its property owners to ensure there aren’t any judgments or liens on the land for unpaid taxes.
If there are unpaid taxes, they will typically need to be paid off before closing. Sometimes, the lender may allow the borrower to pay the delinquent taxes off with cash at closing.
If the borrower is not able to pay off their outstanding tax debt, then they will not be able to use their land-in-lieu as a downpayment, and this can cause the mobile home buyer to lose the approval of their loan,
Sometimes, a landowner has a common last name, and the title search can show outstanding taxes that are another person’s. When these incidents happen, a “not the same person” affidavit will be signed, clearing the landowner’s title of the liens.
Potential Negatives of a Land-in-Lieu Loan
In a chattel loan, a borrower is typically financing the home only. However, in a land-in-lieu loan, the lender will take ownership of the mobile home and the land in the event of foreclosure.
Since you are using your land as personal investment, or collateral, to procure the loan, you must remember that that lien will be on both the mobile home and the property. Therefore, this liability is for the entire duration of the loan.
Another potential negative is that when your land is appraised, it is for less than what the lender requires for a down payment on the mobile home.
If this happens, you will have the assessed value of your land, then come up with the difference in cash and have both invested into the down payment for your mobile home.
Home Nation is excited to offer you a hassle-free process to get approved and begin your home-buying experience. Click here to contact their finance department today!
You Can Use Your Land as a Down Payment for a Mobile Home
If you have the land available, you can use a land-in-lieu loan as a down payment for your mobile home.
You’ll still go through many of the same steps as a standard home loan, including a credit application and title search. The title search ensures the lender that there are no outstanding judgments or liens against the property.
Since many lenders only require five to ten percent of the total down payment for a mobile home, you may be able to seek a higher loan approval. You can use this higher loan approval to finance land and other improvements that you might not have been able to afford otherwise.
It’s important to remember that both your land and the mobile home are part of the loan and that if you default before the end of the loan, the lender will take ownership of both.
As with any loan, it’s essential to talk to an experienced housing consultant or realtor to help you get the loan that makes the best short and longer-term sense for you and your family.
Related: Mobile Home Investing: 2022 Guide