Manufactured Home Lending Programs
There are 3 main types of lending options available when considering
manufactured/modular construction, Chattel, Construction and End (Permanent)
Mortgages. Each has its own specific purpose and characteristics. Below is a review of
these programs and the specifics of each.
1. Chattel Mortgage
A Chattel Mortgage is a loan that can be obtained from a bank or financial institution
using some sort of movable personal property (other than land and buildings) as
security – so a Chattel mortgage is used for financing a car, RV, boat etc on its own
without any land. It is also the mortgage that is used for financing a Manufactured
home on its own without using the land as collateral for the loan. Perfect for a home
going into a Mobile home park or on someone else’s land where there will be no
mortgage on the land just the home itself.
2. Construction Mortgage
A Construction Mortgage is a loan that allows for funds to be drawn in phases to
complete construction objectives, such as foundation, home purchase, home setup, etc.
There are two main types of construction mortgages:
(a) Stand-alone construction plus permanent mortgage: There are two loans
with this traditional construction loan. The first loan pays for construction as the
home is being built. When you move in, you get another mortgage to pay off the
construction loan. It’s two separate loans and is the kind of construction
mortgage that home builders use when the building process takes a long time.
The second mortgage will close at whatever the interest rate is at the completion
of the construction process. Each loan has its own closing costs and interest
rate.
(b) Construction-to- permanent: You close only one loan up front for the total
estimated costs of construction plus the home. This is the loan we typically use
for the shorter time frame for the construction of a factory-built home. The lender
pays the contractors for the construction costs as they do the work and pays the
dealer for the home when it comes off line. When you move in the loan balance
(the total amount paid) becomes your permanent mortgage without the need to
close another loan.
3. End (Permanent) Mortgage Loan
An End loan (Permanent) Mortgage is a loan that will pay for a completed real estate
project (or for the purchase of any existing home for that matter). Permanent financing
is obtained after completion of construction, there are no draws during construction as
with a construction loan.