Interested in buying a mobile home? These affordable alternatives to site-built homes might be appealing if you’re looking to downsize, don’t require a lot of space or will only be in your home for a few months out of the year. However, lenders may not offer traditional mortgages for these kinds of homes since they’re not classified as traditional real estate. Without financing, it could be difficult to pay the upfront costs of buying a mobile home. A personal loan, however, may be an option.
Let’s look at the process for getting a mobile home loan, the pros and cons and some alternatives.
What is a mobile home?
A mobile home is a factory-built home prior to 1976, when the U.S. Department of Housing and Urban Development (HUD) established safety standards for these types of structures. It's since become a popular catch-all term for any type of manufactured home.
What’s the difference between mobile homes and manufactured homes?
All mobile and manufactured homes are homes that were mass-produced in a factory before being transported to their final installation site. Older mobile homes may lack the construction quality, weather resistance and safety features required today. Modern manufactured homes are designed specifically to meet HUD codes and standards. This can include modern insulation and advanced cooling and heating systems, plus plumbing, fire safety and electrical systems that help keep the home safe and sanitary. New manufactured homes can also be heavily customized with modern amenities and may look indistinguishable from traditional houses.
Older mobile homes may generally be more portable than modern manufactured homes. Manufactured homes can still be moved, but it may be a more expensive and complex process.
Can you use a personal loan to purchase a mobile home?
Personal loans may be a convenient way to finance a mobile home when a traditional mortgage isn’t available. Usually, to get a traditional mortgage for a mobile home, you typically need to own the land it’s on, and it must be affixed to a permanent foundation. This may make mortgage options more difficult or complicated if you’re leasing land from a manufactured home complex or village.
With a personal loan, you get a lump-sum payment from a lender that can be used for almost anything, including paying for a new home. Be aware, though, that you may not be approved for a loan large enough to cover the full cost of your new home.
Other ways to finance a mobile home
Beyond personal loans, there are other ways to finance a mobile home. Most alternatives require the home to meet specific size and safety criteria, and there may be rules about who owns the land where the home sits and whether the home is titled as real estate. The right option for you will depend on your needs and financial situation.
- FHA loans: Some lenders offer loans sponsored by the Federal Housing Administration specifically for manufactured (mobile) home purchases, known as Title 1 loans. Borrowers may use a Title 1 loan to purchase a new home, refinance an existing home loan or buy the land the mobile home sits on.
- Fannie Mae and Freddie Mac loans: Some lenders offer government-sponsored mortgages for manufactured homes. Fannie Mae and Freddie Mac mortgages may feature repayment terms of up to 30 years and lower down payment minimums than traditional mortgages.
- VA loans: U.S. Department of Veterans Affairs (VA) loans are available to veterans and certain family members. VA loans may offer lower interest rates and no down payment requirement to eligible borrowers.
- Chattel loans: Chattel loans or chattel mortgages can be used to purchase movable property, such as a boat, piece of machinery or mobile home. Chattel loans don’t require you to purchase the land where the mobile home sits. The mobile home acts as collateral for the loan and can be seized and foreclosed upon if the borrower defaults.
Pros and cons of using a personal loan for a mobile home
To decide whether a personal loan is the right choice for you, it’s important to understand the benefits and drawbacks.
Benefits
- Lower fees: While personal loans may come with certain fees, such as origination fees, these are generally lower than other types of loans, like Fannie Mae, which may have closing costs of up to 5% of your loan amount.
- Simple application process: Unlike with other home financing options, your mobile home doesn’t need to meet any specific requirements to be eligible. Often, all you need to do to apply is to provide your personal and financial information and authorize a credit check.
- No collateral needed: Most personal loans are unsecured, meaning no collateral is required. This means that if you fall behind on your payments, you won’t risk losing your mobile home.
Drawbacks
- Interest rates: Compared to other home loans, personal loans can carry higher interest rates. If you have strong creditworthiness, an FHA loan may have an interest rate as low as 6%, while the average interest rate for a personal loan may be twice as high.
- Shorter terms: The terms of a personal loan are typically shorter than other home loans. Personal loans are typically paid back between 1 and 7 years, as opposed to 15 to 30 years for a mortgage loan.
- May not cover the full cost: Traditional home lending options like VA loans or FHA loans may cover all or most of the cost of a home, while maximum personal loan amounts may not.
Finance a mobile home with a personal loan
Personal loans may be an option if you need assistance paying for your new mobile or manufactured home. While they may not always be able to cover the full cost of a new home, these loans can help cover the gap if you’ve already got some savings built up. Speak with a lender today to find out what options are available based on your financial circumstances.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
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