Can You Get a Mortgage on a Park Home?
Uncover how park homes are financed. Learn about specialized loans and unique considerations, as traditional mortgages may not apply.
Park homes, often called manufactured or mobile homes in the U.S., are factory-built structures typically placed in designated communities. While they offer an accessible path to homeownership, financing a park home differs significantly from a traditional mortgage. Conventional real estate mortgages are generally not applicable; however, specialized financing options are available.
Understanding Park Homes and Ownership
Park homes are factory-built and transported for installation. Manufactured homes built after June 15, 1976, meet U.S. Department of Housing and Urban Development (HUD) standards, distinguishing them from older mobile homes and recreational vehicles (RVs). RVs are built to recreational vehicle standards and are not intended for permanent residency.
A key distinction in park home ownership relates to the land. Owners typically purchase the home but lease the land, or “pitch,” within a park community. This classifies the home as personal property (chattel) rather than real estate. Traditional mortgages secure real estate, including both the structure and land. Because the land is leased and the home is personal property, it doesn’t fit conventional real estate mortgage criteria. For a manufactured home to qualify for a traditional mortgage, it must be permanently affixed to borrower-owned land and titled as real estate. This difference necessitates alternative financing.
Financing Options for Park Homes
Several financing avenues exist for purchasing a park home, moving beyond traditional mortgages. Specialized lenders offer loans tailored to these properties, understanding their classification as personal property.
A prevalent financing method is the chattel mortgage, designed for movable personal property. The park home serves as collateral, similar to a car loan. Chattel loans are common for manufactured homes on leased land within a park community. These loans typically have shorter repayment terms (10-20 years) and may carry higher interest rates (2-5% more than conventional mortgages).
Other loan types can facilitate a park home purchase. Secured personal loans, using the home or other assets as collateral, may offer more favorable terms than unsecured options. Government-backed programs, such as FHA Title I loans, insure loans for manufactured homes not permanently affixed to land. Eligible veterans may access VA loans for manufactured homes on owned land with a permanent foundation that meet HUD guidelines.
Unsecured personal loans are also available. These loans do not require collateral, so the home is not at risk if the borrower defaults. However, personal loans generally have higher interest rates, shorter repayment periods (typically up to 12 years), and maximum loan amounts often capped around $100,000. Fannie Mae and Freddie Mac also support financing for manufactured homes permanently affixed to owned land and titled as real estate, offering terms similar to traditional housing.
Applying for Park Home Finance
Applying for park home financing involves specific requirements to assess a borrower’s ability to repay. Prospective buyers should prepare financial documentation and understand lender criteria.
Lenders typically examine several key eligibility factors. A credit score is a primary consideration, with most lenders seeking a minimum of 580-620; higher scores unlock more favorable terms. Income stability is important, as lenders require proof of consistent earnings. The debt-to-income (DTI) ratio, comparing monthly debt payments to gross monthly income, is another important metric, with 43% or lower generally preferred.
When applying, a comprehensive set of documents is usually required:
Proof of identity, such as a government-issued photo ID and Social Security number.
Income verification, typically recent pay stubs, W-2 forms, or tax returns from the past one to two years.
Bank statements, usually for the last two or three months, to verify savings and regular income.
Details about the park home itself, including the purchase agreement, year, make, and model.
If in a community, verification of park approval and lot rent amount.
Evidence of a down payment, if required, in the form of bank statements or a gift letter.
Important Factors When Financing a Park Home
Financing a park home involves unique considerations beyond the loan itself, impacting the overall financial commitment and ownership experience. Understanding these factors helps prospective buyers make informed decisions.
A primary ongoing cost is site fees, also known as pitch fees. These are monthly payments to the park owner for leased land use, community amenities, and utilities. Site fees vary significantly by location, facilities, and services, and are a consistent budget expense.
Park home depreciation is another important financial aspect. Unlike traditional homes that often appreciate, park homes, especially on leased land, can depreciate like vehicles. Initial depreciation can be substantial, with some models losing 10-20% of their value in the first year. However, consistent maintenance, desirable park location, and market demand can influence depreciation rates, potentially leading to slower declines or even appreciation.
The resale market for park homes differs from conventional real estate. Homes on owned land, with modern updates and diligent maintenance, tend to have stronger resale potential. Park community desirability, amenities, and local housing market conditions significantly determine resale value.
Insurance requirements are a necessary consideration. Lenders typically mandate specific coverage, similar to RV policies, protecting against damage and liability. Park rules and regulations are an important element of ownership. These rules, covering noise, pet policies, parking, and exterior modifications, maintain community standards and must be adhered to by residents.