Mobile Home Owner Financing: Options & How It Works

Many potential homeowners turn to mobile or manufactured homes as an affordable option for purchase. The relatively low purchase prices make mobile homes an affordable option. Although financing is available from banks and finance companies for mobile homes, many people who have less than perfect credit still have trouble obtaining a loan through normal circumstances, and will look for a seller-financed loan for their mobile home.

Personal or Real Property

How a seller financed mobile home purchase is treated depends on certain aspects of the sale, and how the property is held. If the person purchasing the mobile home is not buying the land on which the home is located, but will instead be renting it, the mobile home is treated as personal property, similar to a car or boat. If the home purchaser will be buying the land as well, then often the mobile home and property are treated as real property, just like a stationary house.

Personal Property Transfer and Promissory Note

A seller can sell and finance a mobile home without land by executing a bill of sale. This is much like a bill of sale on a car. It will have the serial number for the mobile home, and may simply state that the seller is transferring the personal property to the buyer. The seller may require the buyers to sign a promissory note by which they promise to pay the loan according to the terms that the seller has outlined. The note will often provide for the mobile home to be pledged as security for the loan, and it will probably specify that if the buyer doesn't pay, the seller can repossess the mobile home.

Rent with Option

With real estate, a rental with an option to buy is often called a contract for deed. This does not apply to a mobile home because there is no deed to the property. A seller financing a mobile home can make the process easier by entering into a simple rental agreement with the buyer that says that a portion of the rent paid to the seller is applied to a purchase if made later. Most of these types of agreements also specify that if the buyer defaults for any reason, the seller can keep all of the money that the buyer has paid as rent, and he does not have to refund any portion or transfer the title.

Other Considerations

Since the mobile home is not real property unless it sits on land owned by the owner of the mobile home, there is no mortgage and deed to record. However, the seller still will want to record her lien unless she is selling on a rental with an option, where she retains ownership. The seller can do this by registering a Universal Commercial Code filing with the state. Seller financed loans are a higher risk than a loan made through a bank, mainly because people seeking seller financing tend to not be as credit worthy. The rates are usually higher on a seller financed loan because of this risk.