Mobile homes have been classified as real estate. Hence, one who wants to buy a mobile home may seek mortgage loan from companies that give home loans. But here, one must be aware that the conditions for these loans differ from those that are normally applicable to loans for immovable homes.
To get security and insurance over the property, the financial institution which provides loans require the mobile homes to be fixed on the concrete floor by removing axles, wheels, hitches which are primary axes of the mobile homes. This is needed for the financial institution to secure them by means of property being fixed to one place not moving around.
Another difference with mobile home loans is that they can be separated based on exactly what is being financed. Mobile homes can be purchased prior to construction and the loan would cover those costs. Like any other construction loan, the lender covers the labor and the cost of the materials used in construction. This does not include any post construction expenses such as transportation costs to move the home to its final site, nor does it cover the taxes that go along with the move. This type of loan typically is purchased by individuals who currently live in a mobile home community or other area that is already prepared to receive the new mobile home. Another type of mobile home loan is one that combines the costs of purchasing the home plus the land on which it will reside. This type of loan is closer to a typical real estate transaction.
Unfortunately, the very nature of being mobile makes mobile home loans a bit of a risk for lenders. Banks like to know that the property they are funding will stay where expected, and mobile homes have the ability to move anytime. This uncertainty has lead to many lenders to no longer carry mobile home loans which are not inclusive of the land on which the home will sit.
If the mobile home has been fixed to the ground, it is far simpler to avail a loan for it. The quantum of loan happens to be more in this case as it is inclusive of land cost too. Here too, the loans do not take care of taxes that are levied on the land.
HUD code of construction and credit rating of the borrower are the two important check points while sanctioning the mobile home loans. If the mobile homes does not qualify and meet HUD code of construction, loans are not given. If the credit rating of a borrower is very low, then also loans are not sanctioned by financial institutions.
Mortgages on mobile homes typically cover between 75% and 90% of the final construction costs. The duration of such loans usually run more than 10 years, with various time limits available.
Graham McKenzie is the content coordinator for a leading South African leading Home loans and Bond Origination portal which provides access to ABSA Home loans.