What Is a Chattel Loan?

If you're looking into financing a manufactured home, you've probably come across the term "chattel loan." It might sound unfamiliar, but chattel loans are actually the most common way people finance manufactured homes that sit on leased land. Let's break down what they are, how they work, and what you should know before applying.

What Does "Chattel" Mean?

The word "chattel" simply means personal property. In legal terms, it refers to movable property -- things you own that aren't permanently attached to land. When a manufactured home sits on land you lease rather than own, the home itself is classified as personal property, not real property. That distinction is what determines the type of financing available to you.

A chattel loan is a loan used to purchase personal property. In the manufactured home world, it's the financing tool designed specifically for homes in communities or parks where you lease the lot rather than own the land underneath.

How Is a Chattel Loan Different from a Mortgage?

The biggest difference comes down to what secures the loan. A traditional mortgage is secured by both the home and the land it sits on. A chattel loan is secured only by the home itself, since the borrower doesn't own the land.

Here are the key differences:

• What's financed: A mortgage covers land and home together. A chattel loan covers the home only.
• Property type: Mortgages involve real property (land + structure). Chattel loans involve personal property (the home on leased land).
• Title type: Mortgaged homes have a deed. Chattel-financed homes have a title, similar to other personal property.
• Loan terms: Chattel loans typically run 10 to 25 years, while traditional mortgages often extend to 30 years.
• Closing speed: Chattel loans generally close faster -- often in 25 to 30 days -- because the process is more streamlined without the land component.

Who Is a Chattel Loan For?

Chattel loans are designed for people who want to buy or refinance a manufactured home that sits on leased land. This is extremely common -- millions of manufactured homes across the country are located in communities and parks where homeowners lease their lots.

You might need a chattel loan if you're:

• Purchasing a manufactured home in a park or community where you'll lease the lot
• Refinancing an existing manufactured home to get a better rate, lower your payment, or change your loan terms
• Buying a home that's being resold by the current owner in a manufactured home community

Advantages of Chattel Loans

Chattel loans come with several advantages that make them a practical choice for manufactured home buyers:

• Faster closing times. Without the land appraisal and title search that mortgages require, chattel loans typically close in about 25 to 30 days.
• Lower closing costs. The closing process is simpler, which usually means less out-of-pocket at the closing table.
• Accessible qualification. Many chattel lenders work with a wider range of credit profiles, making homeownership possible for more people.
• Straightforward process. The paperwork and steps involved are generally less complicated than a traditional mortgage.

Things to Keep in Mind

Like any financial product, chattel loans have considerations you should be aware of:

• Interest rates may be higher than traditional mortgages, reflecting the different risk profile of personal property loans.
• Shorter loan terms mean your monthly payment may be higher than a 30-year mortgage, but you'll also pay less interest over the life of the loan.
• Not all lenders offer them. Chattel lending is a specialized field. Working with a broker who focuses on manufactured home financing can help you find the right lender and program.

How the Chattel Loan Process Works

Getting a chattel loan is more straightforward than most people expect. Here's a general overview of how it works:

1. Apply online or by phone. You'll provide basic information about yourself and the home you want to buy or refinance.
2. Soft credit review. A reputable lender or broker will start with a soft credit pull that doesn't affect your credit score.
3. Get matched with a lender. Based on your profile, you'll be matched with a lending program that fits your situation.
4. Provide documentation. You'll gather items like pay stubs, tax returns, and information about the home and community.
5. Close and fund. Once everything checks out, you'll sign your documents and the loan funds.

Is a Chattel Loan Right for You?

If you're buying or refinancing a manufactured home on leased land, a chattel loan is likely your best -- and sometimes only -- financing option. The key is working with a lender or broker who specializes in this type of financing. They'll understand the nuances, have relationships with the right lending partners, and guide you through a process designed specifically for manufactured homes.

At MH Services, chattel lending is all we do. We've been helping families finance manufactured homes since 1994, and we'd be happy to answer any questions you have about the process.