Last Updated on January 10, 2022
Hard Money Loans For Mobile Homes
Mobile homes have many of the advantages of regular homes, but at a significantly lower price.
But it can be difficult to find a loan for a mobile home. A mobile home loan is especially difficult to secure because a mobile home can be moved. It is important to note a mobile home is considered personal property, not real estate property, and must be financed using a personal loan or a chattel loan.
A chattel loan is used for movable property, and the process closes faster than a conventional mortgage loan. Repayment periods are usually from 15 to 20 years. Monthly payments often exceed payments on a normal home. The personal loan can also be used to cover the expenses of a mobile home purchase, but the personal loan has higher interest rates than traditional mortgage loans. Personal property loans need decent credit and interest rates will usually be higher than a mortgage,
However, a hard money loan can also be used. The hard money loan is particularly advantageous for a homebuyer with bad credit. Banks do not offer hard money loans — they are usually issued by individuals or companies. The hard money loan does not take into account a buyer’s previous financial history, mainly only the asset value of the home.
First, what qualifies as a mobile home?
A mobile home is also known as a “manufactured home” — it is made at a factory and then often wheeled to a destination. The only difference between the terms is when the mobile home is made versus the manufactured home. The mobile home is manufactured before June 15, 1976, while the manufactured home is built after the date, and subject to U.S. Department of Housing and Urban Development’s Home Construction and Safety Standards, according to Casey Bond at US News.
Financing a mobile home will be more difficult, but is still possible. If the home is not on a permanent foundation, it does not qualify as real property and must use a personal or chattel loan.
For the purposes of this article, we will focus on mobile homes built before June 15, 1976, that don’t qualify for FHA loans. However, the FHA insures mobile home loans that are popular with first time home buyers for manufactured homes, and these loans are usually insured against loss if the borrower defaults.
Why invest in a mobile home?
For some investors, mobile homes might be a terrific source of cash flow. Recently, mobile home parks have been a significant form of income to some investors, and individual mobile homes and mobile home parks remain under the radar investments in the current housing markets.
Mobile homes clearly serve residential purposes, and can serve as rental properties. Because mobile homes are considered personal property over real estate, this prevents mobile homes from receiving traditional loans from the bank. However, the land a mobile home sits on also counts as property and is subject to property task.
Real estate investors who want to focus on mobile homes have multiple options. They can put a mobile home on land and rent the whole home to a tenant. They also have the option of owning a mobile home in a mobile home park and charging a tenant rent to the land and the home. Whether the tenant pays rent for the land or lot depends on whether the investor owns the land.
Mobile homes have a benefit of a low cost of entry. Mobile homes can be sold for very cheap prices, and some are willing to sell mobile homes for less than $1,000 to no longer pay lot rent. The low cost helps those starting to invest in real estate.
Mobile homes also give high returns on investment (ROI) due to a low initial investment. They are cheaper to operate and maintain than a building.
But there are downsides to renting mobile homes to invest as well. Mobile homes don’t appreciate in value over time. They depreciate as soon as they are bought, and depreciate more the more they are used. Renting mobile homes gives cash flow, not a return on the original investment.
Mobile homes also can be difficult to maintain to meet Department of Housing and Urban Development (HUD) requirements. Inspections often reveal water damage, mold, and other structural issues that must be dealt with in frequent upkeep. Lot rent is also an expense mobile homes have that traditional homes do not. Because of the often cheaper price of mobile homes compared to traditional homes, they can be difficult to finance.
The risks and benefits of hard money loans
In terms of hard money loans, there is still a process for getting approved. Lenders look at debt to income ratio and loan to value ratio. Hard money loans can be issued with a fast turnaround time, but they have higher interest rates than traditional, personal, and chattel loans. The greater risk associated with the lender leads to this greater interest rates. According to Quicken Loans, hard money loans had an average interest rate of 11.25% in 2020.
They are often considered loans of last resort. They are often used to buy a home fast, when a buyer is facing short-term credit issues, and when a home buyer does not qualify for a bank loan. Hard money is an easily accessible fund with a fast approval period, so they are convenient but expensive. They also have quick repayment periods, usually of less than 12 months.
For mobile home loans, hard money loans have the benefit of quick closing times, flexible deals, and a simpler loan process. Hard money is often used in real estate investing. Many investors will use hard money loans to flip mobile houses in a short period of time.
An investor might use hard money loans to renovate and develop a property, then sell it for a profit. The investor who buys a mobile home with significant upside can make significant profits after repairs, which makes hard money equivalent to cash in the eyes of many investors.
Who does hard money mobile home loans?
Often, private real estate lenders will give hard money mobile home loans in several days, instead of waiting for a bank that can take months to give a loan.
Mobile home loans can have a complicated application process.
But we simplify the hard money lending process, particularly for mobile homes. We offer fix and flip loans and a group of professionals that will help you with your investment, all in the matter of a couple days, especially in Florida.
We have minimal requirements and make loan programs that are asset-based. We focus mainly on the level of risk of a property deal, especially that of a rental property. We will help guide you towards growth in your investment goals. For our Florida rental property loans, we require a minimum credit score of 600, and an interest rate between 9% to 12%. The loan term can be anywhere from 6 months to three years.
To get a clearer picture of your numbers, use our hard money loan calculator to determine the amount that can be loaned. Once we have necessary documentation, we can give you the money and close in three to four days. Both U.S. citizens and foreign nationals can get hard money loans for mobile homes.
What are the elements of a hard money loan?
At Hard Money Lenders IO, our loan calculator takes into account the amount of the home, the down payment, interest rate, and mortgage term. These can all be set to personal circumstances and a personal financial situation.
Set to one or two years, the calculator will give monthly payment amounts, principal, interest, and remaining balance.
Negotiating a hard money loan requires understanding several real estate terms, including the Loan to Value (LTV) ratio. This is the amount of money someone can get from a hard money lender compared to the total value of the property.
Loan to Cost (LTC) ratio stands for the total cost of the project that hard money lenders think about to make a decision on how much money to lend. The After Repair Value (ARV) is the value of the property after renovations have been made, particularly for fix and flip hard money loans.
Our mobile home loans give options and flexibility other lenders do not. Foreign nationals, beginning investors, a bad credit score, and a property being in poor conditions often lead to traditional bank loans giving rejections.
The best option for fix and flip loans is a hard money loan that gives fast closing and flexible terms. Even if we are not the best company for your hard money loan, we have a private lenders directory to help you find the right loan for your location, and hope to provide the best possible resources for financing your mobile home investment.
Adam Smith has spent the last 5 years in the Private Money Lending world helping real estate investors secure financing for their non-owner occupied real estate investments. When he’s not thinking about real estate, Adam is an avid Jazz music fan and fisherman.