What Is a Chattel Loan? Financing a Manufactured Home Without Land

A chattel loan is the most common way people finance a manufactured home. "Chattel" is an old legal word for personal property, meaning something you own that isn't land. With a chattel loan, the home is the collateral and the land isn't part of the deal. That's why it's the go-to loan when your home is going into a manufactured home community, on a leased lot or on land owned by a family member.

Here's how chattel loans work, what to expect on cost, and how to tell whether one fits your situation. Vision Homes, a manufactured and modular home dealer in Fayetteville, NC, put this guide together for local buyers.

Rates, terms and down payments

Because the loan is secured only by the home, lenders take on a bit more risk than with a mortgage on land and a home together. That usually shows up as:

• A higher interest rate than a traditional mortgage. Your rate depends on your credit, down payment and the lender.
• Shorter terms, commonly 15 to 25 years instead of 30.
• A down payment that often starts around 5% and can be higher with lower credit.

The trade-off is that a chattel loan is simpler. There's no land appraisal or land title work, and you don't need to own land at all.

Chattel loan vs. mortgage at a glance

Why chattel loans often close faster

A mortgage on land and a home needs land appraisals, title searches, surveys and more paperwork. A chattel loan skips most of that. With fewer steps, it often closes sooner and costs less to close, which helps when you're ready to move.

What happens if you can't pay

Nobody plans on missing payments, but it's worth knowing the difference. With a mortgage, a lender that isn't paid goes through foreclosure on the land and home. With a chattel loan, the lender's claim is to the home, much like an auto loan. If you own the land separately, the land isn't collateral for a chattel loan. If you're ever struggling, call your lender early. Most would rather work out a plan.

What lenders look at

Chattel lenders look at the same things most lenders do:

• Credit history and score. Some manufactured home lenders work with a wider range of credit than banks do.
• Debt-to-income ratio. Your monthly debts compared with your income.
• Steady income. Usually about two years of documented income.
• Down payment. More down can mean a lower rate and easier approval.
• Where the home will go. Lenders will ask about the lot, lease or land agreement.

Read more about what lenders look for →

Chattel loan vs. mortgage: the core difference

It comes down to land. If the land is part of the loan, you're probably looking at a mortgage, which in North Carolina generally means the home is permanently attached and treated as real property along with the land. If the land isn't part of it, you're looking at a chattel loan.

Some buyers start with a chattel loan and later refinance into a mortgage after they buy land and set the home on a permanent foundation. Ask your lender whether that's an option for you.

Is a chattel loan right for you?

A chattel loan is usually a good fit if:

• Your home will go in a community or on a leased lot
• You'll place the home on a family member's land
• You want a simpler, quicker closing
• You don't want to tie your land into the loan

A land and home loan may be better if you're buying land with the home and want the lowest rate and longest term. Learn about land and home loans →

Common questions

Can I get a chattel loan for a used home? Often, yes. Lenders may have rules about the home's age and condition.

Can I pay a chattel loan off early? Many loans allow it, but check your loan terms for prepayment rules.

Do I need insurance? Yes. Lenders require homeowners insurance on the home for the life of the loan.

Who offers chattel loans? Lenders that specialize in manufactured homes, including several we work with. See our financing options →

Have questions about your situation? Call Vision Homes at (910) 323-8222 or get pre-approved online.