Buying a Mobile Home With a Personal Loan: Pros & Cons to Consider

It’s estimated that roughly 17 million Americans live in mobile homes (also called manufactured homes). These are properties built in a factory and transported to a site. 

Newer mobile homes are different from the ones built before 1976.

Today, they’re available in different sizes (single-wide and double-wide). Plus, you can customize the interior and layout.

Mobile homes are also cheaper to build compared to site-built homes.

Yet, financing a mobile home has its challenges.

In most cases, you’ll need a loan. But, getting a traditional mortgage might be off the table. 

Lenders categorize a large percentage of mobile homes as personal property -- not real estate.

So if you need to finance a mobile home, you’ll have to get a mortgage that’s specific to mobile homes or use a personal loan.

Personal Loans vs. Mortgages for Mobile Homes

Although mobile homes tend to be cheaper than site-built homes, these properties can still cost upwards of $100,000 (or more).

This amount exceeds what some buyers have in the bank, so buying the property often requires getting a loan.

A traditional mortgage doesn’t usually work for a mobile home, though.

To qualify for a home loan:

• the property must be permanently fixed to the land, and
• you must own the land under the property. 

Even though many mobile homes never move once on-site, these properties are considered “movable” because they’re built on a chassis and don’t have a permanent foundation, crawlspace, or basement. 

Sometimes, a mobile home buyer places the property on a rented lot. This scenario also disqualifies a mobile home for a traditional mortgage loan.

The good news:

You have options.

Chattel mortgage

You can get a chattel mortgage to buy a mobile home, which are loans commonly used to finance movable personal property. 

These types of loans can finance other types of personal property, too, such as boats, airplanes, and farm equipment. Different lenders offer these loans, and once you’re approved, the mobile home acts as collateral for the loan.

Personal loan

A chattel mortgage isn’t the only option, though.

It’s also possible to finance a mobile home using a personal loan. 

Banks, credit unions, and online lenders offer personal loans.

Yet, some people only consider a personal loan for debt consolidation, home improvements, student loans, or even a vacation. But these loans are useful for just about any purpose, including buying a mobile home.

Pros

But while you can use a personal loan for a mobile home, should you? 

Benefits of using a personal loan include:

1. Get a personal loan up to $100,000

Some people don’t consider a personal loan for a mobile home because they assume the home’s cost will exceed a bank’s personal loan limit. 

This is a genuine concern, however, personal loan limits vary from bank to bank.

While some banks cap their personal loans at $10,000, $25,000, or $50,000, other lenders allow larger amounts—up to $100,000.

So it’s possible to use a personal loan for a mobile home purchase.

2. Property doesn't have to act as collateral

Personal loans are also attractive because they’re often unsecured, meaning you’re not required to provide collateral. 

This is different from a traditional mortgage and a chattel mortgage.

In both cases, the property secures the loan.

If you default on either type of loan, the lender has the right to foreclose or repossess your property.

3. Often cheaper than a mortgage

Keep in mind, too, that the upfront cost of getting a personal loan is often cheaper than getting a mortgage. 

Personal loans can have loan origination fees, but there’s no home appraisal or home inspection, and you don’t pay other third-party fees.

These include attorney fees, title search fees, and upfront mortgage insurance premiums.

4. Get funds faster

Another benefit of using a personal loan is that you’re able to access funds quicker.

Getting a traditional mortgage involves a lot of layers, as the loan must go through an extensive underwriting process.

For this reason, it can take 30 to 45 days (on average) to close on a mortgage loan. 

The process of getting a personal loan is quicker. It’s not unusual to get funds within a week of submitting your application.

Cons

Even though using a personal loan to buy a mobile home has its benefits, it also has its risks.

1. Higher interest rates

Because personal loans are often unsecured, they also have higher interest rates compared to a traditional mortgage and a chattel mortgage. 

A higher interest rate can result in a higher monthly payment, plus you’ll pay more in interest over the life of the loan.

2. Shorter loan terms

Another thing to keep in mind is that personal loans have shorter loan terms compared to a traditional mortgage. 

Whereas many homebuyers pay off their home loan over 30 years, personal loan terms are usually less than five years.

Some lenders allow a longer term. But even in this case, you’re often expected to pay off the balance within 10 to 20 years.

A shorter loan term coupled with a higher interest rate can result in paying significantly more on a monthly basis.

Factors to Consider 

Property vs. land

If you’re thinking about using a personal loan to buy a mobile home, understand that some lenders will only provide funds to purchase the actual property—and not the land. 

The ability to use funds to purchase land depends on the lender.

Some lenders might allow you to use personal loan funds for both the property and land. But if you don’t own land, other lenders might require a separate land loan.

Other costs

Be mindful of other costs associated with buying a mobile home. This includes the cost of moving the mobile home to the site, and preparing the land for the home. 

Most mobile home dealers include the cost of transport and set up in the price of the property, but you should confirm this.

Chances of approval

Understand, too, that applying for a personal loan to buy a mobile home doesn’t guarantee approval. 

Because mobile homes have higher interest rates and shorter terms, the monthly payment for a mobile home costing $100,000 might be considerably more than the monthly payment on real estate costing $100,000. 

Although personal loans don’t typically require down payments, you might have to pay money out-of-pocket.

For example, you might need $100,000 for a mobile home purchase, yet the lender only approves a loan of $85,000.

When Does It Make Sense?

It makes sense to use a personal loan for a mobile home when the property won’t have a permanent foundation, basement, or crawlspace.

It also makes sense if you prefer an unsecured loan for the home. 

However, getting an unsecured personal loan only makes sense if you have good credit.

This way, you’re able to qualify for the lowest rate. 

You can afford the higher monthly payment

Using a personal loan also makes sense when you can afford a mobile home’s higher monthly payment.

Although you’ll pay more on a monthly basis, the upside is that you’ll own your property outright sooner.

To get approved for a personal loan, you’ll need to complete a loan application and provide supporting documentation. This includes your recent paycheck stub, W-2s, tax returns, and the lender will likely verify your employment. 

Check your credit history and credit score before getting a loan. Paying your bills on time, paying off other debts, and removing errors from your credit report can raise your score and help you qualify for a personal loan.

It’s also wise to get multiple loan quotes from different lenders. You can compare rates and terms to ensure a good deal.

Is a Personal Loan the Only Option for a Mobile Home?

A personal loan and a chattel mortgage aren’t the only options when buying a mobile home. 

It’s possible to use a traditional home loan such as a conventional loan, an FHA loan, a VA loan, and a USDA loan.

However:

Before doing so, the mobile home must classify as real estate property. 

For this to happen, you must own the land under the property, and you must remove the wheels from the property. It must also sit on a permanent foundation like a site-built home. 

Even if the property meets the qualifications for a traditional mortgage, some programs limit the mortgage amount for a mobile home, and you might have to make a down payment.

The Takeaway

Mobile homes or manufactured homes provide an affordable home solution, often costing less than a site-built home.

But since many of these properties aren’t considered real estate, financing can be tricky.

Among the options available, a personal loan can provide fast funding without collateral.

Just know that these loans involve higher rates and a shorter loan term.