Have you decided to take the plunge and purchase our new mobile home within the greater Sarasota Florida area?
If so, then great!
About 7% of the American population has acquired this type of housing since one of the great advantages when acquiring a mobile home, is cost reduction (you can save up to 40% of a normal home). Of course, the price depends on the size, if it is: single, double-wide, or triple-wide, and what you can afford to pay.
Before you move any further ahead we, at The Mobile Home Dealer, would suggest you are knowledgeable about how the mobile home that you are planning on purchasing will be paid for.
Sounds silly, we know, but many times Sarasota Florida mobile home Buyers are not aware of the ways mobile homes on leased land can be purchased.
Mobile homes that are located within mobile home parks in and around the Sarasota Florida area are viewed as and taxed as personal property and not real property. What that means is that the mobile home you may be looking at could very well follow the same purchase process of that as a vehicle and not a traditional stick-and-brick home.
In Florida, since the mobile home is on leased land and viewed as personal property then many traditional financing options will not be available to the Buyer.
The reason why is that many traditional lenders will only lend on a mobile home in the Sarasota Florida area if the land is included in the purchase, if not then more than likely they will not approve the loan.
Lenders usually want to see the land included in the purchase price and not on leased land because, whether accurate or not, they tend to believe that if you default on the loan then you could trailer up your home and hit the road leaving the lender with no way to obtain anything back from the money they lent you on the mobile home.
To further complicate this belief, in Florida, mobile homes need to be 20 years old or newer to legally obtain a transportation permit. This means that if the home you are buying is older than 20 years old it can not be legally moved from where it is currently sitting making the concerns the lender has that much more obsolete.
Regardless of these facts, nearly all traditional lenders will not lend on a mobile home when it is located on leased land.
Currently, there are a handful of larger third-party lenders that will lend on a mobile home when it is located in a mobile home park on leased land. These lenders are referred to as third-party lenders.
Third-party lenders have different credit score requirements, down payments, and loan terms than traditional loans do and vary quite a bit from each third-party lender.
Another way to look at getting a mobile home on leased land financed is through seller financing. This is the method used when the Seller of the mobile home acts as the bank and loans the amount owed on the home to the Buyer themselves. When considering this option always look to make sure you understand the full loan limits that the Seller is willing to lay out so that there is no confusion as to what is owed to who and when the payments are due.
Of course, seller financing has its advantages and disadvantages both the seller and the buyer must understand.
The pros and cons of seller financing that both the seller and the buyer need to understand:
Pros for Buyers
- Faster closing. No processing and waiting for the bank’s loan officer.
- Flexible downpayment. No government or bank-required minimums.
- Alternative for buyers who can’t get bank financing. A better option for buyers who can’t secure a mortgage.
Cons for Buyers
- Higher interest than the bank. Depending on how you negotiate with the seller, the interest can be higher than the bank.
- Due-on-sale clause. If the mobile home is mortgaged, the bank of the lender can demand immediate payment from the owner/seller. To avoid this problem, make sure that the mobile home is not a mortgage and that the seller doesn’t owe anything from the lender involving the mobile home. Also, make sure that the mobile home is not used as collateral.
- Balloon payments: With many owner-financing arrangements, a large balloon payment becomes due after five or 10 years. If you can’t secure financing by then, you could lose all the money you’ve paid so far—plus the house.
Pros for the Sellers
- Can sell “as-is”. The seller can sell the mobile home right away without spending on repairs.
- Good investment. Potential to earn better rates than investing your money somewhere else.
- Lump-sum option: The promissory note can be sold to an investor, providing a lump-sum payment right away.
- Retain title: If the buyer defaults, then you keep the down payment, any money that was paid—and the house.
- Sell faster: Potential to sell and close faster since buyers avoid the mortgage process.
Cons for the Seller
- Dodd-Frank Act: Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, new rules were applied to owner financing. Balloon payments may not be an option, and you might need to involve a mortgage loan originator, depending on the number of properties that the seller finances under owner-financing deals each year.
- Buyer Default: The buyer could stop making payments at any time. If this happens and they don’t just walk away, then you could end up going through the foreclosure process.
- Repair cost: If you do take back the property (for whatever reason), then you might end up having to pay for repairs and maintenance, depending on how well the buyer took care of the property.
Seller financing has been around for years, and we do not see it going away anytime soon as it is usually the only surefire way to obtain financing for a mobile home on leased land.
When looking at buying a mobile home on leased land in the greater Sarasota Florida area cash purchases are the most common method of payment but if you are in the market for financing be sure to understand exactly what options there are and how they can be utilized.
This is Mark Kaiser with The Mobile Home Dealer and we help mobile home Buyers and Sellers get to a better place in life.