Read Time: ~ 6 minutes
Key Takeaways
- Financing for land-lease homes is available, but doesn’t always look like a traditional mortgage.
- Look for a lender who works land-lease homes already to simplify the process.
- There’s several types of financing for land-leased homes, but not all types of loans will apply.
- Hometown America can assist with finding the right lender for you.
- Ask your Hometown America for help with your overall cost estimate. You should know the big picture for your monthly housing budget.
- There’s several types of loans you can get with a land-leased home, but the most common tends to be a personal property loan.
- Loans for land-leased properties don’t take as long to process, so once you do your due diligence, you can get through buying quickly.
- There can be cost advantages to owning a home and not the land it’s on.
- When you buy into a land-leased community, you also get access to amenities that wouldn’t with a traditional home purchase.
- Getting a long-term land lease could help getting financing, as it mitigates risk for the lender.
Buying a home is exciting, and sometimes, a little overwhelming. We want to make this process as easy as possible. So, let’s dive into a topic we get a lot of questions about: financing a land-lease home. There’s so many benefits to owning a home in a land-lease community, including generally more affordable loans. Hometown America can help you find a lender and assist with finding land lease home financing for you. Buying a home on leased land doesn’t have to be intimidating. Let’s go through some of the basics on financing.
How Does the Land-Lease Model Change Financing Options?
Financing options for a land-lease vary, but aren’t like a traditional home loan. They often use what is referred to as a personal property home loan. That means you’re borrowing money to buy a home, while leasing the land. Not every bank offers this type of financing, so it’s a good idea to start researching those options ahead of time.
What is the Cost Advantage of Not Financing the Land?
Personal property loans tend to have lower deposits, as well as a lower overall amount borrowed. Interest rates might be slightly higher without land collateral, but it generally means lower costs for the buyer. It also usually means lower property taxes for the owner, because they are just paying for the dwelling and not the land.
Why Does Your Lease Agreement Matter to Lenders?
Because lenders don’t have land as the primary collateral, it’s important to them the lease’s terms include their ability to seize the property in the case of a loan default. The owner of the land will be involved in the agreement made with the lender.
What Are the Financing Options for Land Lease Homes?
There’s several types of financing available. Here’s some of the options you may come across when looking for a loan:
Construction Loan
A short-term loan that provides funds to the home manufacturer, as phases of the construction are completed. The loan is paid off once the home is built using the proceeds from a permanent mortgage.
FHA Loans
This kind of loan often comes with lower costs for the borrower. While there are certain specifications that need to be met to apply, the FHA guarantees the loan in case the borrower stops making payments, so that tends to mean lower down payments and interest rates.
Home-Only Financing
This includes personal property loans and chattel loans (a personal loan for moveable assets). They tend to get approved quickly, but may require finding the right lender to obtain one, as the home, not the land, is the only collateral.
Land/Home Financing
Buyers place a manufactured home on an approved foundation on their own land. In this case, the home is considered real estate and is taxed accordingly.
Land-in-Lieu Financing
In this case, a home is placed on land the buyer owns and uses the land as collateral. It often makes upfront costs lower, as the equity in the land is used to meet down payment requirements.
Traditional Mortgage
While they can be harder to get, a land lease mortgage is possible. Generally, lenders will require the land lease to extend beyond the maturity date of the mortgage. Without the collateral of the land, lenders put other safeguards in place for the loan.
Personal Property Loan
This type of financing is only for the home you’re buying and not the land it’s on. Personal property loans for manufactured homes tend to have faster closings and lower closing costs. Both chattel loans and personal property loans are treated similarly to an auto loan, where the property serves as the collateral itself.
Traditional vs. Personal Property Loan
| Traditional | Personal Property | |
| Collateral | Lender can foreclose on both home and land | The collateral is the physical home itself, so it may require longer land lease terms |
| Interest Rates & Loan Terms | Usually lower interest rates, larger loans and longer repayment periods | Higher interest rates and shorter repayment terms |
| Down Payments | Typically 3% to 5%, generally requires Private Mortgage Insurance | Can be about 5% to 10%, though it does vary |
| Closing Costs | Can be significant | Closings tend to cost less |
Personal Property Loans: What You Need to Know
One of the most common options for financing a manufactured land-leased home is a personal property loan. This may have some benefits to homebuyers, especially if you’re having trouble with titling a manufactured home as “real property.” Without land included, homes aren’t always defined as “real estate.” The good news is that a personal property loan may be able to solve that issue for you.
Interest Rates: What to Expect
Interest rates do tend to be higher than a traditional mortgage, but they do tend to have shorter processing time. Lenders may also be willing to loan to people with lower credit scores, which can be a good tradeoff. Usually, closing costs do tend to be lower for this type of financing, which can be a financial boon.
Lower Deposits for Accessible Home Ownership
When you’re looking for a lender, it can be helpful to work with an organization that’s experienced in lending for manufactured homes. They often will have low interest rate opportunities and lower deposits upfront. This can also be a nice perk of an FHA loan.
Finding a Lender Who Works with Specialized Housing Loans
Consult with your qualified manufactured home sales consultant to ensure you are working with a lender who specializes in personal property home lending. Not all banks finance homes exclusively without land. It’s best to check with your sales consultant to ensure you are working with a qualified lender. We’re happy to help with the process.
Common Misconceptions of Buying a Land-Leased Home
Owning a land-leased home is becoming more common, but it doesn’t mean that everything about it has become more familiar to buyers. There’s some misunderstandings about the fundamentals of buying a land-leased home. Let’s debunk some of these myths.
Not Owning the Land Means I Can’t Get a Real Loan
It is possible to get a real loan, even if you’re not purchasing the land. Many lenders are familiar with the loan process for land-leases. While you won’t be able to leverage the land as collateral, there’s other types of financing that will work. Your property doesn’t need to be classified as real estate in order to qualify for financing. Not owning the land can save you a lot of money with the purchase of your home.
Financing a Land-Leased Home is Difficult and Risky
Risks in financing a land-leased home can be mitigated with long land-lease terms. Focusing on lenders who work with land-leases, also helps improve your chances of getting the loan. It doesn’t have to be risky if you work with the right lender. Hometown America is also happy to help you find the right lender for a land-leased home.
What Our Sales Reps Hear the Most
Our team members at Hometown America have the knowledge and experience to guide you through the home buying process. We field all kinds of questions, so don’t hesitate to ask yours.
We are often asked: “Can leasing the land make buying a home more affordable?”
Because you are purchasing the home without purchasing the land beneath it, a land-lease arrangement may lower the upfront purchase price and reduce the total amount you need to finance. This can provide a more accessible path to homeownership, along with the lifestyle benefits of living in a professionally managed community.
It is important to consider the total cost of homeownership, not simply the home’s purchase price. Our sales representatives encourage buyers to review their estimated down payment, monthly loan payment, site rent, insurance, taxes, utilities, and other recurring expenses together.
The big question our sales representatives help buyers answer is not simply, “Can I afford the home?” It is: “Can I comfortably manage the complete monthly cost of owning my home while leasing the land?”
Before making a decision, ask your Hometown America sales representative for information that clearly outlines:
- The estimated cash needed upfront
- The estimated monthly home-loan payment
- The current monthly site rent
- The amenities or services included in the site rent
- Applicable taxes, insurance, utilities, and other expected expenses
Looking at these costs together can give you a clearer understanding of your monthly housing budget and help you decide whether land-lease homeownership is the right fit for you.
How Does Hometown America Simplify Land Lease Financing
Hometown America is well versed in the process of obtaining financing for manufactured homes with land-leases. We want to help you get the right loan and get your home buying process rolling as soon as possible. Our team would be happy to walk you through the process and how we can assist you as you embark on your home buying journey.
Here’s how the process might look for you:
Unlike a conventional mortgage, a manufactured home loan requires less paperwork and processing time due to the fact that you are purchasing the home, not the home and the land. Eliminating the land not only saves time, but it greatly reduces costs associated with lending.
Step 1: Find a Qualified Lender
Consult with your qualified manufactured home sales consultant to ensure you are working with a lender who specializes in personal property, home lending. Check with your sales consultant to ensure you are working with a qualified lender.
Step 2: Estimate Your Loan Payment Amount
Have your sales consultant help you estimate your loan payment in advance of completing your loan application. This is a rough estimate and should not be considered precise or a guarantee of loan approval. Based upon a few general credit questions, your sales consultant should be able to provide you with a loan payment range. This can help you determine the amount of down-payment you are comfortable putting down. Depending on your situation, the lender may require more than that amount.
Step 3: Complete and Submit Your Loan Application
Complete the loan application in full and submit it to the qualified lender of your choice. Your sales consultant can assist you in providing the lending application as well as submitting it on your behalf. The lender will require you to provide proof of financial statements made on the loan application, so the more accurate your answers are, the better.
Step 4: Prepare to Close On Your Land-Lease Home
In approximately 24 to 48 hours, your complete loan application should be processed by the lender and your loan approval will be determined. Once approved you simply need to acquire the necessary financial documentation for the lender prior to closing. Your approved down-payment amount as per the lender’s approval can be paid immediately or at closing, whichever you prefer. Note: Hometown America may require a contract deposit at time of contract signing and this would go towards your lender approved down-payment for the loan.
We Have Experience with Lender-Friendly Banks
Hometown America would love to assist in your land-leased home acquisition. We work with a wide variety of lenders; we recommend reaching out to your local sales team member who can work to find a lender that fits your needs.
Here are some examples of national lenders we have worked with previously:
- 21st Mortgage
- South State Bank
- Credit Human
We can help get you on the path to ownership and we’d love to have you join one of our communities.
Ready to Look Into Financing? Let Us Help You
Financing a leased land home doesn’t have to be difficult. We’re happy to help you navigate the process and connect you with lenders. There are plenty of opportunities to find the right fit for you. Land-lease homes offer you a flexibility you don’t normally have with traditional home purchases. Hometown America also offers lots of community benefits you won’t find anywhere else.
Contact our team to learn more about how you can finance a land lease in one of our beautiful manufactured home communities.
Financing programs, loan availability, interest rates, loan terms, site rent, taxes, fees, amenities, and services vary by buyer, lender, home, and community. This information is provided for general educational purposes and does not constitute a loan offer, financial advice, or a guarantee of financing.
