Buying land or a mobile home: title, loans and risks

A manufactured home, which many people call a mobile home or trailer, can be the most affordable way to own a home, especially if you already have or can buy land. But the rules differ from those for a site-built house. This guide is for anyone thinking about buying land, a manufactured home or both: it explains when the home is real estate and when it is personal property, how it is titled, which loans exist and what to check before you sign.

The home must be built on or after this date for an FHA Title II loan

June 15, 1976⁶

The minimum FHA Title II requires

400 square feet⁶

To cancel a non-exempt lot purchase from a developer

7 days¹¹

Maximum term of an FHA Title I loan for the home

20 years and 32 days⁶

Mobile home, manufactured home and land: what we mean

Federal law calls a manufactured home a structure transportable in one or more sections, of a certain minimum size, designed to be used as a dwelling with or without a permanent foundation when connected to utilities.¹ The CFPB explains that these homes are commonly called mobile homes or trailers. They are built in a factory, carried to the site on their own framework and must be built and installed under HUD standards.²

The big difference from a site-built house is legal: a manufactured home can be titled as real estate or as personal property. To be real estate, it generally has to sit on a permanent foundation on land owned by the home’s owner. As personal property, it is generally financed with a personal property loan, called a chattel loan.² That difference decides which loan you can use, what it costs and which protections you get.

Real estate or personal property, side by side

Home and land together

Real estate

• The home sits on a permanent foundation on your land.²
• It can be financed with a mortgage, such as FHA Title II.⁶
• You get the Loan Estimate and mortgage protections.⁴

The home only

Personal property (chattel)

• The loan is secured by the home, not the land.³
• It usually has higher rates and fewer protections.³
• Lower origination costs and a quick closing.²

If you own the land, ask whether the home can be titled as real estate before accepting a chattel loan.²

Why real estate versus personal property matters

According to the CFPB, chattel loans are secured by the home but not the land, and generally have higher interest rates and fewer consumer protections than mortgages. Some people choose them so they do not put their land at risk if they cannot pay. Manufactured homes often come with higher rates and few chances to refinance, and owners who do not own the land are more likely to see their homes lose value and have fewer protections if they fall behind.³

The paperwork changes too. The CFPB notes that only mortgage borrowers get certain RESPA disclosures when applying for and closing a loan.² And for a manufactured home loan not secured by real estate, you do not get a Loan EstimateLoan EstimateThe Loan Estimate is a three-page form you receive from the lender within days of applying for a mortgage. In the same format at every bank, it sums up the terms of the loan being offered: amount, interest rate, whether the payment can change, the estimated monthly payment with taxes and insurance, the itemized closing costs and how much cash you need at closing. Because every lender uses the same form, it lets you compare offers side by side. It commits you to nothing: requesting one is not accepting the loan.See the full definitionClose or Closing Disclosure, but “Truth-in-Lending” disclosures instead.⁴ Those disclosures still show the interest rateinterest rateThe interest rate on a mortgage is what you pay each year to borrow the money, expressed as a percentage of the loan balance. It does not include fees or other charges; that is what the annual percentage rate (APR) is for. On a fixed-rate loan the rate never changes over the life of the loan; on an adjustable-rate loan it can go up or down after an initial period. The rate you are offered depends on your credit score, your down payment, the loan type and the market, and you see it on the first page of the Loan Estimate.See the full definitionClose and costs: compare several offers.

Lenders can also charge slightly more for a manufactured home loan than for a site-built home.⁵ The interest rates guide explains how to compare offers, and the mortgage loan types guide covers the differences between FHA and conventional loans.

How a manufactured home is titled

Each state has its own process for turning a manufactured home from personal property into real estate. As an example, in Florida the owner of a mobile home permanently affixed to land the same person owns, or leases under a recorded lease of 30 years or more, can permanently retire the mobile home title. They record the original title, the land’s legal description and a sworn statement that the home is affixed to the land with the county, then ask the state to retire the title. From then on, the home is conveyed by deed together with the land.⁹

This matters for the loan. For FHA Title II, at closing the titletitleTitle is your legal right to own and possess a property. The deed is the document showing that the seller transferred that right to you, and legal title is the title that can be documented in public records. As part of the purchase, a title search is done to see whether anyone else has a claim against the home; common claims come from a previous owner's unpaid taxes or from contractors who say they were not paid for work on the home. Title insurance protects you if such a claim shows up later.See the full definitionClose must show the home and land classified as real estate, and if there were two titles, state or local requirements for canceling the personal property title must be met.⁶ Fannie Mae also requires the home and land to be legally classified as real property under state law.⁷ The title insurance guide explains how title is checked and what a deeddeedA deed is the legal document the seller uses to transfer ownership of the home to you. The seller signs it at closing, it lists the names of all the buyers and you receive a copy. Afterward, the settlement agent records it with the county records office; that recording puts the public on notice that you are now the owner. There are several types: a warranty deed gives the most promises about the title, and a quitclaim deed promises nothing. Do not confuse it with a deed of trust, which is the mortgage document.See the full definitionClose is.

Loans: FHA Title II, FHA Title I, conventional and chattel

Option	What it finances	Main requirements
FHA Title II	Home and land as real estate	Permanent foundation, at least 400 square feet, HUD label from 1976 on
FHA Title I	The home alone, the lot alone or both	Living in the home; the home can be personal property
Conventional (Fannie Mae)	Home and land as real estate	At least 12 feet wide and 400 square feet, no wheels or axles
Chattel	The home only, as personal property	Varies by lender

For an FHA Title II loan, the home must be designed for one family, have at least 400 square feet and carry the HUD certification label showing it was built on or after June 15, 1976, under federal standards. It must also be classified as real estate, stay on its permanent chassis, have a permanent foundation under HUD’s guide and have come directly from the manufacturer or dealer to the site.⁶

FHA Title I works differently. It finances the purchase or refinance of the home alone, the lot alone where you will place it, or the home and lot together. The home can be treated as personal property when it keeps its vehicle title, or as real estate when that title is canceled. The lender may take the home as personal property collateral and, at the same time, a lienlienA lien is a legal right a creditor holds in your property to make sure you repay a debt. It usually prevents the property from being sold until the debt is paid, and if you do not pay, the creditor may be able to take the property. Your mortgage is a lien on your home: when you pay it off, the lien is released and that shows up in your county's property records. There are other kinds, such as a federal tax lien, which is the government's legal claim against all your property when you do not pay a tax debt.See the full definitionClose on the land. You must own the home and live in it as your principal residence. The maximum term is 20 years and 32 days for the home and 15 years and 32 days for the lot.⁶

On a conventional loan Fannie Mae buys, the loan is secured by the home and your interest in the land, and both must be real estate.⁷ The home must sit on a permanent chassis attached to a permanent foundation, with the HUD data plate and label; with no hitch, wheels or axles; at least 12 feet wide and 400 square feet; and permanently connected to a septic tank or sewer.⁸

If the home goes on a leased lot or in a community

Many manufactured homes sit on leased lots. For a Title I loan in a community of three or more homes owned by the same entity, the lot lease must run three years or longer, be renewable for terms of one year or more and require the owner to give you written notice at least 180 days before the term ends if you must move because the community is closing. If notice is late, the lease renews for another year.⁶

Fannie Mae, by contrast, only accepts a home on leased land if you own the home and it is in a condo or planned development it has approved.⁷ And remember what the CFPB says: owners who do not own the land are more likely to see their homes lose value and have fewer protections if they fall behind.³

If this is you

Your home will go on a leased lot

With an FHA Title I loan, the lot lease must last at least three years and give you 180 days' notice if the community closes.⁶

You want to buy land to build

A construction loan is usually short-term with a higher rate; compare several.¹⁰ The new construction guide covers inspections and warranties.

You are looking for the most affordable option

A HUD-approved housing counselor can compare a chattel loan and a mortgage with you, often for free or at low cost.¹⁵

Buying land: what to check before you sign

If you buy a lot from a developer, the Interstate Land Sales Full Disclosure Act protects you when the sale is not exempt. The developer must give you a printed property report before you sign the contract, and it cannot say it will provide or finish roads, sewers, water, gas, electricity or recreational amenities without putting that in the contract.¹¹ You can cancel the contract until midnight of the seventh day after signing, or longer if your state allows; and if you did not get the report before signing, you have up to two years.¹¹

Buying land and a manufactured home, step by step

1. 1. You check the lot and what the seller promises

   Before signing

   If you are promised roads, water or sewer, they must be in the contract.¹¹

2. 2. You ask for the property report

   Before signing with a developer

   If the sale is not exempt, you have 7 days to cancel; 2 years if you did not get it.¹¹

3. 3. You check the home and its label

   Before making an offer

   For FHA Title II, the HUD label must show June 15, 1976, or later.⁶

4. 4. You decide how it will be titled

   Before applying for the loan

   Real estate with the land, or personal property: that sets the loan.²

5. 5. You compare loans

   With several offers

   Chattel loans usually have higher rates and fewer protections.³

   Try it with your numbersCompare loans

6. 6. You close and record

   Closing day

   With FHA Title II, the home and land must end up as real estate.⁶

If you plan to build on your land, the CFPB explains that a construction loan is usually short-term, with higher rates than a mortgage, and the money is advanced in stages as work progresses. At the end you may pay the balance in a lump sum or perhaps convert it to a mortgage; if it does not convert on its own, you may have to apply for a new loan.¹⁰ If you only want the lot for a manufactured home, FHA Title I has loans to buy the lot.⁶

Colonias and contracts for deed

The word “colonia” has a meaning in federal law. A colonia is a community in Arizona, California, New Mexico or Texas, within 150 miles of the Mexican border, identified by criteria such as lack of potable water, adequate sewage or decent, safe and sanitary housing, that already existed before the law that defined it. Those four states must set aside part of their federal community development funds for water, sewage and housing for colonia residents.¹²

Contracts for deed also come up in land and home purchases. According to the CFPB, the seller keeps legal title until you finish all the payments, and in the meantime you usually carry the repairs, property taxes and improvements. The CFPB found these products often target Hispanic and immigrant communities, among others.¹³ Before signing one, or if you already signed and have doubts, free legal aid can review your case. LSC funds legal aidlegal aidLegal aid is the free civil legal help that nonprofit organizations and their lawyers provide to low-income people in civil, not criminal, matters. In housing, that includes representing families facing eviction or foreclosure, alongside matters such as custody, child support, protection from domestic violence and access to benefits. In the United States, the Legal Services Corporation, created by Congress, funds a nationwide network of these organizations; its finder points you to the one in your area. Each sets its own income limits.See the full definitionClose organizations in every state, and on its site you find the nearest one by address or city.¹⁴ The free legal aid guide explains how to ask for it.

Costly mistakes

• Mistake: Accepting a chattel loan without asking whether the home can be real estate.

  Instead: If you own the land, ask: chattel loans usually have higher rates and fewer protections.³

• Mistake: Placing the home on a leased lot without reading the lot lease.

  Instead: Check the term, renewal and notice if the community closes.⁶

• Mistake: Buying a lot from a developer without the property report.

  Instead: Ask for it before signing; if you did not get it, you can cancel within two years.¹¹

• Mistake: Trusting promises of roads, water or sewer that are not in the contract.

  Instead: Insist that they be written into the contract.¹¹

• Mistake: Buying an older home without checking the HUD label.

  Instead: For FHA Title II, it must be from June 15, 1976, or later.⁶

• Mistake: Signing a contract for deed without understanding who holds title.

  Instead: The seller keeps title until the last payment; free legal aid can review it with you first.¹³

What to do this week

1. Find out whether the home you are interested in is titled as real estate or personal property.²
2. Check the year of manufacture and the HUD certification label.⁶
3. If the home will go on a leased lot, ask for the lot lease and check the term, renewal and notice.⁶
4. If you are buying a lot from a developer, ask for the property report before signing.¹¹
5. Get offers from several lenders, mortgage and chattel, and compare them in the compare loans tool.³
6. If you want help, a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose gives independent advice, often free or at low cost.¹⁵