If you’re looking into buying a manufactured home, one of the most popular options available for potential homeowners is a chattel loan. Unlike conventional mortgages, chattel loans are secured by the property itself, which can be repossessed if the loan isn’t repaid. For those considering a manufactured home, understanding what credit score you need for chattel loans is a crucial piece of research. Let’s take a closer look.
What are Chattel Loans?
A chattel loan is a special type of financing that’s used to purchase a property, where the property is the security against default, and can be repossessed. If you’re thinking that this sounds a lot like a conventional mortgage where the financing is secured by the home or condo, then you’d be right, up to a point. The difference is in the type of property. A chattel loan is a large loan used to purchase movable property, such as manufactured homes, boats, and even some vehicles, and that property secures the loan, not the land it sits on, like a conventional loan for a piece of real estate.
This is a critical distinction since it affects the terms and conditions of the loan, including interest rates and repayment periods. Chattel loans are typically preferred for manufactured homes that are not permanently affixed to a piece of real estate, which offers the additional benefit of typically being quicker and less complicated to close on, compared to a traditional mortgage.
Chattel Loan Credit Score Basics
When it comes to getting a loan, one of the first questions asked, and often one of the most important is “What are the credit score requirements for getting a chattel loan”. When you’re applying for a loan, one of the first things they’re going to check is your credit score, which is a numerical summation of your overall creditworthiness. It is based on several factors, encapsulates your entire credit history, and gives a potential lender an at-a-glance idea of the likelihood that you’ll pay them on time as agreed.
In most cases, the minimum credit score that a chattel lender will accept, with good financial standing, is 575. With even the most lenient conventional home loans not being available for another 45 points of credit improvement, at around 620, this can present an incredibly attractive potential for those looking to potentially get into a home. Since every lender is different, there may be some that will accept lower scores with more extensive manual underwriting, as well as some that require higher scores.
Final Thoughts
For anyone considering becoming the owner of a manufactured home, getting a clear understanding of the credit score requirements is a crucial part of going through the process as an informed consumer. Even though many chattel home lenders have lower credit score requirements than conventional mortgages, having a better credit score at the time of application can help you secure better terms, rates, and more. If you’re in the market for a manufactured home and are looking for more information about chattel loans for manufactured homes in your state, reach out to CIS Home Loans today to speak with a lending expert.
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Source:
moneytips.com/mortgages/types-of-mortgages/non-conventional-mortgage/chattel-mortgage/