Financing Manufactured Homes in Texas: Understanding Mortgages vs. Chattel Loans
Manufactured homes offer one of the most accessible paths to homeownership for Texans. From retirees to working families looking for affordable options, factory-built homes represent a growing share of the housing market across the state. But when it comes to financing these homes, buyers often face an unfamiliar set of rules—especially in land-lease communities.
While many buyers expect to obtain a traditional mortgage, the reality is more nuanced. Depending on how the home is classified—personal property or real estate—different lending options apply. This article explores the financing landscape for manufactured homes in Texas, with a focus on the differences between chattel loans and real property mortgages, and how these distinctions affect homebuyers.
At Mobile Buy Buy, we focus on Manufactured Homes of all shapes, sizes, ages, and conditions. Obtaining a loan for a home can seem overwhelming. This article is meant to provide basic information.
What Makes Manufactured Home Financing Unique?
Unlike site-built homes, manufactured homes are constructed in a factory, transported to their final destination, and often installed on leased land. This creates a unique legal and financial framework.
The key distinction lies in how the home is titled:
- Real Property: The home is considered part of the land, often permanently affixed to a foundation. This allows the buyer to obtain a traditional mortgage.
- Personal Property: The home is treated like a movable object (similar to a vehicle), titled through the Texas Department of Housing and Community Affairs (TDHCA). This structure requires a chattel loan.
The title status of the home is not just a bureaucratic detail—it dictates what kind of financing is available, how taxes are assessed, and how the home is insured and appraised.
Chattel Loans: The Common Option for Land-Lease Communities
A chattel loan is a loan for personal property, not tied to land. This is the most common financing solution for manufactured homes placed in parks or communities where the homeowner rents the lot but owns the home. Because the land isn’t part of the transaction, the home is classified as personal property and is ineligible for a traditional mortgage.
Chattel loans tend to have:
- Higher interest rates than mortgages (typically 2–4% higher)
- Shorter terms, often 10–25 years
- Fewer closing costs and faster processing
- No requirement for land appraisal or deed transfer
While they are efficient and accessible, they come with drawbacks. Buyers are more exposed to lot rent increases, may face higher monthly payments, and have limited access to refinance options down the road.
When Is a Mortgage Available for a Manufactured Home?
A traditional mortgage becomes an option only when the manufactured home is titled as real property. This generally occurs when:
- The home is permanently affixed to a foundation that meets state code
- The buyer owns the land or purchases it as part of the transaction
- The home has a recorded Statement of Ownership classifying it as real property
- The title is converted and recorded at the county level
When these conditions are met, the home and land can be financed together using a conventional, FHA, VA, or USDA mortgage, depending on buyer eligibility.
This opens the door to:
- 30-year fixed rates, typically lower than chattel loans
- Property tax-based homestead exemptions
- Mortgage interest deductions if itemizing taxes
- Standard homeowners insurance (HO-3 or HO-7) coverage
Mortgaging a manufactured home under real property status allows the owner to access the same benefits—and financial protections—as those purchasing site-built homes.
FHA and Conventional Mortgages for Manufactured Homes
Among the most accessible mortgage products for manufactured homes are FHA loans, which are backed by the Federal Housing Administration. FHA rules allow financing for manufactured homes if the unit is:
- Built after June 15, 1976 (with HUD tags intact)
- Permanently installed on a compliant foundation
- Titled and taxed as real property
- Not located in a flood zone (or includes acceptable flood insurance)
FHA loans require as little as 3.5% down and allow for more flexible credit scores than conventional loans. They are popular with first-time buyers, especially in rural and suburban areas of Texas where manufactured homes are common.
Conventional loans, offered by private lenders and backed by Fannie Mae or Freddie Mac, may also finance manufactured homes under real property status, but the guidelines are often stricter. Lenders typically require:
- Higher credit scores (often 660+)
- A minimum down payment of 5–10%
- Land ownership and a permanent foundation
- Full appraisal using comparable sales
Conventional loans can be used for both primary residences and investment properties, making them attractive to buyers who plan to hold the property long-term.
Real Property Status and Long-Term Benefits
Electing real property status for a manufactured home provides a number of advantages, especially over time:
- Increased Resale Value: Real property tends to appreciate more reliably than personal property, particularly when land is included.
- Property Tax Exemptions: In Texas, real estate owners can apply for the homestead exemption, which removes up to $40,000 from assessed value for tax purposes.
- Financing Flexibility: Homes classified as real property are eligible for refinancing, home equity loans, and reverse mortgages.
- Legal Protections: Foreclosure and title rights for real property owners are governed by state law, offering more consumer protection than repossession laws tied to chattel loans.
For buyers planning to stay in their home for more than a few years, these benefits can significantly reduce long-term housing costs.
Converting a Chattel Home to Real Property
Texas allows homeowners to convert their manufactured home from personal property to real property—a process that involves both physical and legal steps.
The conversion typically includes:
- Installing a permanent foundation meeting Texas regulations (43 TAC §80)
- Filing a new Statement of Ownership with TDHCA electing real property classification
- Recording that Statement with the local county clerk
- Paying off or subordinating any existing chattel loan lien
After this process, the homeowner may be eligible to refinance into a mortgage, potentially reducing monthly payments and accessing equity.
Why Many Texans Still Use Chattel Loans
Despite the long-term advantages of mortgage financing, chattel loans remain the most common path for buyers of manufactured homes in Texas. The reasons are practical:
- Many homes are located in parks where land cannot be purchased
- The upfront cost and speed of chattel loans is attractive to first-time buyers
- Not all buyers qualify for FHA or conventional loans
- Park operators and retailers often have established partnerships with chattel lenders
For these reasons, chattel financing continues to dominate in Texas communities—especially those near major metro areas like Austin, Houston, San Antonio, and Dallas-Fort Worth, where land prices remain high and parks are plentiful.
Considerations for Homebuyers in Land-Lease Communities
Buyers should be aware that financing a home without land limits their options for long-term equity growth. While chattel loans help families get into homes quickly, the homes themselves depreciate faster without land ownership—much like vehicles.
Buyers should consider the long-term costs of:
- Lot rent increases
- Shorter loan amortizations
- Interest rates often exceeding 9–12%
For some, these are acceptable trade-offs for immediate ownership and housing stability. For others, it may make sense to delay the purchase until land can be acquired or to seek parks that offer land-lease-to-own programs.
Conclusion
Understanding how mortgages and chattel loans apply to manufactured homes is essential for any Texas homebuyer entering the market. While chattel financing provides an accessible entry point for many families—especially in land-lease parks—mortgaging the home and land together offers long-term financial advantages, lower rates, and stronger consumer protections.
For those who can qualify, a real property mortgage opens the door to conventional homeownership benefits—greater stability, equity growth, and long-term savings. And for buyers who start with chattel loans, conversion to mortgage financing remains a viable option down the road.
As the manufactured housing market continues to evolve, informed buyers will have the edge—whether financing through a chattel lender today or planning a mortgage strategy for tomorrow.
Disclaimer:
This article is for informational purposes only. Mobile Buy Buy is not a licensed mortgage lender or financial advisor. Nothing in this article should be interpreted as legal, tax, or lending advice. Loan options and eligibility vary by lender, property type, and individual financial profile. Always consult a licensed mortgage professional before making financing decisions.