Important Tips for Mobile Home Owners Offering Financing and Mobile Home Note Holders

Knowing how to successfully manage your owner financing for a Mobile Home buyer is extremely important. Learning some guiding principles for maintaining your private note on a mobile home will help ensure you end up with a qualified borrower and hopefully, reduce the likelihood of facing a manufactured home foreclosure situation down the road.

First, you will always want to require that a potential buyer supply you with a recent credit report. Providing financing for someone without knowing their credit score and payment history might leave you open for unfortunate circumstances, despite how well you may know the person.

Second, it´s sensible to advise a potential buyer to make a substantial down payment on the mobile home. This is the buyer's financial commitment to the home. While some lenders ask a buyer to put down the largest amount possible, it´s wise to realize that requiring a buyer to put down the majority of their savings might leave them in a position where they have no reserves to fall back on for their monthly mobile home mortgage payments, should they need to rely on their saved monies. After you have qualified your buyer's credit and down payment, there are other important tips that you need to know before moving forward with your owner financing.

Always Maintain the Original Loan Documents

A Promissory note is the borrower´s promise to repay the loan. This is an important document to keep safe. It´s recommended that you store the note and any other original documents in a fireproof box or in a safe deposit box at your bank. Be sure to keep copies of the originals as well, for your records. It´s advisable to save a digital copy, or PDF, of the documents on your computer or on a disk in the event that the original documents are lost. If you have an attorney that assisted you with preparation of your loan documents, they will typically retain these documents in their files and provide you with a copy.

Keeping a Payment Ledger or Journal of Received Payments

Having a true history of when you receive each of the monthly Mobile Home payments, and the exact amounts of payments, is very important. It will help keep things streamlined when it is time for the borrower to make their loan payoff and also avoid any misunderstandings on the amounts paid and owed. It´s also advisable to deposit the payment into your bank account to provide a verifiable record of when you received each payment.

Make sure Mobile Home Taxes, Registration Renewals, and Monthly Space Rent is Paid

Ensuring that property taxes, registration, and space rent is paid on time is a very important factor in protecting yourself and the home from other debtors. One option is to factor in an impound account for monthly space rent & taxations. This would require your accurate calculation of the yearly rent and taxes, divided into twelve monthly payments that you collect from the borrower and pay to the appropriate party. If this is the route you decide to take, you´ll want to ensure that the monthly space rent bill, and tax bills or registration bills, are sent to you directly from the parties when they become due. If you are not collecting monthly impounds, you will want to verify that the taxes and rent have been paid as necessary.

Be Sure the Home is protected with Fire/Hazard Insurance

Having a sufficient amount of homeowner's insurance is essential for protecting the home and the mobile home note you hold. When the fire insurance policy is being originated, make sure that you are listed as the Lender or Mortgagee on the insurance policy and that the policy is written for at least the total amount of the mobile home note. Make sure that the policy is renewed and paid annually. The yearly premium for the insurance can also be included in the impound account, and collected from the borrower in monthly installments, rather that requiring the buyer to pay the entire insurance premium up-front.

What To do If your Borrower begins to make Late Payments

If you begin to receive late payments from your borrower on the mobile home, it´s smart to check your note for the policy that you and the borrower agreed upon. Your note should reference a "grace" period, wherein the borrower has so many days to make a payment before it´s deemed "late". If your note was not set up with a grace period, or the grace period has already past, you will want to contact your borrower and ask about the late payment. It´s wise to keep a journal of the date and time of the call and keep this ledger with your other records. It´s also a smart idea to write a letter to follow up on your phone call that identifies the borrowers default. You will want to also recap any action the borrower has promised to make and send the letter via USPS certified mail with a return receipt request. Last but not least, you will want to contact your attorney for further legal advice and explanation on default proceedings.

If you have read through this article and do not feel prepared to handle such an undertaking, then perhaps owner financing and note holding isn´t for you. There are conventional mobile home lenders out there that can also offer traditional Manufactured Home Loans for your buyers.