Seller Carry Back Loans when Purchasing a Mobile Home

In these difficult economic times, there are few things more enticing to a possible buyer than seller carry-back financing. This type of mobile home financing allows the buyer to forego the inconvenience of single-family home financing, along with some security against fraud, and will often feature an interest rate that is sub-par and a longer financing term.

However, it is important to understand that seller carry-back financing is a trap often used by sellers of mobile homes.

The trap is usually set by a mobile home seller who is having difficulty finding a buyer for his or her mobile home. Reasons for this difficulty may be that the parks space rent is too high, or perhaps the location is in disarray. Nevertheless, the seller has a choice: they can sit on the home for an undeterminable amount of time, or find a creative way to snare a buyer. An easy-to-qualify, below market interest rate loans for an already affordable mobile home is, in this case, usually too good to be true.

In actuality, there is nothing wrong with a below-market interest rate seller note. However, when used as a trap, it is highly unethical.

The mobile home seller, having lived in the park for a while, already knows that the mobile home park itself will never hold up to the scrutiny of a funder or the appraiser. In order to prevent the buyer from discovering that the manufactured or manufactured home is overpriced, or located in a low-equity mobile home park, or suffers one of the traps that prevent financing from being available, the seller offers to carry the loans for the buyer and completely bypasses the note holding institution from the start of the transaction.

The second aspect to the sellers sneaky trap is to offer a shorter term on the mobile home loan, typically ranging from two to five years. Within the term, the below-market interest rate is usually only valid for the first few years. The buyer is almost immediately put into a negative cash-flow situation, which leads to the buyer flooding every lender with loans applications in a frightened frenzy. Most manufactured home financing applications are declined, due to the perception of loans fraud. Faced with the impending due date for the remainder of the note and no traditional financing options, the buyer often is forced to default the manufactured home back to the seller, having forfeited his or her down payment to the seller. Also lost are the mobile home mortgage payments which were no more than rent payments.

Avoiding this trap is easy, especially for buyers with experienced and honest agents or brokers. When considering your manufactured home purchase, you should never consider a mortgage based on any financing outside a reputable mobile home mortgage broker or lender. Additionally, never buy a mobile home – do not even enter escrow – prior to obtaining a guaranteed approval from your lending institution or mortgage broker. Maintain a safe and pragmatic point of view and always contact either a lending institution or mortgage broker to obtain the most trusted financing for mobile homes.