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Seller Carry Back Loans when Buying a Mobile Home

In these trying economic times, there are few things more enticing to a possible buyer than seller carry-back financing. This financing allows the buyer to avoid the inconvenience of site-built 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 realize that seller carry-back financing is a trap often used by sellers of mobile homes.

The trap is set by seller having a difficult time 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. Regardless of the cause, the seller has a choice: they can sit on the home for an unknown amount of time, or find a creative way to convince a buyer. An easy-to-qualify, below market interest rate financing for an already affordable manufactured 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 immoral.

The manufactured home seller, having lived in the park for a long time, already knows that the manufactured 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 manufactured home park, or suffers one of the traps that prevent financing from being available, the seller offers to carry the financing for the buyer and completely eclipses the lending institution from the start of the transaction.

The second stage of the sellers sneaky trap is to offer a shorter term on the manufactured 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 scenario, which leads to the buyer flooding every lender with loans applications in a frightened frenzy. Most loans 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 available, the buyer often is forced to default the mobile home back to the seller, having lost 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 honest and experienced agents or brokers. When considering your manufactured home purchase, you should always seek financing with a reputable mobile home mortgage broker or lender. Additionally, never purchase a mobile home 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.

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Seller Carry Back Loans when Buying a Mobile Home