Land with marking stakes in it
March 28, 2023

Can I Use Land as a Down Payment on my Mobile Home?

If you are looking at mobile homes, you may have some land purchased already and wondering, can I use the land as my down payment on my mobile home?

We get it, down payments aren’t the fun part. They can weigh down some buyers and leave them feeling discouraged during their mobile home purchase. 

But the good news is, you have options! 

There are ways to get creative. and one of those is what we call a “land-in-lieu.” Let’s get into more detail about this down payment option and see if it’s a fit for you!

What Exactly is Land-in-Lieu?

With a Land-in-Lieu loan, the lender will have a lien on both the land and the mobile home used as collateral. When the loan is paid in full, the liens will be released. This loan allows you to use the equity in your land as a down payment on your mobile home instead of cash. Unfortunately, it will not lower the amount like a cash down payment would. The amount of land equity required will be determined by a lender’s criteria based on the borrower’s creditworthiness.

The out-of-pocket expenses are kept to a minimum for the borrower, because fees, closing costs, and site improvements are financed into this loan. Private mortgage insurance is not required, either. A single closing at the title company can also help to reduce closing costs.

Mobile Home Down Payment Factors 

The total down payment required is determined by several factors, including your income, credit history, and the amount of the loan you’re requesting. In most cases, home buyers will make a down payment of between 5% and 10% of the total purchase price. Any additional land improvements will also be financed as part of the mortgage. If a loan applicant can make a larger down payment, the interest rate and other terms of the loan will be better. This means savings for you over time!

Things to Consider When Using Land as a Down Payment on your Mobile Home

A Chattel loan, the most common type, typically finances only the home. In the event of foreclosure on a land-in-lieu loan, the lender will take ownership of both the mobile home and the land. Keep in mind that the lien will be on both the mobile home and the property. You will be using your land as personal investment or collateral to obtain the loan. As a result, this liability remains for the life of the loan.

Another possible drawback is that your land may be appraised for less than what the lender requires for a down payment on a mobile home. If this occurs, you will have the assessed value of your land, plus the difference in cash, which you will have invested in the down payment for your mobile home.

The Takeaway

Trying to get financing can seem daunting, especially for first-time home buyers. But, there are options tailored to fit just about every need. If you don’t have land to use as a down payment for your mobile home, that’s fine too! There is an option available for just about everyone! 

Speak with a member at Braustin Homes today! You can give us a call, surf our website, or visit us in San Antonio or Odessa, Texas. We want homeownership to be accessible to everyone!

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