Home | Finance | Mortgages
In these trying economic times, there are few things more tempting to a possible buyer than seller carry-back financing. This type of financing allows the buyer to forego the perceived hassle of single-family home financing, along with a degree of insurance 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 set by seller having a difficult time finding a buyer for his or her manufactured 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: either 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 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 unethical. The mobile home seller, having lived in the park for a long time, 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 lending institution from the start of the transaction. The second aspect to 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 financing applications are declined, due to the perception of financing 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 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 not difficult, especially for buyers with experienced and honest agents or brokers. When considering your mobile 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 manufactured home - do not even enter escrow - prior to getting a guaranteed approval from your lending institution or mortgage broker. Maintain a conservative and logical point of view and always contact either a lending institution or mortgage broker to obtain the most trusted financing for mobile homes.
JD Evans is an industry expert in mobile housing finance. He currently manages mobile home lending activities in California.
Article Source: http://www.articledition.com
RSS Feeds