Financing for Floating Homes in Marin and the Bay Area
Financing for floating homes is not within my usual bailiwick, however numerous inquiries pushed me to do some research and I thought I'd post some information on this topic for those in need.
Even in past years when home financing was far more liberal, credit for purchasing a floating home was difficult to find. In today's challenged lending environment, non-mainstream loans have largely vanished and I was able to find only one lender offering financing for floating homes in the Bay Area: Financial Benefits Credit Union (FBCU). With just one player in the market, loan offerings are understandably limited and borrowers are likely to find themselves relegated to either a 7-year fixed or a 7-year adjustable loan. Both loans are based on 25-year amortization schedules, but balloon after the initial 7 years. Current rates on the fixed loan are in the neighborhood of 7.25%, starting at 1.25 points in cost.
Here are some of the major parameters of FBCU's loans:
- Loan limit of $300,000. Significantly larger loans available with board approval at an additional cost of ½ point.
- Financing to 80% of purchase price.
- Loans are due after 7 years, though FBCU will often adjust the interest terms to market price and extend the loan.
- 15-year marina lease required along with BCDC floating home residency permit.
- 3-year prepayment penalty equivalent to 6 months' interest.
- Home must be owner occupied and loan is non-assumable.
The other significant factor to keep in mind with floating homes is that they are considered personal property. Purchases are not recorded and are instead registered with the Department of Housing and Community Development (HCD) in a process that is similar to a transfer of title through the DMV. For this reason, buyers execute a security agreement rather than a deed of trust. The buyer is named the registered owner of record and receives a Registration Card and the lender is named the legal owner of record and given the Certificate of Title (similar to a bank holding the pink slip to a car). Although they are registered as personal property with the state, buyers still pay annual property taxes based upon the assessed value of the floating home.
Buyers are not required by law to open escrow with a title company, but the lender will want a third party to handle the transaction. The loan is considered a consumer loan, so there is no title insurance. The HCD provides the required title search and escrow prepares and submits the transfer application and required fees to the HCD. In turn, the HCD issues the title and registration to the new owner.
There are very few escrow officers specialized in floating home transactions. One highly recommended escrow officer to consider is Jill Woods at Stewart Title in Santa Rosa. Jill may be contacted at 707-526-2000 or, via email, at [email protected]