Buying a Manufactured Home From a Family Member: How the Financing Works
Buying a manufactured home from a parent, grandparent or other relative is financed the same way as any purchase from a private owner: the title has to be clear, the value has to be supported, and the documents have to be complete. One thing is different. If your relative sells to you for less than the home is worth, the difference can sometimes count toward your down payment as a gift of equity.
The steps themselves are the ones in buying from a private seller. What follows covers the points that change when the seller is family.
A family sale is still a real transaction
Lenders sometimes call a sale between relatives a non-arm’s-length transaction: a sale where buyer and seller have a personal relationship. It does not rule out financing. It means a little extra care, so that everything is documented and the price can be explained. Three things do not change:
- Clear title. The home’s title must be in the seller’s name, free of undisclosed liens, and transferable to you. If a relative has owned the home for a long time, confirm that the title is current and can be found before anyone writes anything up.
- A supportable value. The loan is based on the home’s value, established by an appraisal or comparable sales, and not on the price the family agreed. A price below market is a common act of generosity, and it is worth saying so early.
- Complete documents. A written purchase agreement, payoff details for any loan still on the home, and your own income and identification documents.
If the person named on the title has died, the transfer needs additional documents before a sale can go ahead. Mention it on the first call.
How a gift of equity works
A gift of equity is the gap between what the home is worth and the lower price a relative agrees to sell it for. No money changes hands for that part: the seller is giving up value they could have asked for. Depending on the program, some or all of it may be counted toward your down payment, which reduces the cash you need to bring.
A relative can also give cash toward the down payment, known as gift funds.
Both kinds of gift have to be documented, usually with a signed gift letter stating that the money or equity is a gift and not a loan, plus a record of where cash came from. Whether a gift can be used, and how much of it, depends on the program and on your overall qualifications. Mention it at the start so the file is set up for it.
Selling something for less than its full value is also a gift for federal tax purposes, and the person giving it is generally the one responsible for reporting it and for any gift tax. The IRS explains the rules in its gift tax questions and answers. This is general information, not legal or tax advice; your relative should ask a tax professional before the price is set.
Where the home sits still decides the kind of loan
If the home sits in a land-lease community, you finance the home as personal property and pay space rent to the community each month on top of the loan payment. The community also has to approve you as a resident. That applies even if your parent has lived there for years, and it is a separate review from the loan. How community resident approval works explains what communities usually ask for.
Ask the office for the current space rent and the lease terms in your own name. Do not assume your relative’s terms carry over.
If the home sits on land your relative owns and the land is part of the sale or the gift, the purchase may be a land-and-home loan instead, with the land title and site details in the file. Tell your specialist which situation applies, and whether the land is included.
What to settle before you start
Treating a family sale with the same care as any other purchase protects the relationship as well as the loan: nobody has to rely on memory later about what was agreed. To set it up correctly from the first step, talk with a specialist and say at the outset that the seller is a relative. All financing is subject to credit approval, and gift and gift-of-equity options depend on the program.
